OPTIMAL ENERGY, the private company that received a cool R250 million in cash from tax coffers to build South Africa’s first home-grown electric car, the Joule, hopes to produce 50 000 units per year. It is angling for some R7 billion to turn an expensive prototype into a… well, an expensive production model.
There is a certain cool factor attached to a project like this, both from an engineering angle and, if first-look driving reports are anything to go by, from a motoring perspective. But cool doesn’t pay the rent.
Typical small-car profit margins are in the region of R3 500, compared to R20 000 or R30 000 for a big SUV. At this rate, it will take half a century to repay R7 billion in loan funding, assuming interest at prime and 50 000 sales per year. No wonder Optimal Energy raised its sights from its original plans of 4 000 units a year. The profit on 4 000 cars doesn’t cover a third of the interest on R7 billion.
There’s also tough competition in the market. Nissan, General Motors, Smart, BMW, Mercedes, Renault and Mitsubishi are among the big names that either already have plug-in electric cars on sale, or plan to launch models for retail production in the near future.
All hope to cash in on a fashionable product segment, improve their marketing image or exploit the subsidy largesse of governments in thrall to the green lobby. The world over, electric cars are showered with large taxpayer-funded subsidies, ranging from rebates to buyers and manufacturers, to congestion tax relief, to free access to municipal electricity for charging the things.
And even despite this favourable playing field, they’re not selling well. Take the Th!nk City, a plug-in electric made in Finland. Like many brands with punctuation in the middle of their name, it nearly collapsed in financial ruin, before it was saved by an investment of R200 million in 2009. Since then, 2 500 units have been built, but by March 2011 only 1 045 of them were sold across Europe and the US.
The G-Wiz, made by REVA from India, is the world’s best-selling all-electric car. Unlike the Joule, it is a micro-car that escapes European safety standards by not being classified as a real car. It sells for about half of what the Joule is expected to cost, but has sold only 4 000 units in countries all over Asia, Europe and South America (but not the US).
In the US, a market of more than 10 million vehicles a year, plug-in electric vehicle sales are counted in hundreds. After a slow start, the biggest player in that market, General Motors – half-owned by the US government – talks up prospects for its Chevy Volt in 2011, saying it expects to make and sell 10 000 units. But the Volt is technically a hybrid, with a “range-extender” petrol engine that takes it twice as far as the best Joule will go on one charge.
Truth is, even the better-performing, more practical hybrid-electrics have been struggling in the market. After the initial excitement around the Toyota Prius, the industry has been watching sales decline every year for three years in a row.
This year is looking better, but hotcakes these cars are not. The Joule’s hopes of selling 50 000 a year are ambitious indeed.
And it’s not like they’re the panacea that proponents make them out to be. The Joule will do 150 km on a standard battery, with a 300 km pack as an optional extra. You don’t want to get to work only to find that you can’t take your car to a client in Pretoria or Boksburg. You don’t want to get home only to find that you can’t make it to a restaurant that evening.
Moreover, displacing the pollution caused by the internal combustion engine to a coal-burning power station hardly meets the claimed environmental objectives of purchasing such a car. A recent study published in the journal Energy & Environmental Science ranked electric vehicles on a par with an efficient petrol or diesel engine in terms of “well-to-wheel” impact.
The makers claim that the Joule will usually charge during off-peak hours, but would a typical driver not plug it in when arriving home after work? If the majority of electric cars will start their charge cycle exactly during the afternoon power consumption peak, that they take eight hours to charge is neither here nor there.
Altogether, the name seems apt. It takes 3,6 million Joules to make up one unit of household electricity, or the energy produced by a pool pump or a small heater running for one hour. A Joule is a very insignificant little thing.
But it could have been worse. They could have called it the K!ef-Kar.