The Great E-llusion: Germany to Promote Electric Cars with Massive State Aid

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Even in this case, however, the benefits of the electric Smart over the diesel model are relatively modest. On the other hand, the costs of achieving those benefits are enormous. A vehicle in the lower mid-range class with an electric engine costs between €10,000 and 15,000 ($13,300-19,950) more than a comparable car with a gasoline engine.

Without government subsidies, electric cars are virtually unmarketable. France offers customers an incentive of €5,000, China offers €6,500 and the United States offers €5,500 (see graphic).

Nevertheless, the major carmakers have no other choice. They have to put electric cars on the market. On the one hand, oil supplies are limited, which is why alternatives to the internal combustion engine must be developed. On the other hand, many carmakers will be hard-pressed to achieve the emissions targets planned in the EU for 2020 without electric cars -- "unless we build nothing but small cars with three-cylinder engines," says BMW CEO Reithofer. But such small cars are "not an option" for his company.

The German auto companies are latecomers with the electric car. But that doesn't translate into the demise of VW, Daimler and BMW. The e-car will remain a niche model for the foreseeable future, because of its high price and limited range.

Disappointing Results

Mitsubishi says that its i-MiEV, which is now being sold in Japan for the equivalent of €34,000, can travel 144 kilometers (89 miles) on a single battery charge. An electric Smart supposedly has a range of 135 kilometers.

But in a test conducted by the German motoring magazine Auto Motor und Sport, the electric Smart only made it 106 kilometers on a single charge, while the Mitsubishi's battery was empty after 77 kilometers, even though the heating system had already switched itself off automatically 10 kilometers earlier, to save electricity.

These ranges are sufficient for most people's daily commute to and from work. But they still need a second car with an internal combustion engine or a hybrid engine for longer distances. This will limit the uptake of electric cars.

According to a study by Deutsche Bank, about 5 million electric cars could be registered in the European Union in 2020, which would still only amount to 2 percent of all cars. "But even this proportion can only be attained," the study states, "if the costs of electric cars come down dramatically in the next few years."

The Future Is Mixed

The great e-llusion creates the impression that the future belongs to this engine technology and that this future is already underway. It is reminiscent of the euphoria surrounding biofuels, which were once touted as a clean alternative to oil. But those hopes were quickly dashed when tortilla prices went up in Mexico because farmland was no longer being used to grow grain and corn, but to produce energy plants instead.

It has long been clear in the industry that there will not be a single type of engine to ensure individual mobility in a cost-efficient and environmentally friendly way. Instead, cars will still be powered by classic internal combustion engines, as well as by hybrid engines, natural gas, biofuels and one day perhaps even with hydrogen. And, of course, with electricity.

"We want the battery technology, and we're working on it at full speed," says VW CEO Martin Winterkorn, "but it's important to tell people the plain truth." The costs are still too high, the ranges too short and the charging times for batteries too long. Safety is also a concern, at least with the controversial lithium-ion batteries. Laptop and mobile phone makers have already had to recall some of their products because of a risk that the batteries could catch fire and explode.

Purchasing Offensive

There is still a lot of research to be done. However, the government, in its draft of the closing statement for the summit on May 3, has already committed to paper its ideas on how it intends to promote the electric car.

For instance, it plans to support a rule that would allow cars with CO2 emissions of less than 50 grams per kilometer to be credited more than once when the consumption figures for a manufacturer's total fleet is calculated. That way one electric car could be used to offset several gas-guzzlers.

In addition, the government wants to start a "purchasing offensive" for cars with very low CO2 emissions for its own vehicle fleets. Whether it will provide additional funds to promote research is still unclear.

Some of the top executives invited to Merkel's event, on the other hand, are paying more attention to a more immediate goal, namely securing prestigious positions in the government's circle of advisers.

For example, they have been jostling for weeks over the role of spokesperson on the issue of infrastructure. A top manager at E.on was initially slated for the job. But then Siemens claimed the leading position, threatening that otherwise they would not participate. In the end, the Chancellery decided the matter by creating two positions. Both managers, according to the plan, will have the chance to be photographed next to the chancellor.

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• Part 1: Germany to Promote Electric Cars with Massive State Aid
• Part 2: No Other Choice for Carmakers