At a conference-debate organised by the Idea Foundation at the Chamber of Commerce, François Bausch, Gerry Wagner and IDEA economist Frédéric Meys analysed electromobility in Luxembourg. Undeniably, as things stand, the target of 49% electric and plug-in hybrid vehicles by 2030 set by the National Energy and Climate Plan will not be achieved.
The Idea Foundation, the Chamber of Commerce’s think tank, has examined the environmental targets and incentives for electromobility in Luxembourg. Although the country ranks among the best performers in Europe, with the third largest electric vehicle fleet in Europe (behind Denmark and Sweden), Luxembourg’s target of 49% electric and plug-in hybrid vehicles by 2030 now seems to be a pipe dream. “The current trend is not sufficient to achieve the objectives set by the Grand Duchy. Based on current trends, by 2030, electric and plug-in hybrid vehicles will account for 17 to 20% of the fleet. So, the question we can ask ourselves is: what are the potential advantages and what are the potential obstacles to accelerating electromobility?” emphasised Frédéric Meys, economist at Idea.
In an attempt to answer this question, François Bausch, Member of Parliament for déi Gréng and former Deputy Prime Minister and Minister for Mobility, and Gerry Wagner, spokesperson for the House of Automobile, exchanged views in front of an audience of around 100 people.
Very quickly, the well-known obstacles to electrification were put on the table: concerns about range, higher purchase costs, constantly evolving technology, concerns about resale value… But most of these were dismissed. “Talking about concerns about range is an excuse today. Those who drive electric cars no longer talk about it; it’s no longer an issue because their daily journeys are covered,” said François Bausch. Gerry Wagner immediately confirmed this, pointing out that 97% of people who lease electric cars do not want to go back to combustion engines, according to a recent study by the House of Automobile.
When it comes to price, Frédéric Meys once again demonstrates that electric vehicles are competitive. The economist studied the issue in his working paper No. 34 on the electromobility market. By analysing 15 pairs of comparable electric and combustion engine vehicles in two scenarios (a six-year purchase and a three-year lease) and adding in the costs (purchase, energy, maintenance, insurance and taxation) as well as subsidies, electric vehicles come out on top in 12 out of 15 cases. ‘The gain remains small, around £1,255 over six years, but the price argument is no longer valid today. At least not with subsidies. Without subsidies, the same exercise reverses the situation, with a gain of £4,145 for combustion engines,’ said Frédéric Meys. The result is even more pronounced in the leasing scenario, where electric vehicles come out on top in 14 out of 15 cases.
Gerry Wagner qualified this demonstration. While he agrees with it, he nevertheless pointed out that this is an overall calculation, whereas consumers are primarily concerned with the initial outlay, which is often higher than the overall cost. The HOA spokesperson also pointed out that the economist’s calculation did not take resale value into account.
The Idea study also shows that while switching to electric vehicles ultimately represents a financial gain for users, it comes at a cost to the public authorities. ‘One tonne of CO₂ avoided costs the State between €533 and €1,252. By way of comparison, the carbon tax on the ETC market was around €50 to €60 per tonne of CO₂,’ explained Frédéric Meys, demonstrating the high but essential cost of encouraging the transition to electric vehicles.
How can we speed things up?
Still on the subject of price, François Bausch said he was optimistic that manufacturers would offer more financially attractive models in the near future. ‘The price of batteries will fall in the coming years and manufacturers will be able to offer attractive deals,’ he said, while calling on both national and European politicians to invest in the battery industry and the automotive industry more generally. ‘If we do nothing, within five years, Chinese, South Korean and American cars will wipe out the European market,’ he claimed.
The idea of social leasing, currently under consideration by the government, was also debated. But for Gerry Wagner, social leasing will not be a miracle solution. ‘The study showed that electric vehicle users are mainly homeowners, which makes it easier for them to access a charging station at home. Social leasing will undoubtedly be aimed at tenants who may not have access to a charging station in their residence…,’ Gerry Wagner pointed out.
For François Bausch, the focus must now shift to investment in infrastructure. “It is very frustrating to arrive at a charging station that promises a certain charging power and then realise that it charges at a much lower power. This is a real obstacle to the transition, and we need to invest in our networks and infrastructure to make them more efficient,‘ argued the MP.
Finally, the Idea Foundation put forward some recommendations, ’not always popular” according to Frédéric Meys, in order to move towards the famous 49% target, such as: the introduction of social leasing, the deduction of the purchase premium, the establishment of low-emission zones, the modulation of annual taxation, the introduction of a road tax, better communication on the advantages of electric vehicles and, finally, reducing the size of the vehicle fleet.
