March 9, 2010 2:00 am

VW shifts gears on electric vehicles

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Volkswagen, a long-time sceptic about hybrid and electric cars, has officially shifted gears.

At last week's Geneva motor show - where nearly every leading carmaker showcased a planned or experimental hybrid or battery-powered model - the German carmaker said it planned an "unprecedented" drive into electric vehicles.

Martin Winterkorn, the chief executive, said the group aimed to increase the cars' share in its portfolio from zero to 3 per cent of its total sales by 2018.

In a preview of forthcoming models, VW's Seat brand rolled a sleek, sporty all-electric "concept" vehicle, the IBE, down a catwalk. Porsche showed the 918 Spyder, a hybrid petrol-electric concept car that it said could shift from petrol mode on the highway to hybrid driving in the city, delivering 78 miles per gallon.

Elsewhere in Geneva, VW's luxury competitor Daimler announced a partnership with China's BYD to build a battery-powered vehicle for the world's largest car market under a new brand.

And Nick Reilly, General Motors' European boss, drove the carmaker's forthcoming electric Ampera from Opel's headquarters near Frankfurt to Geneva, where the mud-spattered prototype took a place on the show floor.

Carlos Ghosn, chief executive of Renault and Nissan, rebuffed VW's bid for leadership in battery-powered cars, saying the Franco-Japanese alliance would have enough capacity to produce about half a million electric cars and batteries by 2013-2014.

Mr Ghosn predicted a shortage of manufacturing capacity for both plug-in cars and the batteries needed to power them within two years.

"From everything I'm seeing, in 2011 or 2012 we're going to have to rush to build capacity for both batteries and for cars," he said.

Mr Ghosn has predicted that zero-emission cars - primarily electric vehicles - will capture a tenth of the world market by 2020.

But most industry analysts and some carmakers - including those planning plug-in models themselves - predict smaller sales for electric cars and hybrids, which rely on a combination of a large battery and a combustion engine.

While most predict a long-term shift to electrification, they say the cars' higher initial cost and the lack of widely available recharging infrastructure will limit demand initially.

"Ten years down the road, more than 90 per cent of cars will be the conventional cars that we have now," said Al Bedwell, an automotive technology expert with JD Power, the consultancy. "Ten per cent will be hybrids or electric vehicles."

Within that figure, all-electric vehicles would account for just 3 per cent, Mr Bedwell said.

National and local governments around the world are investing or pledging billions of dollars in charging points and tax breaks to promote electric cars, which are not yet widely available, and have not proven they will find a significant market.

The uncertainty surrounding demand makes carmakers' forthcoming electric models - not to mention the billions of dollars being invested in lithium-ion batteries expected to power them - largely a leap of faith.

Early motoring press reviews of pioneering all-electric models such as Tesla Motors' electric roadster or BMW's prototype Mini E have mostly praised the cars, but dwelled at length on the anxiety caused to drivers by the lack of public places to recharge them.

Even hybrids, which have been on the road for more than a decade, are still selling modestly except in countries like the Netherlands and Japan that offer generous incentives to people who buy them.

In Geneva Takanobu Ito, Honda's chief executive, said the carmaker, whose flagship Insight hybrid has sold poorly in the US, had been able to sell hybrids in Japan largely because of scrapping and "eco-car" incentives.

He said he was not expecting high sales for a planned all-electric model, which he said Honda was developing to meet California's legislation requiring zero-emission vehicles.

"Pure battery-electric vehicles will be a rather small figure: under optimistic criteria, for Europe less than 5 per cent in 2020," said Wolfgang Bernhart, a partner with Roland Berger Strategy Consultants. "On a global scale, the figure will be even lower."

The doubts are not deterring Renault and Nissan, which have made leadership in electric vehicles a central plank of their corporate strategy.

The two carmakers are planning eight electric vehicles over the next four years, the biggest line-up of any major carmaking group.

At a dinner with reporters in Geneva, Patrick Pelata, Renault's chief operating officer, dwelt primarily on the carmaker's electrification plans, devoting relatively little time to other questions about the company's current products and markets during one of the most challenging times in its history.

In order to lower the prices of its electric cars, Renault and Nissan plan to lease the batteries to customers, and recycle them as energy-storage units after their natural life in vehicles comes to an end.

The group claims that this - coupled with generous tax subsidies for zero-emissions cars in countries such as France - will allow it to offer its plug-in cars at prices comparable to similarly sized diesel models.

Far from a looming bubble and bear market for electric cars and their batteries, Renault fears the opposite: a global competitive rush to develop them. "The biggest strategic fear is that the Chinese or Indian auto industry will take a shortcut" in the new technology, Mr Pelata said.

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