The Trouble with Tesla? – Electric cars!

12 mins. to read
The Trouble with Tesla? – Electric cars!
Hadrian /

The electrification of vehicular transport is coming. France, the UK and now India have set target dates for the demise of petrol engines. (Diesels will be banished even sooner). But are electric cars really all they are cracked up to be? Are they really that environmentally friendly? And will the economics of electrification really be that favourable?

A new landscape

When I first started to write about electric and self-driving cars in these pages it all sounded a bit like science fiction. Now that a number of leading governments have declared target dates for the demise of petrol and diesel powered cars, it is becoming reality.

On 03 June, a few days after the Trump administration announced that America would walk away from the Paris climate accords, the Indian government made a bold vow to sell only electric vehicles by 2030 – meaning that petrol cars would still be allowed on the roads but that all new cars would be electric[i]. In July. President Macron of France announced that French roads would carry only electric cars in 2040. Shortly thereafter, the British government followed France’s target.

Much has been written about both the desirability and feasibility of these targets over the summer. Some commentators believe that India’s initiative is more of a gesture to stimulate the renewables sector in that country. The French, who produce more than 90 percent of their electricity using nuclear power have a stated aim of being the European leader in electric cars – Renault SA (EPA:RNO) is already one of the leading producers of electric cars globally. Yet the announcement by the British government was greeted with a barrage of derision.

In the meantime, the largest electric only manufacturer, Elon Musk’s Tesla (NASDAQ:TSLA), continues to hit stratospheric valuations. As Jim Mellon observed in these pages on Tuesday, Tesla, which has never made a profit, has a larger market capitalisation than General Motors (NTSE:GM). Jim noted that the current Tesla stock price (around $347 as I write) attributes a market cap for each car Tesla sold in 2016 of $880,000; while GM’s stock price (currently around $35.50) equates to $5,000 per car sold last year.

Now I wrote in the lead article for the April edition of the MI magazine: After more than a century of reliance on fossil fuels the electrification of vehicular transport is going to be huge. I unsay none of that. But the obstacles ahead of us in making electric cars universal are daunting. And it is by no means a foregone conclusion that the early entrants into this sector will make huge returns.

Electric cars – their limitations

Electric cars face four intractable problems.

The first is that, at present, their range is much more limited than that of petrol cars and, even with the prospect of advances in battery technology, that is likely to remain the case.

A Nissan Leaf can manage 124 miles on a fully charged battery after which it would have to be plugged in for a minimum of four hours if you install (at extra cost) a special recharging point in your garage. If you plug it into a conventional UK power socket the charge will take 12 hours. But if you can find a rapid recharging point of the type that Ecotricity (private) is rolling out around the M25 motorway and elsewhere, you could get an 80 percent recharge in just 30 minutes.

The 124 mile range, however, is only in ideal conditions and numerous car magazines have claimed that, in practice, the range of various electric cars is often somewhat less that their manufacturers advertise. Moreover, just as with mobile phones, the charging capacity of an electric car battery declines with age. According to one website, a Nissan Leaf which had done 52,000 miles had a range of 45 miles – and one which had clocked up 90,000 miles had a range of just 30-35 miles.

It is by no means a foregone conclusion that the early entrants into this sector will make huge returns.

Tesla’s Model 3 has a stated range of 215 miles between recharges but, reportedly, the owner of a four-year-old predecessor model claimed that his Tesla could not do more than 150 miles without a recharge. Tesla’s competitive advantage to date has been in battery technology.

What’s more, the range of electric cars, unlike that of petrol cars, is sure to be reduced in cold weather. Electric cars are much more efficient than petrol and diesel cars. In fact the engineers tell us that electric motors can be 80 percent plus efficient while petrol engines are only about 25-30 percent efficient. Why? Because a lot of the energy consumed in the internal combustion engine is released as heat and noise. But the petrol car has one advantage. The cabin can be heated by waste heat collected from the engine cooling system (which would otherwise be dissipated by the radiator – without which the engine would overheat and catch fire).

In short, in-car heating is free for a petrol-powered car. But for an electric car the cabin heat would have to be produced by the battery, thus reducing the driving range further. As well as powering the electric motor, the battery would have to power the equivalent of a two-bar electric fire which consumes about 1-2 kW!

