Widespread adoption of EVs in Russia, E. Europe not in near future

(July 2010) When California-based Coulomb Technologies deployed its first electric-vehicle charging station in Warsaw in May after its local distributor, 365 Energy, struck a deal with Polish energy company Polenergia, Green Car observers could be forgiven for being optimistic about the prospects for rapid alternative-powertrain vehicle growth in Poland, Russia and other Eastern Bloc countries.

"We aim to expand our electric-vehicle charging network across Poland and we thank Polenergia for its decision to work with us," said Omer Zimmer, managing director of 365 Energy affiliate Zohar Energy, in a May 26 statement.

So does this mean Eastern Europe and Russia will be part of the increase in alt-fuel vehicle adoption expected for other global regions such as North America and Asia?

So far, the answer appears to be somewhere between "not yet" and nyet. The relatively higher cost of EVs and hybrids, Russians' penchant for making heavier cars and the relatively inexpensive oil costs in that region of the world will likely keep former Eastern Bloc countries from rapidly adopting alt-fuel vehicles, according to at least one recent report.

While battery-electric light-duty vehicle (BEV) sales in Asia and North America will surge to a combined 800,000 units in 2015 from about 150,000 next year, Eastern European BEV sales in 2015 will trickle to 1,500 units, or about one-tenth of the number of U.S. deposits Nissan has already taken for the all-electric Leaf it's debuting later this year, according to Pike Research.

Even regions such as Africa-Middle East, where BEV sales in 2015 will be at about 30,000 vehicles, look positively green relative to Eastern Europe and Russia, where the average price of a new domestically-built car last year was about 240,000 rubles ($7,900), according to a Bank of Finland report.

"They're used to a significantly cheaper vehicle than we see in the in the U.S. or even Western Europe," said David Hurst, senior analyst at Pike Research. "In Russia, they're very used to heavy vehicles, so these lighter vehicles are really going to be a big challenge, as far as coming up with a viable marketing strategy."

That's not to say Western companies in the EV field haven't had their eye on an Eastern European region whose population of about 300 million people almost equals that of the U.S., but whose gross domestic product is about a quarter of America's. In June, New York-based lithium-ion battery maker Ener1, whose EnerDel division's customers include Volvo, Mazda and Norwegian EV-maker Think, said it signed a memorandum of understanding with Russia's Federal Grid Co.

Federal Grid, which is majority-owned by the Russian government, will use Ener1 batteries to help develop a so-called smart-grid system designed to cut electricity waste and handle surges in demand caused by such factors as a jump in population or electric-powered transportation.

Meanwhile, French auto giant Renault paid about $1 billion in 2008 for a 25-percent stake in Russian government-controlled AvtoVAZ, whose Lada division accounts for about three-quarters of Russian auto production.
Still, Russia's economy and access to oil appears to be keeping those in the EV industry from committing significant resources toward developing EV demand and an infrastructure to support it.

Russian new-vehicle sales, which dropped by about 50 percent in 2009 to 1.5 million vehicles, will be little changed this year and won't reach 2008 levels for another four years or so, J.D. Power and Associates said in early July. While the research firm forecast that global hybrid-vehicle and BEV sales will jump to a combined 2.8 million units in 2015 from about 930,000 units this year, it didn't break out numbers for Russia, where fuel prices in Moscow are about the same as they are in the U.S. and about half of Western Europe's.

"It remains the most fragile and tenuous economy of the four BRIC (Brazil, Russia, India, China) nations," said J.D. Power Executive Director of Global Forecasting Jeff Schuster. "Russia has a distinct advantage over the other emerging markets - deep reserves of oil that fuel its economy in better years."

By contrast, China and Brazil, in particular, remain vulnerable to global fuel uncertainties and are continuing efforts to turn to alternative energy sources, notably in their transportation bases."

As a result, Renault, which in 1999 formed an alliance with Nissan to expand battery-electric-vehicle production while working with global governments on developing the electric-charging infrastructure necessary to sustain BEVs, hasn't announced any plans for Eastern Europe alternative-fuel vehicle production or distribution.

Meanwhile, Ener1, whose EnerDel unit's projects include electric-vehicle charging systems and energy-storage systems in Japan, is working in Russia solely on stationary energy storage and not on electric-based transportation.

Still, while U.S. and Japanese automakers aren't rushing to develop alt-fuel vehicles for Eastern Europe, green-car supply may come from within. In April, Mikhail Prokhorov, the Russian billionaire who acquired the NBA's New Jersey Nets earlier this year, announced plans to build three EV prototypes by the end of the year, according to a Bloomberg News report.

Prokhorov's Onexim Group, along with Russia-based truckmaker Yarovit, will invest about $200 million in a car-making plant that's received public support from Russian Prime Minister Vladimir Putin. The cars will cost between $10,000 and $15,000 and will be less than half the weight of a typical Russian-produced car, Bloomberg News reported.

By Danny King,