09 Dec 2010   |   News

Investing in electric vehicles

The German government wants to see 1 million electric vehicles on the roads by 2020. But do investors see a smooth journey ahead?

The somewhat awkward catchphrase “electric mobility” has taken hold in Germany over the past year, since the government unveiled its National Development Plan for Electric Mobility. This aims to get one million electric vehicles - whether cars, bikes or scooters -on Germany’s roads by 2020.

The government earmarked €500 million from its second economic stimulus package to support electric vehicle technologies, including €115 million for eight cities and regions across the country where pilot programmes are being conducted.

While the hype around the topic has been high, the market still needs a good decade to develop, according to experts at the 4th annual Cleantech Conference, in Munich last week.  The event sought to bring together potential investors, start-ups, researchers and corporations to discuss business models for commercialising new electric vehicle technologies.

But pickings for an actual investor at the event were slim, with only one out of three start-ups pitching electric vehicle technologies.

“We still don’t see a lot of specific products related to electric mobility out there,” says Curt Winnen, managing director of the Munich Network, the association of technology companies and investors that sponsored the event.  “There are some start-ups, but few offer innovative and scalable business models.”

Better batteries needed

For a start, the technology still needs to be significantly improved. It will be five to ten years before batteries are slimline, cheap and longer-lasting enough for electric vehicles to really take hold, according to conference participants.  A further obstacle is the need to build a network of recharging stations, with estimates that 600-1,000 new recharging stations would be required to service 600,000 electric vehicles.

“Without a proper infrastructure, the German government’s goal of one million vehicles will not be reached,” said Frank Pawlitschek, co-founder of Ubitricity, a Berlin-based company developing a mobile metering system for electric vehicles.  He estimated that each recharging station requires an investment of up to €10,000. “Electric mobility must be affordable or it is dead,” Pawlitschek said.

Where to recharge?

Ubitricity, which recently raised €1.8 million from Munich-based venture capital investor Earlybird Venture Capital, has developed a virtual charging network that can turn every electric socket into a recharging point for electric vehicles. This is backed up by a billing system, enabling customers to charge up their vehicles anywhere and pay later.

Apart from the technology challenges, it is still unclear what consumers need and will accept. “Do they want to load up their vehicle at home or at a charging station? How many customers lack a garage where they could charge up their vehicle? Might there be consumers willing to buy an extra vehicle for short distances on top of their traditional automobile? Or, are attitudes changing, do people want to give up cars altogether?” wondered Ulrich Bürger, senior project manager at Munich-based alternative energies consultant Ludwig-Bölkow Systemtechnik Gmbh.

A recent poll of Copenhagen’s residents, Bürger noted, showed a majority would prefer to ride a bike or take the bus, rather than purchasing an electric vehicle.

The need to take consumer demands into account is becoming increasingly important in the energy business overall, according to Jürgen Neubarth, an senior scientist with Innsbruck, Austria-based e3 consult OG-Energie Wirtschaft. Consumers want to take energy in their own hands, from installing solar panels on their roofs, to charging their own vehicle.  “The consumer will play an increasing role in the energy market of the future,” he predicted.

The benefits of electric technologies are not always clear either. For example, it is assumed that electric vehicles will reduce carbon emissions, but this is not always the case, said Thomas Harmacher, director of the professorship for energy at the Technische Universität München. In Germany, for example, the majority of electricity is still generated by burning coal, so the use of electricity to power vehicles will not reduce emissions. In countries where dependence on nuclear energy is higher, such as in France and Norway, however, there is a clearer benefit in terms of carbon emissions.

But the need to move away from oil dependency and continued high global energy demand will drive this market over the long-term, believes Peter Fuss, partner with Ernst & Young GmbH in Stuttgart.  Global demand for energy will increase 25 per cent over the next 20 years, with high demand coming from China, India and developing countries.

As oil prices rise due to scarcity and alternative energies fall in price, consumer demand will follow, Fuss noted. In a recent “Global Emobility survey” conducted by Ernst & Young, 93 percent of those interviewed said that fuel savings would be their top reason for purchasing an electric or hybrid vehicle.