So... we create a fuel at 70% efficiency from electricity, which is then put into an ICE to be converted to mechanical energy at tops 40% efficiency for a combined 30%... instead of converting the electrical energy from the plug directly to mechanical energy at more like 80% (wall-to-wheel) efficency?

I think it's a problem of storing the energy. Oil is compact, easy to store, and even though it's far less efficient than a battery-electric-motor, a fuel-driven approach might still be more economical. Batteries don't come for free.

Energy from renewals is cheap and plenty. Generation is not the problem. Storage is.

In Germany, there is excess energy in the system when the sun is shining/wind blowing, even with many conventional plants shut off. It goes to the point, where negative energy prices are traded on the exchange markets.

But with renewals, you can't guarantee or augment the capacity you have at a certain time.

With the artifical fuels, we can store practically unlimited amounts of energy when it is available. The efficiency loss is a drawback. But it really doesn't matter much.

A lot of that electricity from the wall is generated by turbines at 30% to 60% efficiency. This becomes relevant if the energy source is solar thermal or high-temperature nuclear. If you use the heat directly to generate fuel, skipping the turbine, the overall system efficiency isn't so different.

Audi is using electrolysis but there are ways to split water directly with heat: http://en.wikipedia.org/wiki/Water_splitting

Oil is a far more compact store of energy, and we have tremendous experience in handling it efficiently and effectively.

I don't see this technology becoming dominant while oil is still used. However it is great to see manufacturers anticipate the oil shortage.

I see it becoming important if they can drive the price down sufficiently.

This is way cool. I recall the similar result where the US Navy was making something very like thin crude from air and water, using electricity: http://blogs.discovermagazine.com/d-brief/2014/04/08/u-s-nav... That was at a cost of about twice conventional oil, so it's surprising and pleasing to see the cost of this sort of thing coming down so much.

Seriously, carbon-neutral gasoline will be hugely awesome. We have a century of technology for handling and using the stuff, making it not a climate disaster will be spectacular.

Also, note this is a large car manufacturer doing it - not an oil company. They're commoditising their complement.