Honda doubts drivers will take to electric cars

Japan's No 2 carmaker Honda remains skeptical about demand for electric cars, while rival Nissan and luxury leader BMW push ahead with plans to accelerate production of EVs.

Honda has a "lack of confidence" in the future of EVs, says the carmaker's head of research.

"It's questionable whether consumers will accept the annoyances of limited driving range and having to spend time charging them," says Tomohiko Kawanabe, president of Honda's research and development programme.

But Nissan CEO Carlos Ghosn forecasts the vehicles will make up 10 per cent of the global car market by 2020. And BMW is moving forward plans to roll out an electric-powered city car by two years to 2013 and investing in carbon-fibre parts to gain an edge in lightweight technology.

Honda says it plans to sell electric cars in the US to help meet California emission rules, but its priority is to improve the fuel efficiency of new and upgraded models.

"We are definitely conducting research on electric cars, but I can't say I can wholeheartedly recommend them," said Kawanabe, 58, an engine specialist.

Nissan's hatchback Leaf EV makes its European debut in Portugal and the Netherlands in December, followed by the UK and Ireland two months later. It has a range of 160km on a fully charged battery. Running the air-conditioner or accelerating for long periods of time reduces the range.

BMW's move to bring forward EV development is part of a go-it-alone strategy by CEO Norbert Reithofer, supported by the Quandt family, a German industrial dynasty and the carmaker's dominant shareholders.

BMW is also developing front-wheel drive technology to serve as the basis for the Mini and namesake brand. Front-wheel drive cars, a departure for BMW, are typically cheaper to make.

From model years 2012 through 2014, the largest carmakers by volume in California must sell about 60,000 plug-in hybrid vehicles and electric cars combined, according to the state's Air Resources Board. Nissan's Ghosn said last week he aims to have capacity to build 500,000 electric cars a year by 2012, even as other demand estimates are lower than his.

Nissan is trying to make its Leaf electric car affordable and says it expects governments to begin phasing out incentives in three years, denying consumers the full benefit of cost savings from better technology.

Governments won't provide sales subsidies indefinitely and may begin a phase-out when current commitments expire in three years, says the company.

The Japanese carmaker is relying on incentives to price its mid-sized Leaf below €30,000 ($54,000) in most European markets and compete with petrol-electric hybrids from Toyota and Honda.

But Nissan may find economies of scale from increased production may be offset by diminishing payments, say analysts.

Portugal, the Netherlands, UK and Ireland were chosen as launch venues for the Leaf in part because of incentives, typically worth €5000 per car. They were also picked because of plans to offer a recharging infrastructure for electric cars.

But the introduction and phasing-out of "cash-for-clunkers" payments over the past 18 months has shown "how unpredictable incentives are", say analysts.

Nissan and 44 per cent-owner Renault have committed to invest €4 billion to develop and produce electric cars and batteries. While Ghosn predicts the vehicles will represent 10 per cent of global car sales by 2020, consultants foresee a much smaller market share.

"The uncertainties about battery longevity, inconvenience of limited range and lengthy charging times mean that electric vehicles are likely to remain a niche product for the foreseeable future," said Mike Tyndall, a London-based automotive analyst at Nomura Securities.

Batteries for European-built cars will initially be shipped from Japan, leaving scope for big savings on transport costs and import duties when the two carmakers have battery plants operating in England, France and Portugal, says Pierre Loing, Nissan vice-president for product planning.

"Between these savings, technology improvements and economies of scale as production ramps up, we should be able to avoid losing money even as incentives are phased out," Loing said.