The second problem is the cost of batteries. The Nissan Leaf is currently the world’s best-selling electric car. Nissan’s website quotes a list price for the basic model of £16,680 – without the batteries. You can either rent the batteries from Nissan at a cost of about £90 a month (depending on your estimated mileage) or you can buy them outright for about £5,000. So the real cost of the car is nearer £22,000. (The on-the-road cash price with finance as I write is £24,190).

As for the cost of the batteries, the £5,000 price tag is only possible because the government is offering a subsidy of about £4,500 per car. Without that subsidy the market price of the batteries would be nearer to £10,000 and that of the on-the-road car would be over £26,000. The nearest petrol equivalent car in Nissan’s range is the Micra which retails at around £12,000. So, very approximately, one can say that currently an electric car costs twice that of its petrol analogue.

The third problem is the shortage of charging points. Norway, where 29 percent of new cars sold last year were electric, has nearly ten times the number of charging points per head of population than the UK. Certainly, new charging stations are being rolled out in UK cities and on motorways by the oil majors and by niche players like Ecotricity. But, given the range issue, we really need to have about four times as many charging stations as there are currently conventional petrol filling stations. One can imagine the hard shoulders of Britain’s motorways clogged with discarded vehicles, the drivers of which have miscalculated their journeys and run out of juice…

There is a fourth issue which has been little discussed thus far. The disposal of used electric car batteries will be a major challenge as the risk of environmental contamination is high. This will also be costly – and someone will have to pay for it. What’s more, we are already running into a shortage of lithium – the essential material in these batteries – which means that battery prices will be under upward pressure, despite increased economies of scale.

Electric cars – advantages

The cost of running an electric car is currently far cheaper than the cost of running a petrol or a diesel car. Nissan suggests that the electricity cost for the Leaf works out at two pence per mile as compared with a petrol cost of over ten pence per mile for an equivalent petrol car.

Sceptics will point out that much of this disparity arises through tax. As we know, about 67 percent of the cost of a litre of petrol in the UK is tax. That is about 79 pence on a litre of fuel at the current pump price in London of £1.18 per litre.

This raises another interesting problem. If the tax revenue on petrol in the form of fuel duty and VAT were to dry up completely – as the government foresees it will – the government will have to raise equivalent revenue elsewhere. Tax revenue on fuel duties last year, not including VAT, amounted to a massive £27.6 billion according to the IFS. In their wisdom the politicians may determine that they have no choice but to tax the electricity used by motorists to charge their cars. The cost advantage of electric transport might thus evaporate overnight.

The cost advantage of electric transport might evaporate overnight.

In any case, the environmental advantages of electric cars (fewer carbon emissions) will only come about if we produce the electricity used to power them via renewable energy (wind turbines, solar panels etc.). In 2016 only 9 percent of the UK’s electricity output was from renewables. That will clearly have to increase. Yet we know that electricity produced by renewables will be more expensive than that currently produced by fossil fuels. Therefore, as electric cars become standard, the cost of electricity is likely to rise anyway.

So by the time we get to 2040 we may find that the cost of running an electric car is comparable to that of running a petrol-powered car today.

Electricity demand

If we were really to ban all petrol cars and run only electric cars, by how much would demand for electricity increase in a country such as the UK? This depends on a number of assumptions.

The first is that owners of electric cars would choose to recharge them off-peak – that is, at night. That is reasonable if we assume that motorists will use their cars for short journeys – the school run, shopping, short commutes – and then return home and recharge them overnight. This also begs the question, much debated of late, of whether we could use other high-demand household electrical items (such as kettles, oven and immersion heaters) without tripping the household main fuse – and being plunged into darkness.

But if people (and truckers) are making long journeys they would have to recharge at charging stations during the daytime.

There are also assumptions to be made about the overall impact of electrification on behaviour. Some have argued that electrification could incentivise the migration of rail freight to the roads. This, together with the prospect of cheaper self-driving convoys of lorries on motorways (much reported over the Bank Holiday weekend[ii]), may increase the overall volume of traffic on our roads.

Therese Coffey MP, the UK Environment Minister, claimed in a letter to the Daily Telegraph on 24 August that the all-electric future will entail an increase on today’s peak demand of just eight percent.

It turns out that Ms Coffey’s is the most optimistic scenario outlined in The National Grid’s Future Energy Scenarios 2017 which sets out five scenarios for energy production and use in the UK. (Readers can download this document by clicking the hyperlink). The fifth scenario -tucked away on page 93 – envisages that the increase in peak demand will be in the order of 30 GW as against the total existing peak capacity of 60GW – that is an increase of 50 percent.

