More Governments Power Electric-Car Development

By SEBASTIAN MOFFETT in Paris and NORIHIKO SHIROUZU in Beijing
Governments are pumping more money into electric car projects, hoping the new vehicles can be part of the solution to major problems from global warming to dependence on oil.
China, the U.S. and France are among the governments that have so far pledged to spend up to $15 billion in the next five years in tax incentives, levies, subsidies and consumer bonuses to help car companies develop electric cars, according to the Boston Consulting Group.

The aid is crucial to car makers' chances of success in turning electric cars into mass-market products. At the Tokyo Motor Show, which opens to the media on Wednesday, Nissan Motor Co. plans to unveil a new electric car resembling a scooter. It is also aiming for 20,000 orders of another electric car, the Leaf, in the U.S. next year.
But car makers are being held back by the high cost of developing and running them -- and the technical difficulty of keeping them charged. It's a chicken-and-egg challenge facing many new mass-market products: Consumers will buy electric cars only when they are cheap and convenient enough to use, but that will happen only if lots of people buy the vehicles. So governments are trying to kick-start the market.
"Government help is absolutely imperative at least over the next few years," says Mitsuhiko Yamashita, Nissan's head of technology and product development. "Without those incentives, the electric-battery car is not going to be accepted in the marketplace anytime soon and anywhere around the world."
Policy makers say governments like the idea of electric vehicles because regular gas automobiles depend on oil that is often imported and is a major cause of carbon-dioxide emissions, which they have pledged to cut.
Honda Motor Co.'s EV-N, a compact electric car that looks like a conventional engine-driven vehicle, is actually powered by lithium-ion batteries.
By giving financial aid, governments are also giving their car makers a head start in a potentially big future industry.
Past attempts to commercialize electric vehicles have floundered. The batteries cost too much, running out hours before the cars had driven very far and then taking hours to recharge.
Recently, technology has improved. Concept electric cars aimed at the mass market claim to be able to run about 100 miles on a single charge thanks to new battery technology. The cost of batteries is still way too high, however, costing some $10,000 each. Japan's Mitsubishi Motors Corp. has put a small electric car on sale at four million yen, or more than $40,000, but is losing money even at that price.
"The most important thing that governments do is to give signals to consumers for what the expectation is for adoption of electric vehicles in the future -- like an announcement to get off oil," says Shai Agassi, chief executive of Better Place PLC, which is developing recharging and battery-swapping stations in Israel and Denmark.
The main way governments are contributing to electric-car development is through consumer incentives. France has announced a €5,000 bonus ($7,500) for buyers of cars with very low emissions, and it slaps a penalty tax on gas-guzzlers. China is running a 20 billion yuan incentive program ($2.9 billion) for public and service-sector vehicles, such as buses, taxis and government-use vehicles. In Japan, central and local government subsidies will amount to $10,000 per car in some cases.
Israel taxes cars that use gasoline by as much as 92% of their value, but it has reduced the tax to 10% for electric cars. Denmark levies a tax of more than the price of the car for some vehicles, but will reduce this to zero for electric models.
The U.S. government earlier this year offered $2.4 billion in grants to develop green auto technology.
Write to Sebastian Moffett at sebastian.moffett@wsj.com and Norihiko Shirouzu at norihiko.shirouzu@wsj.com