Electric Cars – toys of the rich, subsidised by the masses

Joanna Nova reports on a new study showing that electric cars produce more CO2 that either petrol or diesel cars if that electricity is produced principally from coal-fired power stations.

The most practical electric car

In Britain there is more a market for electric vehicles, but still puny sales. The European Car of the Year is the Chevrolet Volt, which has a 1.4 petrol engine to accompany the electric motor. At £29,995 it costs 50% more than a similarly-sized Ford Focus diesel, even with the £5,000 government subsidy. In fact, it is more than a similarly-sized Audi, BMW or Mercedes and will not last nearly as long. If you look at the detail, the Volt has a claimed CO2 emission 27 g/km, as against 99 g/km for the best diesels. This takes no account of the CO2 emissions from the power stations. In Britain electricity is mostly from gas, with much of the rest from coal and nuclear.

There is also a question of equity. Domestic electricity has a 5% tax added on. Diesel has over 120% added. So the cost for 100 km (using official figures and 15p per kwh + 5% vat) is £2.66 for the Volt and £6.00 for the equivalent diesel car (combined 67.3mpg and £1.43 per litre). But tax is £0.13 and £3.30, so most of the cost saving is in tax. In the UK the average is 12,000 miles or 19,300km per year. So the tax saving from driving the Volt is up to £610 per annum. Although if you travel that distance per annum there will be a number of long distance journeys. Let us assume half the 12,000 miles is on the petrol engine at 50mpg, with petrol at £1.38. Then the annual tax saving drops to just £70.

The biggest saving for electric car owners is in London, with the congestion charge. Drive 5 days a week for 11 months of the year into London, and the conventional car owner will pay £2,750 a year. Drive an electric car or hybrid and the charge is zero.

So what sort of people would be persuaded to buy such a device? It is the small minority who have money for at least two cars, but want to appear concerned about the environment. They have the open-top sports car for summer days, the luxury car for long journeys, and the Volt for trips to the supermarket or to friend’s houses. It is the new form of conspicuous consumption for the intelligentsia, making the Toyota Prius so last year.

The least practical electric car

Launched this year the Renault Twizy is claimed to be about the cheapest “car” available today. As a car it is also by far the smallest available as well, being more a quadricycle, with no proper doors. The cost is kept low by not including the battery which is rented for at least £48 a month. As the Telegraph concludes, it is an expensive toy. My 12 year old son said he would love one when he saw it in a car showroom recently. But he would soon regret it if he was transported to school in it every day, instead of riding on the top-deck of a bus. At least if his dad forgot to plug it in, it would be small enough for him to push.

Boris Johnson spoils a good polemic on Fuel Costs

Boris Johnson is in great form in today’s Telegraph on the escalating cost of fuel. However, he is wide of the mark on the costs side.

The cost of the fuel for deliveries does not impact not through greatly price of goods in the shops. Our distribution systems are fairly efficient – though the low volumes to small shops proportionately big impact than deliveries to Tescos or Sainsburys.

It is on the consumer that this pays a larger impact, but less than you might think. Take somebody with a 1995 petrol Toyota Previa living in London and doing 5000 miles per year at around 18mpg. That is 278 gallons per annum, or 1264 litres. With petrol at £1.29 per litre, that is £1630 per year. That seems a lot. But add in £1000+ for maintenance and the MOT, £1000+ for insurance (if a VIP it gets quite steep), £200 tax, and £200 for depreciation, then it is not a huge cost. Trading in for a more modern monster could make out jolly Mayor worse off. Spending £15,000 on a secondhand Galaxy Diesel will save on fuel, the occasional big maintenance bills, maybe nothing on the insurance, but will cost £2000+ more on depreciation.

Consider also

The electric revolution is happening, but it will not be overnight. The up-front cost of the vehicles remains high, and there is still no electric people carrier. For the foreseeable future, millions of people will have to invest not just in a car but in an overpriced lagoon of fossil fuel.

The reason that the costs of fuelling electric cars are so much cheaper is that the only taxes for domestic customers are the additional 5% VAT.  The excise duty and petrol, plus the 20% VAT add more than 100% to the cost. They may be more fuel efficient because they are so much lighter. Furthermore, a new electric car can only have a comparable cost to an efficient diesel with huge subsidies. If you look at the true cost per mile excluding tax and subsidies, then it would be twice the cost. And the cost distinction will get worse not better. The chemicals in the batteries are scarce, so the phenomenal push for electric cars will push up the costs of the chemicals exponentially. And this government does not help – the ConLib Coalition one. The government’s plans for new “alternative” electricity supplies will push up real costs by at least 30% in coming years and even more when it cannot keep up with the extra demand.

       The worst part is the government finances. When Mayor Johnson gets his electric people carrier, he will deny his government £800 a year in taxes, have a subsidy of £5,000 from the worse off to help pay for it and still be out of pocket. Oh – and the people carrier will be more Meriva than Previa in size.

Why Electric Cars Cannot Pay

In the Sunday Times of  1st August, Jeremy Clarkson does a review of BMW Mini E – an electric test car. (In Gear Pages 15 & 16).

He concludes that  electric cars are something that cannot be achieved – simply because they are too expensive, too short a range, and we have not got the electrical capacity.

There is another reason. We would decimate out public finances. Clarkson estimates that topping the Mini E up with standard rate electricity would cost £4, compared with about £12 for a standard Mini Cooper, or around £10 for a 60mpg diesel for 104 miles.

Now consider the exchequer impact. The £4 of electricity carries 20p of tax (VAT at 5%). The tax on petrol or diesel is about 60%, so £7.20 for petrol and £6.00 for diesel. The net loss for a typical 10,000 mile per year motorist is in the order of £650 – plus the road tax loss of around £100 or more.

If just a million car users switch to electric – 3% of the total – then the loss is around £750m per annum.

 Will motorists actually go for these savings? Not if they look at the total costs of ownership. The life of the batteries will be less than the 100,000+ miles that you expect from a modern engine. Current lithium ion might give you about 300 charges, or 30,000 miles in the Mini E. With the cost maybe £6,000 per pack (for simplicity), that would add 20p per mile to costs – equivalent to annual costs of £2,000 per year. The servicing may cost a bit less (no engine, but still all the other mechanical bits like brakes, tyres, etc.), but overall the cost of ownership.

Therefore, it will only be a small minority who will buy these cars – probably the richer end of the Prius set. Alternatively, the government will step in to subsidise the battery pack. So the middle class conspicuous consumers will be subsidised by the, poorer, users of internal combustion engines.

Finally, will this save the planet within Lord Stern’s criteria cost of £80 per tonne of carbon? Let us assume somebody swaps their standard small car with 130g/km of carbon with the zero-emission car. At 10,000 miles per year, that is a saving of 2 tonnes of carbon IF the electricity comes from zero-emission sources. The net cost to society is going to be at least 10 times that, so it fails the economic test as well.