As far as I am aware, there are no plans to expand electricity generation in the UK by 50 percent by 2040. This opens the real possibility that when, in 2040, you arrive at your motorway charge point, say half way between London and Leeds, there will be no power available. You will just have to wait until the power comes back on. Maybe a new affectionate name for electric cars will emerge: snooze pods.

Economic impact of electrification

One recent report by the Green Alliance argued that the 2040 target was not good enough: a 2030 target could halve oil imports into the UK within ten years. But Wood MacKenzie reckons that the dramatic fall in fuel consumption by cars will be partially offset by a rise in consumption by commercial vehicles and aviation, and that the net demand for oil will fall by only 20 percent.

Since 01 April when tax breaks were removed Tesla’s Hong Kong sales have been as follows. April: zero; May: five.

Overall, if demand for oil is going to fall significantly worldwide, one should assume that the price of oil will fall also – thus narrowing the differential between the costs of electric and petrol motoring. The Petroleum Industry Association which represents the interests of Britain’s six major oil refineries insists that oil will remain a major part of the UK economy.

The subsidy circus

In markets such as Denmark and Hong Kong where subsidies to buy electric vehicles have been removed, sales of electric cars have fallen dramatically. 3,700 Tesla models were sold in Hong Kong in the first quarter of this year. Since 01 April when tax breaks were removed Tesla’s Hong Kong sales have been as follows. April: zero; May: five.

Tesla’s share price has been sustained by its order book of over 400,000 vehicles – many of them in California where the subsidy regime on car batteries is generous. Sooner or later those subsidies will be reduced and the company’s sales may go the way of Hong Kong.

Just around the corner?

Twenty years from now technology may have solved the problems I foresee. Battery technology may be such that sturdy electric cars have a range of 700 miles and the widespread use of nuclear fusion reactors may have made electricity cheap and plentiful. On the other hand, it may be that there are physical limits to battery technology and nuclear fusion, which has been just around the corner for the last 50 years, will probably still elude us. I don’t know – and neither does the government.

Moreover, some of us might have appreciated the right to run around in efficient petrol cars if we wanted, especially for long journeys. I can’t imagine that the electric version of the Paris-Dakar rally will be quite the same.

Just on the basis of the precautionary principle it might have been better to have made 2040 an aspirational target for the triumph of electric cars rather than the twilight of the petrol heads. There is certainly a lot of politics going on. Was it coincidence that DEFRA announced the British target in the same week that BMW (ETR:BMW) announced plans to build the electric version of the Mini in Britain (with German motors, of course)?

As electric cars become mainstream so batteries will get cheaper to produce and may become somewhat more efficient – but the gradual removal of government subsidies will cancel out any cost reductions. In the same way, as electric cars become ubiquitous the cost of electricity will surely rise with more of it generated by costly renewables and then taxed to make up the government’s short-fall in tax revenue.

No doubt we shall all own electric cars in 2040. But it is just as well that we shall be practically unable to undertake long journeys in them – because most of us will be unable to afford to anyway. Thank you once again, Mr Musk.

[i] See:

[ii] See Driverless lorries to hit UK roads, The Daily Telegraph, 25 August 2017.

Comments (13)

  • Robin Andrews says:

    Thankyou for your thoughts. However, you omit the possibility that Hydrogen Fuel cell technology might come to the rescue. Hydrogen produced from renewables is simply another “battery” or way of storing energy. However, it has the massive advantage of being able to power a vehicle for many hundred of miles – not the 150 or so that existing battery technology allows. A Hydrogen fuel cell does not wear out – like a Lithium Ion battery. I note today that the Pau municipal authority has announced the adoption of Hydrogen Fuel cell technology for their bus fleet.

  • stan says:

    It would seem that hydrogen powered cars may be a better answer – fuel up at existing petrol stations instead of using LPG, longer distances between fills, no use of lithium, and exhaust gases are water vapour.

  • Ian says:

    Another excellent analysis from Victor Hill. Do the same arguments apply to hybrids?

  • Andy spurr says:

    You conveniently have not realised that these electric cars will be hybrids , probably powered or topped up by fuel cells , so charging points are not required in many instances and as such will be redundant by the 2030 deadline

    • S. B. Nisbet says:

      True, but this remedy ignores the extra pollution caused by the manufacture of 2 different engines being manufactured for the one car.

