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Will there be an electric revolution?

John Redwood, Charles Stanley’s Chief Global Strategist, looks at development in next-generation vehicles.

Recharging electirc car

by
John Redwood

in Features

14.02.2019

Do you want to buy an electric car? Governments are in a hurry to make you buy one. Car companies are responding to the pressures of regulations present and to come, and to the offer of subsidies. It’s enough to make them offer more electric models alongside their diesel and petrol products. They are doing so with good grace, even though many of them were persuaded to go for diesels a few years ago, only to find governments changed their minds radically. Companies that committed a huge investment to creating bigger diesel fleets and more diesel options had just a few years later to start planning to phase out all that work and capacity and to set about designing a very different type of vehicle.

The truth is the electric car is not yet flying out of the showroom on a crest of enthusiasm from must-have owners. There are some keen green pioneers, who like the story line that they are doing their bit to save the planet by buying electric. Most other car buyers watch to see how the problems with electric cars are tackled. Perhaps many anticipate a better financial deal from governments and car companies before they are tempted to sign a contract. Volume production should lead to cheaper models.

There are genuine concerns holding people back. Many electric vehicles have a short range between charges. People are used to be able to travel 400 miles or more on a tank of fuel and do not like the idea of having to interrupt a long journey to recharge. Recharging takes a long time, whilst refuelling a petrol car takes five minutes. The initial price of most electric cars is still quite high even after allowing for the subsidies some governments offer. People do see that they avoid petrol or diesel tax on the fuel for an electric vehicle, but many worry how the government would make up the revenues if lots of people switched. They assume there will be some new car tax to fill the hole in the budget once enough people have committed themselves to the electric vehicle.

It is also not all plain sailing on the green front. Recharging a car in the UK from the grid means a lot of the energy has come from burning fossil fuels in the power station. There is also the issue of the metals used in battery construction, and how there can be safe disposal when the battery wears out. Engineering the vehicles for better performance is not easy, as beefing up the battery to provide more power usually comes with an increase in weight which defeats some of the point of the extra power.

When the private sector developed smart phones and tablets, they flew off the shelves because they offered people a new service, with access to vast stores of data and better communications. There was no need for special government subsidy. Parliaments did not have to regulate and tax the old mobile phone or the desktop computer in order to get people to buy the new products. The electric car feels different, with much more top-down influence seeking to get people to buy these designs.

Maybe the car companies will come up with solutions to range and charge times, and maybe governments will find a way of reassuring potential buyers they will continue to give electric cars a strong advantage through differential taxation. Maybe the challenger companies specialising in electric cars will win the hearts of more customers and be able to produce enough high quality vehicles to carry through the revolution. Whilst there are doubts both about the pace of customer take up, and which of the many firms taking electric cars seriously will come up with market-winning product, it is difficult to make good long-term investments in this fast-changing space. If you wanted to “win” from the digital revolution then Apple, Google and Amazon emerged quite early from the competition as winners with cut through to the customer. We have yet to find the Mini or the Beetle of the electric-car revolution.

Meanwhile the advance of general digital technology continues to reshape economies, transferring more revenue from old businesses and established brands to the new stars of the digital age.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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