How will rising energy costs impact electric car adoption?

With energy costs rising all over Europe, many in the industry are concerned about the future of fully electric vehicles (EVs). The price of electricity has always been one of the most attractive aspects of switching to an EV. Electric cars come with higher entry costs but are then cheaper to run, meaning you’ll make some of that initial investment back over time by avoiding the petrol pumps and fluctuating oil prices. At least, that was until the current energy crisis. Now, industry bosses in Germany are concerned that if the trend of rising energy costs continues, long-term electric car adoption could be impacted. Here’s why they’re worried.

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The cost of fuel and the cost of electricity

For years now, early adopters of electric cars have watched the steady rise in fuel prices with a sense of smugness, a relief that they’re outside of those market forces. In September 2020 a litre of Unleaded 95 cost around 1,20 € in Germany. By March 2022 that price was 2,20 € per litre. The worrying thing for EV drivers is that we’re now seeing similar rises for electricity, with costs rising by 10% for those charging at home. The price of electricity is linked to the price of gas, and that is becoming scarce in Europe.

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Public charging networks are the same story

Many EV drivers in Europe charge their cars at home, but when making longer trips the reliance on public charging networks becomes unavoidable. Just like the cost of charging at home is on the rise, the price at networked charging stations is also going up. In Germany, for example, Allego put its prices up from 43 cents per kilowatt hour to 47 cents last month. The numbers are even worse for fast charging methods, with express charging rising from 65 to 70 cents per kilowatt hour and ultra-fast charging going up from 68 cents to 75 cents per kilowatt hour. Sound familiar?

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State subsidies for electric cars are set to halve

Lower running costs were one way to offset the purchase cost of EVs, but another was state subsidies. Countries such as Norway have achieved remarkable EV adoption rates thanks to significant subsidies. In Italy, however, the system of state incentives has slowed down. This is mainly due to the exhaustion of allocated funds and the complexity of the bureaucratic procedures to access them. National and regional incentives are certainly important but they represent only a drop in the ocean compared to real needs.

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Car-sharing is one solution, for now

Drivers all over Europe have been turning their backs on private car ownership and switching to car-sharing models for some years now. One of the most attractive aspects of the car-sharing model is that the operator pays for the running costs of the vehicle - including the fuel or charging costs. When petrol and diesel prices surge, car-sharing becomes more attractive. With many fleets now featuring electric cars for car-sharing, the same principle applies to surging energy costs. The solution, however, does seem short-term. It is only a matter of time before the car-sharing providers pass on these costs to customers one way or another.

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Not every car-sharing company can be 100% electric

Car-sharing is, for many, an entry point for EV driving and can in turn lead to higher EV adoption overall, but not every car-sharing provider has the ability to operate a 100% electric fleet. SHARE NOW CEO, Olivier Reppert, has written extensively on the subject. SHARE NOW operates a fleet that is 25% electric, but several hurdles need to be overcome to get that number to 100%. High leasing costs, insufficient existing public charging infrastructure and the need for further investment are all challenges that car-sharing providers face in 2022 when it comes to going electric.

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The future looks uncertain

So how real is the danger that the EV hype will subside in Europe? Are we really facing a reduction in the rate of electric adoption? Industry experts are certainly worried about it. Prof. Dr. Stefan Bratzel, founder and director of the Center of Automotive Management (CAM) in Bergisch Gladbach, told German media: “The electricity price explosion could end up being an acute danger for vehicle transition, and we need to be damn careful about it.” You can see why he’s worried. If electric cars become more expensive to run, the rise in electric mobility is in danger of collapsing - and that’s bad for us all.

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But the future is going to be exciting

It's not all doom and gloom for electric cars, though. The market is starting to liven up, and an exciting convergence is occurring. On the one side, traditional car manufacturers - the old guard from the ICE era - are going electric one by one. We're talking about the likes of BMW, Ford, Honda, and company. On the other side, there are the startups, for want of a better word. The software-driven companies like Tesla, Rivian and even Google and Apple, joining the EV market from the opposite end. They're meeting in the middle, and the drivers have never had so much choice. Here are some of the upcoming EVs we're most excited about.

Image© : Tesla

David McCourt

David McCourt

Sr. Editorial Content Strategist

"Own less, share more."

David is on a mission to improve the quality of life in cities through modern mobility solutions.