Com­bus­tion en­gine won’t be killed by prom­ises alone

Woonsocket Call - - Opinion - Leonid Ber­shid­sky Ber­shid­sky is a Bloomberg View colum­nist. He was the found­ing ed­i­tor of the Rus­sian busi­ness daily Ve­do­mosti and founded the opin­ion web­site

Euro­pean gov­ern­ments are mak­ing big prom­ises to ban the sale of cars with com­bus­tion en­gines: Ger­many by 2030, France and Bri­tain by 2040. It'll take a lot more than prom­ises, though, to bring about the all-elec­tric fu­ture.

The ini­tia­tives could be­come the big­gest gov­ern­ment-driven rev­o­lu­tion in a ma­jor mar­ket since an­ti­to­bacco leg­is­la­tion — and a benev­o­lent one, given that car mak­ers get fair warn­ing. But it's easy to tout the end of an era with non-bind­ing prom­ises, and much harder to get enough peo­ple to like a gen­uine zero- emis­sion car ( that is, one whose only con­tri­bu­tion to emis­sions is made by the en­ergy in­dus­try as it pro­duces elec­tric power).

Granted, elec­tric ve­hi­cles al­ready have a lot of fans. Peo­ple like the idea of re­duc­ing their car­bon foot­print, as well as elec­tric cars' fast ac­cel­er­a­tion and noise­less­ness. Tesla has a big or­der back­log, and pre­dicted re­sale val­ues are good: In the most re­cent Ger­man rank­ings, two of the three elec­tric lead­ers — Hyundai Ioniq and BMW i3 — were ex­pected to re­tain more than 60 per­cent of their orig­i­nal price af­ter four years. In the U.S., 30 per­cent of buy­ers con­sider an elec­tric car, com­pared with close to zero as re­cently as four years ago.

The re­al­ity of elec­tric cars, though, re­mains at odds with their prom­ise. Con­sumers tend to balk when they get a sense of the range lim­i­ta­tions (pro­duc­ers' es­ti­mates are valid only un­der spe­cific con­di­tions) and con­sider the strate­gic as­pect of plan­ning their driv­ing around charg­ing op­por­tu­ni­ties. No more than 10 per­cent of those who con­sider an elec­tric ve­hi­cle ac­tu­ally buy one, and older elec­tric cars with short ranges are worth a lower per­cent­age of the orig­i­nal price than even much-ma­ligned diesels. And then there are the longert­erm ques­tions of whether the charg­ing in­fra­struc­ture will keep up with the num­ber of ve­hi­cles, and whether elec­tri­cal grids will be able to han­dle all the added de­mand.

Prob­a­bly the big­gest shifts in the Euro­pean auto mar­ket are hap­pen­ing in diesel, which ma­jor cities plan to ban sooner than com­bus­tion en­gines. In the U.K., de­mand for diesel cars dropped 10 per­cent in the sec­ond quar­ter of this year. Still, the de­clines haven't yet been se­vere enough to af­fect resid­ual val­ues much. In Ger­many, where diesels are sit­ting on deal­ers' lots an av­er­age of about 12 days longer than gaso­line-pow­ered cars, the re­sale value of an av­er­age three-year-old diesel car is still sim­i­lar to a gas-pow­ered one.

The cam­paign to con­vince con­sumers that the com­bus­tion era is end­ing and elec­tric is tak­ing over is work­ing about as well as anti-smok­ing cam­paigns did be­fore cig­a­rettes were banned in most pub­lic spa­ces and be­came pro­hib­i­tively ex­pen­sive for many smok­ers. Some peo­ple be­lieve what they're told and grow en­thu­si­as­tic about the new era and the next big thing. Most, how­ever, see no rea­son to change their habits. Fi­nan­cial in­cen­tives can help by bring­ing elec­tric-car prices close to those of tra­di­tional ve­hi­cles — but they're not enough for a break­through. Only coun­tries such as Nor­way, where the in­cen­tives make elec­tric ve­hi­cles ap­pre­cia­bly cheaper to buy and own, have seen sig­nif­i­cant up­take. Gov­ern­ments are rightly hes­i­tant to force some­thing on con­sumers that doesn't re­ally work for them — which is why coun­tries that plan to ban com­bus­tion en­gines in new cars haven't ac­tu­ally leg­is­lated on it yet. Driv­ing a com­bus­tion en­gine car hasn't ac­quired the stigma of smok­ing, and it may never do so. Un­less the cur­rent gas sta­tion in­fra­struc­ture dis­ap­pears — un­likely, given that used com­bus­tion en­gine cars won't be out­lawed — gas-burn­ing and hy­brid car sales might even boom in the few years be­fore bans go into ef­fect. And that's if the bans ac­tu­ally hap­pen.

That's a big "if." Reg­u­la­tors won't take the plunge un­less elec­tric cars al­ready make up a ma­jor­ity of pur­chases — with­out sub­si­dies and other crutches, since no coun­try can af­ford to sub­si­dize most car buy­ers. That will hap­pen only if the elec­tric car can match the real-life range of its com­bus­tion coun­ter­part, and if charg­ing takes only marginally longer than fuel­ing.

Au­tomak­ers are rac­ing to get there. Toy­ota is re­port­edly in the pro­duc­tion engi­neer­ing stage of build­ing a solid- state bat­tery, which em­ploys a solid elec­trolyte to im­prove on the weight and range of a lithium-ion bat­tery — and pos­si­bly even on the charg­ing time. Such ad­vances could not only boost de­mand for elec­tric ve­hi­cles but also de­cide the win­ners and losers in the in­dus­try, which is why it's worth watch­ing com­pa­nies' re­search and de­vel­op­ment bud­gets.

Toy­ota's lead­ing in­vest­ment could make it the first au­tomaker to pro­duce an elec­tric car that most con­sumers will ac­tu­ally want. Other ma­jor man­u­fac­tur­ers' bud­gets also ex­ceed a bil­lion dol­lars per quar­ter, some of which is go­ing into bat­tery tech (Daim­ler and BMW, for ex­am­ple, are also work­ing on solid-state bat­ter­ies). Tesla, the cur­rent mar­ket icon, isn't big enough to match that level of spend­ing, and so risks be­ing left be­hind in the fi­nal push to make the elec­tric ve­hi­cle for the masses.

But there's also a chance that the re­search ef­forts will get nowhere, or pro­duce tech­nol­ogy that peo­ple can't af­ford. In that pos­si­ble fu­ture, gov­ern­ments won't be bound by their elec­tric prom­ises, and the com­bus­tion en­gine — al­beit an emis­sion­min­i­miz­ing ver­sion of it — will re­main the car mar­ket's main­stay.

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