Renault’s Ghosn Says Future of Electric Autos Hinges on $70 Oil

By Laurence Frost and Ryan Chilcote

Sept. 16 (Bloomberg) — Renault SA Chief Executive Officer Carlos Ghosn said the future of electric cars depends on a rebound in oil prices that may boost sales of the battery-powered vehicles he’s spending 4 billion euros ($5.9 billion) to develop.

“If it’s less than $70, we’re going to have a problem,” Ghosn said in an interview at the Frankfurt Motor Show. “If oil’s at $200 the economic equation’s very easy, and if it’s more than $200, even easier.”

Renault pledged yesterday to sell 100,000 electric cars by 2016 in Israel and Denmark, the first two countries to hire the Paris-based company’s U.S partner Better Place to roll out nationwide networks of battery-charging and swapping stations.

Ghosn is pitting electric cars from Renault and Japanese affiliate Nissan Motor Co. against a new generation of smaller, cheaper gasoline-electric hybrids from rivals including Toyota Motor Corp. The French company’s Fluence sedan, on show for the first time in Frankfurt, will become the world’s first mass- market electric car if the agreement with Better Place pays off.

“The outlook for investors in electric cars is extremely perilous, but if oil prices take off again there may be a significant commercial opportunity and big rewards,” said Peter Schmidt, managing director of Warwick, England-based consulting firm Automotive Industry Data.

The price of oil, which stood at $70.88 a barrel as of 2 p.m. in New York yesterday, will rise to $75 next year, based on the median of 35 estimates ranging from $40 to $110. It’s likely to fluctuate between $80 and $92 through 2013, according to data compiled by Bloomberg.

State Support

Renault is unveiling four all-electric prototypes at the Frankfurt show, where they’re going head-to-head with hybrids including a new version of Toyota’s Auris compact.

Ghosn is counting on state financial support for electric models in the form of infrastructure investment and sales subsidies, with the level of aid required depending on the price of crude, he told Bloomberg Television yesterday. France has promised 5,000 euros toward each purchase in the country.

“If you want the electric car to be a mass-market car it’s going to need support until you reach a certain scale,” the CEO said. “All our equations are based on $70 or $80 a barrel. It’s $70 a barrel today in the middle of a recession, so when the global economy picks up it’s very likely to be more.”

Renault is alone among major manufacturers in focusing solely on battery-powered models, with Ghosn’s peers developing electric and hybrid cars in tandem. Spokesman Olivier Floc’hic said the company regards hybrid technology as unlikely to deliver a “real breakthrough” on carbon-dioxide emissions.

Market Share

Nissan, which is also headed by Ghosn, unveiled its own all- electric car last month and began developing a gasoline- electric powertrain only last year, a decade after the first Toyota Prius hybrid went on sale.

Ghosn predicts that electric cars will grab 10 percent of global auto sales by 2020, compared with an estimate of 1.5 percent to 2 percent at Volkswagen AG and 0.6 percent at London- based consulting firm IHS Global Insight.

“You can take your pick,” the CEO said. “But I’m putting 4 billion euros into electric cars and I have 2,000 people working on it. And even if it’s 5 percent, we’re fine.”

Ghosn has pledged to produce the Fluence from 2011 in partnership with Palo Alto, California-based Better Place, whose founder Shai Agassi says that the model, based on the Megane small family car, has the potential to transform the industry.

Battery Swaps

Central to the Renault-Better Place plan is a network of battery-swapping stations, where drivers would exchange a near- flat powerplant for a fully-charged replacement in about the same time that it takes to fill up with gas.

The system would overcome the eight-hour battery charging period that effectively limits electric-car operations to the 100-mile (160-kilometer) range of a single charge.

Renault and Better Place plan to lease out batteries rather than sell them as part of the car, slashing purchase costs. Battery contracts could eventually come with the vehicle thrown in, in much the same way that cellphone users get a free or discounted handset when they buy airtime, Agassi said.

To contact the reporters on this story: Laurence Frost in Frankfurt at lfrost4@bloomberg.net; Ryan Chilcote in Frankfurt at rchilcote@bloomberg.net.

Last Updated: September 15, 2009 18:01 EDT

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