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The Business of Green

Money matters in the green world, by Leon Gettler.

Electric cars to save the auto industry


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Australia’s auto industry is in serious trouble and there are suggestions that the electric car might save it.

According to the Automotive Australia 2020 Technology Roadmap released by the automotive industry, vehicle electrification is one of four big opportunities to revive the auto industry. The other three are gaseous fuels, lightweight vehicles, and telematics. The report says Australia has a number of advantages that could make it a significant player in the global electric car market. These include the fact that Australia is the second largest producer of lithium, an important component in current state-of-the-art battery technologies. Australia also accounts for approximately five per cent of the world’s rare earth metal reserves used to produce permanent magnets for electric motors, with smaller quantities used in semiconductors, catalysts and exotic alloys. Australia has potential for plenty of green energy with a well-connected, robust electricity grid that will allow the charging and uptake of electric vehicles, and plenty of wind, wave and solar energy. Australia also has a lot of global strengths in research and development.

Business commentator Alan Kohler says that any handouts to the auto manufacturers has to be contingent on them building an electric vehicle here. “The government has already helped fund a proof-of-concept electric Commodore that has now been built by Australia’s parts manufacturers; it needs to follow up by making any further cash payments to GM conditional on it actually being produced here. If car industry handouts are not tied to making EVs in Australia, the government will be making a huge bet on the future of Australian manufacturing, and possibly consigning the Australian car industry to the scrap heap.”

Of course, the problem is that the decisions are made in Detroit which has an agenda against EVs. That means the Australian government would have to put pressure on Detroit.

Damon Cantwell, a partner at Deloitte who has been involved in auto industry analysis for many ears, says that the big opportunity for Australia would be to build connections with the electric car industries in China and India which are booming. “With the dynamic of Indian and Chinese vehicle manufacturers who are setting their sights on the US and western Europe, there’s a strong argument to encourage them to look to Australia as a toe in the water and setting up a production facility in a market with a highly sophisticated consumer and with a high skills base,’’ Cantwell says.

The other great advantage of electric vehicle manufacture is that the plants, unlike traditional car manufacturers, don’t require the manufacturer to produce 300,000-400,000 vehicles a year. They could do it on much lower volumes. That makes it perfect for a market the size of Australia which has a population as big as Calcutta.

The government claims, according to one report, that electric vehicles will make up 20 per cent of new car sales in Australia by the end of the decade and 45 per cent by 2030, potentially requiring up to $10.2 billion in upgrades to the electricity system.

But that remains to be seen. At the moment, electric cars aren’t selling. As reported
here, figures supplied by the Federal Chamber of Automotive Industries show that only 49 electric cars were sold last year. That’s in a market that topped one million cars for the fourth time. This represents market share of 0.005 per cent.

The stratospheric price of electric cars here – they’re now selling at about $47,000 - $52,000 plus costs - would have to come down. This year, there will be a few more models, with Holden, Nissan and Renault all launching EVs in Australia. The problem is the price of the EV when compared to how much you spend on petrol. The Holden Volt, for example, will cost just under $60,000 when it launches later this year. Compare that to the $21,000 of the Cruze it’s based on and you just know which car people will buy.

If electric vehicles take off in Australia, prices will have to come down. Auto manufacturers might scream about their margins but if they don’t, they’ll be losing out on a growing market. It will also take some work from the government. Otherwise, Australia’s auto industry could become a giant scrap yard.