Why Should We Subsidise?

The Department of Transport recently made two key announcements. It seemed like the culmination of a growing media focus on sustainable transport in Ireland. The first was the Electric Transport Plan (ETP) in November and it came with tactic recognition from minister Eamon Ryan that Ireland could be an early mover with regard to the electric car. He mentioned some of the following reasons:

Driving distances are relatively small in Ireland.

Ireland relies almost completely on imported oil.

Motorways are not internally essential to our cities (they tend to surround rather than criss-cross them).

Irish people demonstrate a tendency to prefer personal as opposed to public transport.

Ireland will probably fall short of its emissions targets unless something radical is done.

The ETP came up with a target of 10% of all vehicles being electric by 2020 and provisioned for the following:

Tax incentives for business to purchase electric vehicles: Businesses can write off 100% of the cost of purchase against tax under the Accelerated Capital Allowance Scheme

A €1 million project by Sustainable Energy Ireland to research, develop and demonstrate of vehicles nationally

Assistance for individuals purchasing electric vehicles – publication of a “Buyer’s Guide” and a “Cost of Ownership Calculator” by Sustainable Energy Ireland

Establishment of a National Task Force which will examine infrastructure options for national roll-out of electric vehicles, including street charging

This was soon followed by the Smarter Travel plan:

• Move over 500,000 potential car based commuters to other more sustainable forms of transport
• Slash CO2 emissions by at least 4 million tonnes
• Ensure that electric vehicles account for 10% of all vehicles on our roads
• Move over 150,000 people to work by bike
• Create regional e-working centres to help cut commuting times
• Create an all island car sharing website
• Invest in new, safer cycling and walking routes
• Invest in more-park and ride facilities on the outskirts of our major cities

Analysis

There is no lack of ambition here and we applaud their vision. But this can only be a first step. Currently, the tax incentives concern a single measure that apply only to businesses. It comes to very little since corporation tax is already very low - 12.5%. Here is a hypothetical example of how it could work:

There is also a VAT rebate though this was hidden in the 2008 Finance Bill. Company cars in emissions band A can claim 20% of the VAT back. For ten grand’s worth of EV this marks a €240-400 saving (like paying 16.5-18% VAT).

This is not enough. The Smarter Travel Plan seems to be more concerned with the Green Party’s pet project of getting the Irish public on bikes and it was disappointing to hear snide remarks about minister Ryan’s cycling to work (a Garda escort has to follow him). The vision may be bold, but they’re not courting public opinion with what has been widely perceived as a washed-out idea (excuse the pun but biking in Ireland has a major drawback).

Has the ETP used the plural — ‘tax incentives’ – because more are on the way? We hope so because 10% of all vehicles being electric is a big challenge. Ireland’s vehicle population grew by 1.5 million between the years 1997 and 2007. If we assume that something like this will happen again, then we’re talking about something in the order 15%-20% of all new vehicle sales being electric.

This is an intimidating figure. In a decade it would mean 25,000 EVs a year. Assuming that the market will have to build up to these volumes, we could be talking about 60,000 vehicles per year in the space of 3-5 years. This might prove to be significantly more than half the amount of cars sold in 2009 alone.

Two Scenarios

So how can this come to be a reality? The answer seems to lie in two possibilities. The first is the obvious one – a revolution in battery technology. Lithium chemistries have to be delivered at a more reasonable price or else they need to be superseded. A sudden breakthrough might have manufacturers rushing to roll out EVs. For consumers to snap them up immediately, the advantage over conventional fuel would have to be massive. We’re talking about the FCEV here – the Fully Capable Electric Vehicle that does everything except cost more than a euro to refuel.

Alternatively, a large EV market might grow steadily. As economies of size and scale kick in, better batteries will be delivered at lower prices. People start simple with early adopters taking advantage of local convenience and cost. Government incentives eventually grow this cohort so that EVs become ubiquitous. A price threshold would then be reached making the EV a highly competitive option and high volumes would be realised.

A multi-million euro industry would then have a much stronger financial footing for continued research and development. If the FCEV won’t arrive suddenly, its gradual appearance will be down to the pioneering efforts of those early adopters (and the assistance they’re accorded).

We Need Both

There is no question of ‘which’ scenario will occur. For the sake of the planet, it would be great if a breakthrough happened as soon as possible, but there is no way to predict when or indeed even if it will happen. What’s more, it makes no sense from a policy point of view. If the government is betting on technological advancement to do the work then the figure of 250,000 cars simply reflects a baseless conjecture that 2020 will be a year where the ‘big switch’ is well underway.

