On the road: Powering up electromobilityMatthias Wünsche, Head of Strategy and Automotive Insights, Allianz Global Automotive, discusses the prospects for greener cars.
Matthias Wünsche: In the long-run they really will be cleaner, for two reasons: First, the entire production of the electric vehicles will produce less CO2. Some manufacturers, for example BMW in Leipzig, are targeting to operate their production facilities with 100 percent renewable energy.
Second, it is a definite plan to primarily use renewable energy sources such as wind or solar energy to fuel the electric vehicles.
Can this supply of renewable energy be guaranteed?
It should be possible, especially because we have to take a broader timeframe into account here. We will not have one or two million electric vehicles on the road within the next couple of years. Hence, demand will develop slowly and, therefore, provide enough room for more research and development as well as significant investments to set up the appropriate capacity and infrastructure eventually.
But wouldn’t we be better off developing better public transport and improved cycling infrastructure instead of focusing on alternative vehicles?
Due to everybody’s individual need for mobility, it should be an intelligent combination of both. Sophisticated public transportation systems, which by the way can also feature electric vehicles, for example for public car sharing solutions, are especially efficient in large urban areas. Besides the positive impact on the environment, such systems also significantly lessen overall traffic density.
However, public transportation in rural areas is often inefficient and expensive. Alternatively powered vehicles will be an important alternative.
Additionally, given the automotive industry’s importance on the world economy, it appears highly unlikely that we would ever want to get rid of automobiles altogether. So, those vehicles that will be on the streets are expected to be alternatively powered vehicles in the long run.
The industry is taking care of those potential threats through initiatives like the European Commission’s Raw Materials Initiative which focus on the reusing and recycling of such batteries. They strongly advise all manufacturers and suppliers to recycle and if this is not possible to make sure that the materials don’t do any harm to the environment.
And as technological development progresses, new technologies will eventually be invented – maybe without lithium as the core substance.
Will electric cars ever outnumber their traditional forerunners?
Definitely not in the near future. Various forecasts are stating that by 2020 between two and five percent of new car sales in developed countries will be for electric vehicles. We will probably see at least another 25-30 years before they will account for the majority of new car sales.
By then, an efficient infrastructure will also have been set up. Many countries and cities have already started. For example, In Paris, France, there are already more than 700 public charging facilities. Another example is the city of Shenzhen in China, which is planning to have 30,000 electric vehicles in use by the end of 2012. They are currently installing 22,000 charging stations across the entire metropolitan area.
So, yes, eventually electric vehicles will outnumber their traditional forerunners – but definitely not in the nearest future.
It’s a noble goal but are electric vehicles really suitable for everyday use?
They are absolutely practical. Again, we would have to distinguish between the urban and rural areas and also take the length of the daily drives into account. But people living in cities typically do not drive any further than 50 to 80 kilometres a day. A fully charged battery will definitely be able to fulfil that requirement.
What will change in terms of road safety? Will the silent engines in electric vehicles cause extra threats?
An increasing number of newly-developed electric vehicles on the roads are likely to bring an increasing number of the latest integrated intelligent traffic management systems and safety technologies with them. Hence, one would expect road safety to further increase.
How will mass adoption of electric vehicles change the insurance business?
There will be changes, that is for sure. Unfortunately, as of today we do not have enough experience and reference data to determine the exact impact. Hence, we are currently trying to clarify various issues in close collaboration with the automotive manufacturers, their suppliers, as well as with internal and external experts.
We are focusing on important questions here: What will be the preferred business model for an electric car? Who will be the owner of the battery? What impact will the quick acceleration have? What about adjacent infrastructure such as charging stations at home? The crash behavior, repair and maintenance and especially the costs also need to be taken into account.
But there will also be the opportunity to develop truly innovative, dedicated e-mobility solutions.
Studies (for example from the Highway Loss Data Institute) say that higher repair costs will increase insurance rates?
Not necessarily - reportedly, less than two percent of a Toyota Prius’ overall warranty costs are caused by the electric engine. In an electric vehicle you have about 90 percent less moving parts to wear out over time compared to a conventional car. There are no pistons, no crank shafts and the like. Hence, the standard repair and maintenance costs should actually be lower.
On the other side, a standard battery costs up to 10,000 Euros, depending on range. Repairing or replacing these will be accordingly cost intense. Due to the current lack of reliable data, only time and experience will show how rates will really develop.
Paying more money never attracts customers. How can people be encouraged to try electric cars nonetheless?
True enough, compared to a traditional car, the initial costs of an electric car are pretty high. Some studies say that customers are willing to pay not more than 1,500-3,000 Euros extra for a new car with an alternative fuel technology. Until battery technology is further developed this will not be enough, unfortunately.
However, customers are well advised not to purely focus on purchasing price, but to consider total cost of ownership, including all cost from the purchase until the resale or disposal of the car.
Some countries and manufacturers are establishing subsidy systems to encourage people to reconsider electric cars. China, for example, is currently subsidizing every newly-bought electric vehicle with up to 10,000 US-Dollars. Daimler is about to additionally subsidize the leasing of the battery for the new e-Smart.
Hence, including subsidies and other benefits, some upcoming electric vehicles may turn out to be not so expensive after all – especially for those customers who want to do good for the environment.