Merkel sticks to ‘electromobility’ despite setbacks

Chancellor says she wants 1mn electric cars in Germany by 2020; Only 3,000 sold in Germany last year; Nearly half of Germans say they won’t pay higher cost; Better Place failure not seen as significant problem

 Berlin/Reuters

Chancellor Angela Merkel reaffirmed her target to bring 1mn electric cars on to German roads by the end of the decade, despite evidence of dwindling consumer interest.

“You have a chancellor who believes in electromobility,” she told a conference to promote electric car technology, less than 24 hours after the collapse of an Israeli electric car company.

Fewer than 3,000 electric cars were sold in Germany last year out of a total market that exceeded 3mn.

The German auto industry plans to invest roughly 12bn euros ($15.5bn) in the next three to four years in alternative powertrains, including battery-powered electric cars, according to the president of industry association VDA.

“Driving electrically is no vision anymore, it’s a reality,” said VDA’s Matthias Wissmann.

Yet economy Minister Philipp Roesler refused to adopt the approach of China, France and the US, which subsidise purchases of electric cars to boost demand.

Once hyped as a technology that would crowd out conventionally-powered cars, electric auto sales have flopped due to high costs and range limitations.

A survey by Germany’s motoring club ADAC said drivers are much more sceptical about the technology than two years ago and nearly half are unwilling to pay extra for an electric car.

“We actually lose money with each Ampera we sell, because the technology is too expensive,” said Karl-Thomas Neumann, chief executive of General Motors’ unprofitable unit Opel.

Last year, the GM brand sold 5,300 Amperas out of 1mn cars, making it the best-selling passenger car running on electricity in Europe, according to the company.

Upstart electric car maker Tesla has been a rare success story, posting its first-ever quarterly profit.

The low interest in Germany is echoed by problems elsewhere.

US electric car battery maker A123 filed for bankruptcy and cash-strapped Fisker Automotive is in talks to sell itself to a new owner.

On Sunday, Israeli charging station provider Better Place filed a court motion to liquidate.

Renault, which partnered with Better Place to set up a battery swapping network in Israel and Denmark, said the move did not call into question its own electric vehicle strategy, one of the most aggressive.

Better Place partnered with Renault in 2008 to create an electric car system combining charging terminals with battery swap stations to increase the range of electric cars and put an end to drivers’ worries about running out of power.

It had raised more than $850mn from top-tier investors and two years ago said it was valued at $2.25bn.

Last August, Better Place secured a €40mn ($50mn) loan from the European Investment Bank (EIB) — the company’s first credit facility from a financial institution — to further develop its global electric car network.

But sales never took off, with just over a thousand cars on the road in Israel and Denmark, the first two countries where it began operating.

“The (gasoline-free) vision is still valid and important and we remain hopeful that eventually the vision will be realized for the benefit of a better world,” the company’s board of directors said in a statement. “However, Better Place will not be able to take part in the realisation of this vision.”

Car makers have invested heavily in electric cars, but awareness is growing that hybrid and battery cars may not be enough to win the race to meeting rigid EU carbon dioxide emissions limits.

“This is a difficult day for all of us,” said Chief Executive Officer Dan Cohen.

“Unfortunately, after a year’s commercial operation, it was clear to us that despite many satisfied customers, the wider public take up would not be sufficient,” he said in a statement.

The company management, he said, requested the appointment of a voluntary liquidator who would decide on how to award compensation to customers and staff and maintain the network already in place.

Sunday’s announcement came as no surprise. With its partner Renault, Better Place committed to a production run of 100,000 electric cars for Israel and Denmark, counting on large fleets to sign up.

At the same time it developed plans to expand into Australia and then onto markets like China and the US.

But the large-scale deals never materialized. Only about 900 of its cars are on the road in Israel, and about 400 in Denmark.

Renault could not immediately be reached for comment. In February 2008 it said Renault-Nissan and Better Place had signed an agreement “to provide the necessary conditions for the successful launch of electric vehicles.”

A November earnings report published by conglomerate Israel Corp, which owns about 30% of Better Place, said the company had an accumulated deficit of $561.5mn with more losses expected.

The company made changes and reduced its workforce. Founder Shai Agassi was removed as CEO in October, and his successor was named four months later.

Alan Gelman, chief financial officer and head of operations in Israel, told Reuters at the time that the company knew why it was floundering and was trying to turn a corner.

“We at times were too focused on turning into a global company and expanded too fast, but we have to focus on local operations and selling cars,” he said.

After a failed final round of fundraising, Better Place turned to the Tel Aviv area court.

“Revenues are still insufficient to cover operating costs, and in the light of the continued negative cash flow position, the board has decided that it has no option but to seek to make this application to the courts for an orderly liquidation of the company,” it said in a statement.

Israel Corp, the largest shareholder in Better Place, said in a statement to the Tel Aviv Stock Exchange on Sunday it had decided not to inject more cash into the beleaguered company.

Other shareholders include HSBC, GE, Morgan Stanley and Vantage Point Venture Partners. None were immediately available to comment.

Gene Gable, a spokesman for Vantage Point Venture Partners, confirmed that the group was an investor in Better Place and since 2008. However, he said he could not disclose the amount of Vantage Point’s investment in the electric car venture.

“We are not making any further comment on Better Place right now,” he said. “We may have a statement later in the week.”