Though electric vehicles currently represent a small portion of the European market, auto manufacturers will increasingly vie for control of the segment, abetted by more proactive governmental strategies. Standard & Poor's Ratings Services reports that European automakers may need this governmental support to give the continent's electric car industry a fighting chance.

This idea, delineated in S&P's report "Can Governments Jumpstart The European Electric Car Industry," examines the role the EU and national governments can have in developing electric vehicles that can compete with conventional cars in price and performance (you can read the whole report below). Of course, a major motivator remains the EU target to knock carbon dioxide emissions down to an average of 95 grams per kilometer by 2020.

But the economic figures remain. EVs, which garnered a market penetration of some 0.7% in 2010, have failed to gain widespread traction because of the dearth of regional charge station infrastructure. Each government has a different take on strategy: France, for example, is bolstering the EV potential by supporting public charge stations and offering EV customers subsidies, whereas Germany is focused on tech development and incentivized tax breaks.

This political push may be just the fuel this industry needs to jumpstart the widespread acceptance of EVs in Europe.

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Government Support Could Power The Advance Of Electric Cars In Europe, Report Says

FRANKFURT, June 14, 2011--Europe's automakers may need the support of governments to help create a viable industry for electric cars, says Standard & Poor's Ratings Services in a report published today "Can Governments Jumpstart The European Electric Car Industry?"

The EU and some national governments have stated that developing electric vehicles that can compete with conventional cars in terms of price and performance could play a significant role in helping car makers meet EU targets to reduce carbon dioxide emissions from their fleets to an average 95 grams per kilometer by 2020, the report says.

Yet, because it's not yet clear which technologies will gain the strongest market footing, and because a regional infrastructure of charging stations is lacking, e-cars have so far made little impact on total car sales in Europe. They achieved a market penetration of about 0.7% in 2010 and industry experts predict that sales volumes could stay relatively low until 2020.

As a result, government strategies to support the development and take-up of electric cars are also patchwork. For example, while the German government is focusing its support on technology development combined with some tax breaks, France is supporting public infrastructure for refueling, such as charging points in new buildings and also offers purchase subsidies.

Because they still represent only a small proportion of total sales, electric cars are also not a significant credit factor in Standard & Poor's ratings on Europe's automakers, the report says, and are unlikely to become so unless the market take-up increases significantly.

"Nevertheless, we don't think car manufacturers can neglect investments into research and development of electric vehicles because over the longer term they have the potential to gain a foothold in the industry," said Standard & Poor's credit analyst Jan-Willem Plantagie.

"We expect auto manufacturers will jostle for leadership in developing e-cars in the view that they could become a more important segment of the industry in 10, 20, or 30 years' time," said Mr. Plantagie.

Given the importance of the automotive industry to European economies, we believe governments may have to contribute a combination of support to technological development, consumer incentives, and infrastructure development to expand the development of electric vehicles to speed up the expansion of electric vehicle use in the region, report concludes.

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