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The motor industry has urged the government to revise its targets for electric vehicles, unanimously warning that the current zero emission vehicle (ZEV) mandate will result in a loss of inward investment and British jobs.
So what? Car makers broadly accept that decarbonisation is inevitable, but the industry still feels squeezed by
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industrial energy costs that are among the highest in Europe;
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mandated EV sales targets that it says don’t match consumer demand, and which result in fines for companies if not met;
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competition from Chinese companies that sell into the UK, but barely invest; and
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a decade of self-inflicted trade friction with the EU.
CHX and balances. To make matters more complicated, the UK may be about to get a chancellor who is deeply committed to net zero targets, and the automotive sector is already pushing back.
Attendees of the Society for Motor Manufacturers and Traders (SMMT) annual conference yesterday were unequivocal that Ed Miliband – who is largely viewed as an architect of higher energy costs – would be the wrong choice.
“He’s totally incompetent. No good for business at all. It’ll be a disaster,” said Stephen Morley, President of the Confederation of British Metalforming. Another attendee described Miliband as “without a doubt, inflationary”.
Miliband, as energy secretary, has previously stated the importance of a “commitment to our world-leading EV transition plan”, despite rumours last month that Keir Starmer intended to relax the rules.
By the numbers. Fast-moving politics aside, there’s a disconnect between the government’s aspirations and the reality on the road.
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24%: ZEV market share in the UK, year to date (half of which the SMMT says is driven by subsidies rather than “natural” demand).
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38%: ZEV mandate target for next year, rising to 52% in 2028.
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95%: what the government’s Committee on Climate Change (CCC) assumes the market share for electric vehicles to reach by 2030.
Mike Hawes, the chief executive of the SMMT, said that the CCC’s analysis did not take into account “industrial consequences” and that “if we all have to buy EVs from abroad, so be it. The UK will meet its climate goals, but… the domestic industry will be collateral damage.”
Plugging in. The government has recognised the impact that high energy costs are having on manufacturing, and has introduced a scheme aiming to cut industrial prices by a quarter. It could go further by radical reform of the electricity market. Playing to its advantage is mounting evidence that conflict-driven disruption to global fuel prices has increased the appeal of EVs to British consumers.
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Ian Plummer, chief customer officer at Autotrader, notes that 82% of customers are considering an EV for their next car purchase and that, as opposed to previous energy shocks, the Hormuz disruption has led to a “sustained” bump in EV demand.
Seeking directions. How the British car industry navigates the next few years will be critical. EU rules on the sourcing of car parts, already delayed once since Brexit, are set to take effect from January, triggering a 10% tariff on battery electric and plug-in hybrid models sold by UK manufacturers into the bloc and jeopardising £16.4bn of bilateral trade. With the EU-UK summit that was due in July now postponed, it’s not clear whether that deadline can be shifted.
At the same time, competition from Chinese manufacturers is intensifying, rising to 13% of UK retail sales. On the consumer side, this is leading to a “buoyant” market, says Plummer, “spurring the established brands to react and improve their pricing, bring out better cars”. However, the number of Chinese brands building out supply chains and jobs in the UK remains low.
What’s more… Nissan and Chinese firm Chery have signed an agreement to explore manufacturing cars in Sunderland. Hawes said the project was “very encouraging” but cautioned that it should safeguard UK jobs and that early production would rely on imported components.
Photograph by Justin Sullivan/Getty Images