Let’s spark the electric car revolution now — there’s no time to stall

Stephen King
Tesla co-founder and CEO Elon Musk gestures while introducing the newly unveiled all-electric battery-powered Tesla Cybertruck: AFP via Getty Images

For those of you thinking that electric cars didn’t exist before Elon Musk and Tesla, think again. Those stepping out into the manure-strewn streets of Manhattan in 1897 could have hailed a battery fuelled, as opposed to horse drawn, taxi. In 1900, more than 1,000 electric cars were made in the US, 28 per cent of total American car production that year.

A few years later, however, Henry Ford produced the petrol-powered Model T and the electric starter motor replaced the hand crank. From that point on, the electric car was seemingly doomed: not enough power, not enough range and, as petrol stations proliferated, not enough charging points.

To be fair, electric vehicles still managed to flourish in niche areas. The humble milk float had a maximum speed of around 15mph, could travel roughly 25 miles (following a seven-hour charge) and blocked the streets of Britain for decades. Floats were cheap to run and could easily be charged at the milk depot after the day’s deliveries (a model that could be used in the 21st century if we end up with huge fleets of self-driving cars). Still, floats could never compete with a Ford or, for that matter, a Ferrari.

Tesla, however, can. And, increasingly, so can other manufacturers of electric cars, one reason why the Government is now planning to ban the sale of petrol and diesel cars by 2035. Range is less of an issue than it once was. The cars — unlike milk floats — are quick. Fuel-wise, they’re incredibly efficient: they don’t rely on the controlled explosions taking place in an internal combustion engine (which creates too much by the way of heat and too little by the way of miles). And, over time, the maintenance bills will be a lot lower: no gearboxes to go wrong, no spark plugs to clean, no engine oil to be changed.

Yet, before we get too excited about this belated electric-transport revolution — and its consequences for the environment — it’s worth dwelling on three major challenges: the generation of electricity, its distribution and, finally, tax.

Stephen King (Alamy Stock Photo)

The advantages of going electric are hugely reduced if the electricity itself depends on the burning of coal, oil or gas. The good news here is that, unlike some countries, we have already made considerable progress in reducing our dependency on carbon: last year, for the first time, more of our electricity came from renewables — solar, wave, wind — than from fossil fuels. The bad news is that we will need a lot more generating and grid capacity if we really are going to meet the Government’s electric car ambitions.

The same goes for the distribution network. Other than Tesla’s bespoke Superchargers, there’s a tremendous shortage of ultra-rapid chargers able to “fill up” an electric car in less than an hour. Ionity claims to be Europe’s dominant rapid charging network but, to date, has only three charging stations in the UK: great if Maidstone or Milton Keynes happen to be nearby and rather handy if you’re planning to elope to Gretna Green but otherwise somewhat limiting.

There are only three ultra rapid charging stations in the UK but these challenges need not be insurmountable

As for charging more generally, only 57 per cent of UK households have access to off-street parking, the ideal place to charge an electric car overnight. And almost 40 per cent of the nation’s charging points are to be found in London and the South-East. When it comes to the electric-car revolution, there’s little evidence to date that the UK is “levelling up”. Admittedly, such infrastructure challenges need not be insurmountable. The Victorians, after all, managed to build 20,000 miles of railway track. Along the way, however, many investors lost an awful lot of money (the 1840s “Railway Mania” remains a textbook example of financial excess). And history suggests that, once a new infrastructure has been constructed, governments have a nasty habit of regulating price down to the marginal cost of providing the service (with renewables, that’s virtually zero): good for consumers (and voters) but very bad news for the investors who stumped up the money in the first place (it’s one reason why the share prices of mobile phone operators have tumbled since their late-Nineties heyday).

If investors cannot easily be persuaded to part with their cash on the appropriate scale, future governments may have to dip into their own pockets to plug the gap. Ironically, however, the electric-car revolution may mean government pockets are not as deep as they once were. For decades, the Treasury has been heavily dependent on income from fuel duty (which, in 2020, is likely to stand at a little less than £30 billion or approaching four per cent of total tax revenues). It’s a bigger source of government income than capital gains tax, inheritance tax, stamp duty, alcohol or tobacco. And, in 15 years’ time, it will begin to disappear.

Making up the eventual shortfall would require the equivalent of six per cent on the basic rate of income tax or 4.5 per cent on VAT. As neither of those is likely, the Treasury will have to look elsewhere. Taxing electricity more heavily isn’t terribly attractive if it ends up penalising those who choose not to own a car. Taxing road users would seem a better option, but is only likely to be “fair” if allowance is made for both location and time of day: that, however, would require more or less continuous monitoring of people’s movements, an obvious challenge to civil liberties (even if our smartphones do more or less the same on a minute-by-minute basis).

Boris Johnson has always been an enthusiastic supporter of transport revolutions: he’s banned bendy buses, backed Boris bikes, and boasted of building bridges. And he’s probably right to be backing battery electric vehicles. They’ve come a long way in the past 10 years. If, however, the electric revolution is to succeed, we need to go beyond the first baby steps. As Mao Zedong once wrote — admittedly in rather different circumstances — “a revolution is not a dinner party, or writing an essay, or painting a picture, or doing embroidery”. There is much work to be done.

  • Stephen King (@kingeconomist) is HSBC’s Senior Economic Adviser and author of Grave New World (Yale)