Britain’s Mighty Electric Car Market

Nestled within a recently released British report on climate change are these ambitious expectations:

The energy efficiency of Britain's housing stock should be systematically tackled in a national programme, neighbourhood by neighbourhood, so that 10 million lofts and 7.5 million cavity walls are insulated by 2015 and 2.3 million solid walls by 2022. And a national electric charging system should be set up so that 240,000 electric cars can be on the road by 2015, rising to 1.7 million by 2020.

The U.K. new-car market is about 2.5 million cars per year. It’s actually been shrinking over the past decade, but let’s assume that it grows slightly by 2020, to around 3 million. The climate report argues that by then, more than half the new cars in Britain will have to be EVs. If we were to demand the same of the United States, we’d need to have something like 8 million EVs in the national fleet, assuming a new-car market of about 16 million by 2020 (it’s less than 10 million right now, but expected to recover and get to 14 million-16 million over the next two years, then grow). One out of every two new cars sold would have to be an EV.

At the moment, we have a lot of startups trying to build and sell EVs, but we only have a single carmaker of scale, Nissan, proposing to bring an all-electric car, the Leaf, to the United States by 2010. Of course, we also have General Motors' (MTLQQ) Chevy Volt, but that’s not an all-electric EV. So I’m pretty skeptical that we’ll see 50 percent EV penetration in the United States by 2020. And even if we did, 8 million new EVs would only represent a fraction of the overall U.S. vehicle fleet of 210 million cars and trucks. I’m not even sure that the battery market can scale fast enough, worldwide, to provide enough high-tech lithium-ion batteries to satisfy that level of EV production.

Still, the English climate wonks say that major-league EV adoption is what’s needed for Britain to meet its ambitious targets for atmospheric CO2 reduction. Could it work? The U.K. is obviously a much smaller and more manageable environment than the United States. So even though much of the impetus behind the development of EVs is in the United States, it’s possible that the best markets for these cars will be in Europe. Could do wonders for the trade deficit, if U.S. EV startups discover that their best customers aren't actually closest to home.