Million-Car Electric Dream Spurs Smoggy Poland to Woo Musk

(Bloomberg) --

Maciej Chmielinski wove his electric compact BMW, quiet as a whisper, through the noisy Warsaw traffic -- a rare sight among the growling delivery trucks and gas guzzlers that tainted the spring morning with exhaust fumes.

It was the fifth day since Innogy Polska SA rolled out what it says is Europe’s third-largest electric car-sharing fleet, a program that Chmielinski helped design. He hoped that the German utility’s foray into transport will provide residents of the congested Polish capital a glimpse into the future of eco-friendly driving and help combat pollution. But even if successful beyond his wildest dreams, the service will only be a drop in the ocean.

The market has caught the attention of at least one major manufacturer of electric vehicles. On Thursday, Tesla Inc. Chief Executive Elon Musk tweeted that his company would ``soon'' begin sales in the Polish market.

The country is home to more than 30 of the 50 cities in Europe suffering from the worst air pollution. Because of the nervy local politics of coal, there’s been so little progress on the Polish government’s ambitious plans for cleaner air that the lofty targets have become demotivating punchlines, rather than inspirational catalysts.

Prime Minister Mateusz Morawiecki set a goal of 1 million electric vehicles by 2025, compared with less than 5,000 at the end of March, including plug-in hybrids. He recently spoke with Tesla CEO Musk to talk e-mobility and beat the drum for technology innovation in Poland on U.S. television. But away from the flashy headlines, industry executives paint a gloomy picture of infrastructural shortfalls, financial constraints and regulatory hurdles.

“The target seems to be very ambitious,” said Jakub Farys, the head of the Polish Automobile Industry Association. “But it’s not the 1 million number that counts, but the fact that it’s the road that can’t be escaped.”

Retail prices keep electric cars out of reach for many would-be customers, who are also wary of a patchy network of charging stations. It’s a classic chicken-and-egg dilemma -- to sell e-cars first or build out charging stations -- that threatens to leave Poland in the dust as other European countries pull ahead.

But even with accelerating growth in electric options as they carve out a bigger share of carmakers’ offerings, Poland’s goal looks difficult to attain. The Polish Alternative Fuels Association forecasts that without government subsidies, the country would have about 60,000 e-cars by 2025, with five times as many if incentives were introduced. Reaching a million isn’t possible before 2030, and would require further steps such as tax cuts, it said.

In all of Europe, there will be 9.3 million electric cars by 2025, according to BloombergNEF projections. That means that to reach Morawiecki’s goal, more than a tenth of those would need to run in the country that accounts for less than 3.5% of the continent’s car market, according to the European Automobile Manufacturers Association.

Poland is the largest eastern member of the European Union both in terms of population and territory. Yet, it has about the same number of chargers and registered e-cars as the Czech Republic, a neighboring country with a quarter of the people. Per capita, that puts Poland just above the bloc’s poorest members, data from the car-makers’ lobby group show.

While the industry expects market forces to eventually drive the adoption of electric vehicles, the government is pushing the agenda through state-controlled companies. Refiner PKN Orlen SA and utility PGE SA are working with charger distributor GreenWay Polska Sp. z.o.o. to build out the charging infrastructure.

At end of March, the country had 646 chargers, with the ability to charge 1,148 vehicles at once. PGE plans to have as many as 1,500 charges by 2022. GreenWay wants to expand its private network to 630 stations within two to three years, which will help accommodate the anticipated build-up of e-cars on Polish roads.

“The problem at the moment is not the basic charger infrastructure, especially for those who can charge at home, but the number of electric vehicles on the roads,” Rafal Czyzewski, the head of GreenWay Polska, said in an interview. “Now the stress should be put on the demand for electric vehicles.”

To help whip up demand, the government is weighing an 8,000 euro ($8,960) per car subsidy. Still, the plan may take months or more before it is up for approval and that has slowed demand among would-be e-car buyers, even as sales of hybrids, which combine a combustion-engine with electric power, take off. The future of incentives is also far from certain after the cabinet already stretched the budget with a $10 billion election-year stimulus plan.

Morawiecki is sticking to his seven-figure car target and there may be further steps from the government as well, though he was coy after he spoke with Musk last month.

“We had a good discussion,” Morawiecki told reporters in Brussels on April 16. “We have to wait a few months for the next steps.”

Teslas aside, a cheaper locally produced electric car might also help prop up the market as well. Some of the largest utilities including PGE and Tauron SA are backing ElectroMobility Poland SA, which is developing its own vehicle.

The company plans to have three compact models ready for manufacturing by 2022, pick a greenfield factory somewhere in the country and enter the market in five years, said CEO Piotr Zaremba. Even if it delivers on the project, with planned capacity of 100,000 cars a year, the ElectroMobility plant will be small compared to traditional factories.

“You are seeing more automakers popping up around the world who think they can compete,” said Colin McKerracher, BloombergNEF’s head of advanced transport analysis. “There is an interesting window there. But what you are quickly going to see is that the big automakers are scaling up in the 2020s, so what I would worry about is how long that window will be open.”

Local Transport

For now, though, the biggest contributors to the increase in electric vehicles are car-sharing companies and city councils adding electric buses to local transport fleets. One of them is Krakow, the southern Polish city that once suffered from the worst air pollution in the country, which was the first to introduce an emission-free zone. As a result the number of electric vehicles jumped by 853 in the first quarter alone.

Innogy is rolling out 500 electric BMWs on Warsaw streets. Its 10,000 signups in the first five days of the service, suggest an appetite for cleaner options that contradicts Poland’s reputation as a coal addict, CEO Filip Thon said.

“This is nonsense, the country loves coal because there are no options,” he said. “But people want to have a nice environment.”

To contact the reporters on this story: James M. Gomez in Prague at jagomez@bloomberg.net;Konrad Krasuski in Warsaw at kkrasuski@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Wojciech Moskwa

©2019 Bloomberg L.P.