How Carnaby Street is sparking the electric car trend

James S Murray
@James_BG
09 April 2013

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James Murray muses on some green lessons from his daily walk to work

Each morning, I take a half-mile stroll from Bond Street tube station through Mayfair and Soho, past the former haunts of Handel and Hendrix, to BusinessGreen's central London bunker. Despite our interminable winter, it is a very pleasant walk and over the past few years it has provided a daily snapshot of an under-reported revolution in the green economy – a revolution that promises to slash carbon emissions, improve UK energy security and boost the profitability of millions of firms, although you'd be forgiven for having missed it.

If you walk through central London at about eight in the morning, you will see surprisingly little traffic (the Congestion Charge is still working; one of the many travesties of Mayor Boris' reign is the failure to build on its early success), but you will see a lot of delivery vans. And if you are interested in such things, which I have to admit I am, you will notice that a significant and growing number of them are green. In the space of a 10-minute walk you will typically see between five and 10 vans or trucks proudly displaying their green credentials, declaring to the world that they are using hybrid, gas or increasingly electric technology. They are invariably complemented by the growing numbers of electric cars taking advantage of Mayfair and Soho's relatively numerous electric car charging points. Yes, these vans and cars are still very much in the minority, but they are there, and their numbers are growing.

Obviously you have to be careful about drawing wider conclusions from a sample as arbitrary as "things I see on my walk to work", but the figures confirm that interest in these clean vans and cars is climbing at a rapid clip. The most recent numbers from the Society of Motor Manufacturers and Traders (SMMT) confirm sales of alternatively fuelled vehicles – including electric, natural gas and biofuel powered cars and vans – rose nearly 10 per cent last year to almost 28,000 units. Yes, they still make up just 1.4 per cent of the automotive market, but demand for these vehicles is growing at twice the rate as it is for petrol vehicles. Meanwhile, those petrol and diesel cars and vans are getting significantly more efficient, as evidenced by hugely encouraging new research from the AA that confirms forecourt fuel sales have fallen by nearly 10 per cent since 2007.

All this means that on the ground it is visually apparent that more and more businesses realise it makes sense to operate delivery fleets that are dominated by alternative fuelled vehicles. They understand that they offer a lower total cost of ownership and improved reliability, as well as lower environmental impacts. Switching your fleet overtime to electric, gas or even fuel cells is starting to become a no-brainer for a wide range of companies.

There are also several important lessons for business leaders and policymakers contained in my daily walk to work – lessons that should be heeded if we are to make the transition towards greener vehicles as painless as possible.

The first is that with alternative fuel fleets and electric cars having pretty much reached the tipping point where they offer a lower total cost of ownership than conventional alternatives, this technology is becoming normalised. It is tempting to dismiss this trend as yet more southern metropolitan eco-bling that will have no meaningful repercussions outside of the M25 – tempting, but wrong. Trends may start on Carnaby Street, but they soon spread. The cost of electric cars may currently be prohibitively high, but the cost of mobile phones and computers (both of which you also saw first in places like Soho and Mayfair) were cripplingly high at first, too. Prices for electric vehicles are already coming down fast, as evidenced by the recent cut in the price tag for the Nissan LEAF, while predictions of yet higher oil prices only serve to make alternative fuelled vehicles more attractive.

Another aspect of this green transport technology becoming normalised is the mounting evidence that it works. When you see logistics giants like UPS and FedEx using electric vans you know the due diligence has been done and that it has been extremely thorough. Delivery is the core business of these firms; they are not going to risk it being undermined by unproven technology. Other businesses can now look at these pioneers, many of which are several years into their alternative fuel vehicle programmes, and safely conclude that the approach makes both technological and economic sense.

The second major lesson is for policymakers, who, as I have argued time and again, remain obsessed with pushing green consumer technologies at the expense of business technologies that can deliver greater environmental and economic benefits at a lower cost.

Drawing on the example provided once again by the IT industry, it is worth recalling that it was businesses and schools that first pushed the use of computers into the mainstream, providing the springboard from which the technology then made it into the home. This is the approach governments should be seeking to emulate with alternative fuelled vehicles (not to mention solar panels, smart meters, and most other low-carbon technologies).

It would be far more cost effective to focus on providing the incentives and infrastructure needed to convert delivery and taxi fleets to zero emission technologies than the current approach of trying to support every aspect of this emerging market. You would realise greater economies of scale, you could better target the new recharging and refuelling technologies you would need, you would deliver rapid improvements in air quality in congested city centres, you would provide a guaranteed market that would help manufacturers to reduce costs and, best of all, the technology would become highly visible, accelerating the vital process of normalisation. Anyone driving or, more importantly, taking a taxi would experience the benefits of zero emission vehicles invariably encouraging more consumer adoption of the technology.

There are already some attractive tax breaks and grants available to companies switching to electric cars or vans, but the government should now double down on this trend and properly investigate how to ensure businesses outside of W1 can also take advantage of green fleets.

Finally, there is a broader macro-economic lesson for investors, businesses and governments contained in both my walk to work and the AA's startling figures showing that UK fuel demand is on the slide. The likelihood remains that the drastic surge in car ownership being experienced in emerging markets means global demand for oil will continue to rise for the foreseeable future. But the increasingly rapid improvement in fuel efficiency and the transition to alternative fuel vehicles proves that countries can push fuel demand into reverse. As the IT revolution proved, technological transitions can happen remarkably quickly when a new product, such as a computer or an electric car, prove that they offer cost and performance benefits over the incumbent technology.

Investors, businesses, and governments all need to be aware that there is a real and present risk that new technologies could result in falling demand for fossil fuels. And if they need a reminder they could do worse than walk through central London of a morning.