Risks Surround Renault's Pricey Electric Dream

By MATTHEW CURTIN
If you are going to bet, bet big.
Renault is investing $4 billion in its electric-car program, the auto industry's largest single bet on completely replacing the internal-combustion engine. But, even allowing for the key role of government subsidies and regulation, the economics are anything but compelling.
Electric cars are an expensive way to reduce emissions. Batteries cost more than $15,000 a car, though that is forecast to fall to $5,250 a car by 2020. Add heavy investment for battery-charging infrastructure, and the cost per kilogram of CO2 reduction for an all-electric car is two to four times what it is for advanced internal-combustion engines and hybrid variants, according to Boston Consulting Group.
Electric cars emit nothing. But with emissions displaced to the grid, much depends on the generation mix among nuclear, gas, coal and renewables. Renault reckons electric cars in Europe would emit the equivalent of 60 grams of CO2 per kilometer compared with current auto emissions around 150 g/km.
The EU has set a ceiling of 130 grams of CO2 per kilometer for 65% of Europe's car fleet by 2012. But for small cars, new models are nearly there, even before the arrival of new-generation traditional engines and gas-and-diesel hybrids.
Renault is confident that, despite their limited range, its quiet, clean cars will sell millions. But its forecast of 10% penetration of the French car market by 2020 is premised on a government subsidy of €5,000 ($7,400) per electric car, battery prices falling below $15,000, consumer willingness to lease batteries for €100 a month and the appearance of a recharging infrastructure. In the absence of sky-high oil prices, it may yet prove a costly gamble.
Write to Matthew Curtin at matthew.curtin@dowjones.com