  • Tony Papantonioi says:

    Just because governments decree that by a certain date we will all be driving electric cars is just nonsense. 10 hours charge on an ordinary domestic supply or 90 minutes fast charge, there will be a lot of heat with fast charge and a large drain on the electric network a dozen or so cars fast charging will take all the power. The cars have to be affordable in the 10k to 15k bracket which they are not. Also the electric motor may be more fuel efficient but generating, transporting, charging batteries all take power so there is loss before it gets to the motor. Car manufacturers lied about diesel emissions because they peaked years ago you cannot make them any cleaner the limit was reached. And until you can charge a car in 5 minutes and be affordable it is all a pipe dream.

  • Terence T Restorick says:

    Yes the Hydrogen fuel cells.
    Probably more important is having identified a problem human ingenuity – certain individuals accept the challenge. Tesla himself, Musk as examples, regardless of personal gain. Not all shareholders are in it for the money, maybe they have enough.
    The boffins do it because that’s what they do. Musk said he wanted to start the revolution. The money is the soldiers of that revolution.
    If ever there was an impetus to find the solutions. Harvey deep in the heart of Texas, will have even George W Bush funding this research if he cares about his grand children.
    Geely, BYD, For a tiny UK IP related business that is drawing interest from the big names take a look at LSE:IKA. It’s a long shot like ARM 20 years ago. But that is the time scale we are looking at. ARM: To remind you. IBM” Who wants a computer in their home.”
    Intel ex CEO: “Mobile? forget it.”
    Sure Tesla will be a rocky ride. But then the Stones didn’t expect to still be rocking more than fifty years on.
    Victor you are no Rock Star.

  • S. B. Nisbet says:

    Too much emphasis is being made about the cleanness of electric cars. It ignores the fact that much pollution has been produced to manufacture wind or solar farms in the first case. These farms need to be maintained, producing further pollution, and eventually have a finite life. Where the electric power is produced by fossil fuel, quite a lot of energy is lost in converting the latter into the former. By the time it is used, I doubt the world wins ecologically but a number of intermediaries, in the Global Warming industry, have creamed off a deal of profit for themselves.

  • Lawman says:

    The best analysis on this subject that I have read.

    Two readers beat me to the point that jumped out at me from the beginning: the way ahead is hydrogen. Britain could be a world leader by developing H fuel cells. Given the HMG obsession with windmills and similar, I suspect Japan will beat us.

  • Victor Hill says:

    These are all very interesting and appropriate comments and I shall try to address them in a follow-up article out this coming Friday (08 September). Many thanks to all readers who wrote in – I take your feedback very seriously. Victor

    • Jude Meritus says:

      Your article and commenters do not appear to have considered what is really behind these risky announcements by governments. They are either gambling on the major technical, economic and practical problems being solved before they are forced to back-track on their target dates. Or there really is a far different agenda in mind if they are planning based on the UN’s sinister targets of Agenda 2030:
      which can only mean they anticipate (or plan) massive reductions in population where only the liberal/Marxist elite will be owning vehicles. Everyone else, if they even have the freedom to move around will be routed via self-driving vehicles and public taxis. But this is but the most prosaic of the scenario that is planned for us.

      As exposed by

      just one short quote will I trust encourage your readers to consider the outcomes that will be necessary as the world advances towards its false utopia:

      “Governments around the world routinely and with increasing transparency lie to promote hidden agendas, as evidenced by actions that are at odds with their words. If the UN is truly pursuing its stated goals, its words will be supported by its actions. So, what actions or methods will be used in implementing its plan, and are those actions in harmony with its stated goals?”

      Both hyperlinks deserve serious study by your futurists and I trust your ‘evil’ namestyle is nothing more than parody. Perhaps the acceptance of this post – or not – will reveal the truth?

  • springer says:

    Victor you are a rock star! Tesla fanboys are totally missing the point about electrification of cars. It’s just change of drive train, it’s not a revolution of any kind. It’s like changing the wheels on your car to certain style and calling it a revolution! Incumbent auto heavy weights are still there because they were the best at cut-throat competition of 100 year old car manufacturing business. Tesla, the new kid on the block was weaned on selling boutique luxury electric cars to silicon valley millionaires (or some air head who took out $100K on a bank loan to buy Tesla). Nissan and GM are the true revolutionaries of mass market EV having produced original GM Ev1 and Nissan Leaf. Now Tesla wants to join the big boys in the ring and duke it out over domination of the mass car market. Good luck to the new kid, but heavy weights are in it for full 10 rounds, and more than likely new kid will wind up on the mat from outright KO!

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