How will Irish people know that the FCEV has suddenly arrived? Probably by following the example of some other country that has been pushing EVs for years. Or perhaps some manufacturing hub will show us the way. Regardless, if Ireland waits in the wings, the best that it can hope for is an early chance to get on board with a trend it had no part in starting.

The Early Movers

San Francisco is America’s EV capital and it recently announced this loudly with a series of public charging points. The geography of the Bay Area makes it all look like a fairly pointless endeavour. The peninsula itself has a notorious gradient and freeways criss-cross every single urban expanse. At the moment, a Tesla Roadster to the tune of $100,000 is the only possible way to negotiate this infrastructure. So why are the city authorities so keen on EVs?

Take a moment to appreciate how hybrid sales have stayed firmly with Toyota. It’s shown itself to be a technology that you can’t just rip off and offer for cheaper. In over ten years, the Honda Insight has proved to be the only viable competitor and this was simply down their early positioning and good investment. It exposes the importance of expertise and we’re about to see this all over again with GM’s plug-in hybrid (PHEV). Will they deliver a good car at a good price? Are the public prepared to endorse it?

If GM gets it right they’ll probably leave behind their financial woes and become a new type of market leader. But their refusal to announce a price and their constant stalling seem to suggest a lack of expertise. It’s strange because GM is one of the biggest automotive companies in the world but the fact of the matter is that they just haven’t been building the right cars. Even if they do come through with an excellent vehicle, people will have to be willing to invest in the new technology.

The proposition might be so cheap that it just can’t be ignored. Failing that, government will have to embark on some kind of ‘fiscal equalisation’, as Mitsubishi call it. At the very least, enthusiasm will have to be captured and information disseminated. The public and the press must be prepared for what will be on offer. This may even involve giving GM a second chance if they botch the release of the Volt. Thankfully, the Obama Administration is offering the subsidies that might do the job and bailout loans have come with the condition that GM overhaul their range to produce tomorrow’s cars.

Early movers are those who successfully mount the technological, social and political challenges all at once. They benefit by serving as an example that the rest of the world follows. But this isn’t as ephemeral as it might sound. If Ireland were to establish itself an early mover then it could feasibly become a manufacturing hub and a centre of R&D.

With regard to the latter, our population has the educational credentials and the green sector is one of the few that’s still creating jobs. More are on the way and with adequate subsidy the country might well have a shot at successfully bidding on one of the many new EV start-ups. While this looks like the growth scenario, the possibility of a breakthrough only makes action more urgent. Some smart choices could hold the prospect becoming a world leader in a development that will eventually realise a market of hundreds of millions vehicles.

The Shopping List: Take You’re Pick

We need more incentives at the individual level. Every day, we loose ground on becoming an early mover. Like it or not, something bold will have to be done. Slightly disturbing the bus lanes, briefing traffic wardens and facing incredulity from Top Gear is something we’ll just have to deal with because it’s time to look at the bigger picture. Ireland needs jobs and it needs spending to resume. EVs represent a great investment but a poor gimmick so here’s the shopping list, Mr. Dempsey. Take your pick, but don’t let it grow any longer:

1. 

   Ollie says:

   March 4, 2009 at 11:53 am

   GIVE US THE BUS LANES !!!

   Excellent article Motricity !

   The most EV friendly country to date is Norway where they have every incentives in place to favour EVs over combustion engines.

   The most popular incentive for individuals over there seems to be the use of bus lanes which is the key selling point for commuters who can save up to 2 hours of traffic every day going to work in Oslo.

   The reason is simple : there are not enough EV’s around for a mass market adoption , the volumes are therefore still relatively low .

   I cannot think of a better incentive in Ireland to start with, it will not cost a penny to the government nor will it incur a loss of revenue . Of course taxi drivers will be annoyed and perhaps a few bus drivers but something’s gotta give in these challenging times.
2. 

   Dorptrieroill says:

   June 5, 2009 at 5:25 pm

   Hi, Congratulations to the site owner for this marvelous work you’ve done. It has lots of useful and interesting data.
3. 

   Peter says:

   August 6, 2009 at 7:41 pm

   Very interesting and amusing subject. I read with great pleasure.
4. 

   Bunker says:

   August 23, 2009 at 1:21 am

   Are you a professional journalist? You write very well.
5. 

   Bunker says:

   September 4, 2009 at 3:12 pm

   Можно и подискутировать по этому поводу…