Votes or volts?

Although my blog relates to one of the main headlines to hit the UK news last week, my point is relevant to readers of this blog everywhere – so read on, I’ve not turned UK-centric!  The big news story was that the UK Government confirmed rumours that have been building for a while that the ban on the sale of ICE cars which was due to take effect from 2030 would now be pushed back to 2035, so that it is now realigned with the EU which is where it started.  In order to demonstrate his green credentials, Boris Johnson had pulled it forward five years in 2020 when he was Prime Minister.  Two Prime Ministers on, following an election in one parliamentary seat where his Conservative Party unexpectedly held on as they were not associated with a move by the Labour Party London Mayor to introduce a green tax on higher polluting vehicles, Rishi Sunak has reversed that.  He argues that this is not a cynical political move ahead of next year’s General Election, but a recognition that the costs of an accelerated move are unaffordable to many households.

An outcry from many parts of the industry followed, with much of the press commentary focused on whether the billions of pounds of recent investment announcements such as the Tata battery factory or Stellantis investment in switching their Ellesmere Port plant to manufacturing 100% BEV products (which ironically formally opened last week) would now be at risk.  These comments miss the point that the global industry is marching towards an electrified future, and what is happening in the UK is mirrored by similar investments across Europe and elsewhere.  The decisions that have led to manufacturing investment in the UK are not driven by the needs of the domestic market, and the vast majority of the BEVs that will be sold here will come from overseas.  Similarly, the majority of BEVs that come from UK plants will be exported to Europe or further afield.  In practice, the BEV sales mix targets have also been left in place for now, so whilst the attention-grabbing headlines say that consumers can still buy ICE cars in the UK after 2030, in practice manufacturers will not be able to sell them if they want to avoid fines for failing to hit an 80% BEV mix target.  You know it makes sense…

The real issue from my perspective is not the upstream implications which will only affect production mix for a small part of total demand several years from now, but the effect that this has on the fragile retail consumer demand for BEVs.  This is already weak as I commented on in my blog a month ago.  Reports I hear from most markets are that retail customers will only buy a BEV if they are heavily incentivised, normally through Government-funded schemes.  Where these are reduced or removed, as they have been in the UK, retail customers choose cheaper ICE cars than the BEV alternative.  Private buyers who are putting their own money into a car are nervous about technology change that may affect the desirability and residual value of the BEV they buy now, are deterred by stories of weaknesses in charging infrastructure, and remain fixated on their occasional 400km trip which may be more inconvenient in a BEV than an ICE car.

I believe in climate change and believe that we have a debt to repay to our children and grandchildren in respect of the environmental mess that we have created over the last couple decades when the science was clearly pointing out the issues.  That does not mean that I watch every gram of carbon that I am responsible for, but where we have options available to us, then we should make the green choice as attractive as possible.  Increasingly that will mean BEVs, but could also include fuel cell cars and running my classic car on e-fuels when they become available.  Governments everywhere have the responsibility on behalf of society as a whole, not just those voters who can be influenced to vote for them, to create a smooth path that allows the industry to continue to develop and offer solutions to the environmental challenges.

By doing a U-turn on the ICE ban, the UK government has created uncertainty in the minds of consumers about BEVs, reinforcing views that they are unaffordable.  The German Government has done something similar by responding to industry pressure to open the way for e-fuels, which look likely to pay some part in the future but may be most relevant in terms of greening the existing ICE parc beyond 2035.  Poland is challenging the whole 2035 ICE ban in the European Court of Justice, and cracks are appearing elsewhere.  My greatest concern is how all Governments handle the loss of income from taxation of ICE and PHEV cars.  I raised this in my blog last November, pointing out that as BEV penetration grows, this tax take (currently around 1.5% of GDP in the UK) will need to be replaced.

The tax changes required (presumably by some form of taxation that applies to BEVs) should be phased in progressively as their share increases, but such changes will further deter potential BEV buyers, so need to be managed with care.  Unfortunately, like the UK U-turn on the 2030 deadline or the last minute German intervention on e-fuels, I suspect that the introduction will be abrupt, with little advance consultation.  The industry, car buyers and society as a whole need a clearer roadmap which is not subject to short term political expediency.  This would allow the industry to get on with what it does best – continuously improving the product to the point where buyers can make the right choice for the planet and their pockets.