The unfrozen moment for the car industry

Rows of new cars covered in protective white sheetBritain’s automotive industry faces a moment of reckoning. Brexit threatens to disrupt its highly sophisticated ‘just in time’ operations while pressure to cut air pollution and go electric risks stranding investment in factories designed for the fossil fuel age. The sector contributed over £22 billion in added value in 2016 and employs over 800,000 people. It’s a big beast in big trouble. If policy makers want the car industry to have a part in the UK’s clean growth future, they will have to simultaneously preserve the status quo in EU trade, while rapidly reorienting the industry to make zero carbon vehicles.

The customs kerfuffle
We believe common sense will prevail but it needs to prevail pretty soon.” This is how one senior car industry commentator summarised the growing impatience of the car industry. But, looking at the numbers suggests the industry has already begun to move: its investments have halved since the referendum from £2.5 billion to £1.1 billion. Individual manufacturers like Vauxhall and JLR are claiming that Brexit is one of the reasons for cutting jobs at their UK plants.

Last week, the European Commission and, more explicitly, the Dutch government, instructed car companies to prepare to stop using auto parts manufactured in the UK for cars they export outside the EU, because UK parts won’t count toward EU content, meaning the cars will be subject to export tariffs. The response from the 2,500 British automotive component providers?: “The hard Brexiteers have built a bomb under the UK automotive industry and the EU have lit it,” said one chief executive.

The air pollution problem
While the customs union question remains unresolved, the European Commission has initiated new legal proceedings against the UK (along with Germany, France, Italy, Romania, and Hungary) for repeatedly breaching EU air pollution standards. Diesel cars are at the heart of this problem: an average inner city diesel causes £16,423 worth of health damage over its lifetime.

While laggards in the industry are pushing a ‘clean diesel’ story, new analysis from the FIA foundation has found that nearly every diesel car on European roads is breaching legal air pollution limits, including new models released in 2017 that were four times above the EU standard of 0.08 mg of nitrogen oxides (NOx) per kilometre. By contrast, companies including Nissan, Honda, Toyota and Fiat Chrysler, currently settling charges for inserting cheat devices on 104,000 of their cars, will phase out diesel by 2021 at the latest. As European Commissioner Elzbieta Bienkowska put it in an interview with Bloomberg, “Diesel cars are finished.”

Why the UK should go electric, fast
If diesel is dead and trade’s in trouble, is it the end of the road for the UK’s car industry? Maybe, but it doesn’t have to be. Green Alliance’s recent report, How the UK can lead the electric vehicle revolution, has a roadmap to reboot the car industry, ensuring its longevity by making it clean and competitive, using three main tools:

1. Banning sales of new petrol and diesel cars in 2030, not 2040. Doing so would halve UK oil imports, could cut air pollution by 40 per cent by 2025, and help fill the gaps in meeting the UK’s carbon targets.

2. Introduce a zero emission vehicle (ZEV) mandate. If manufacturers are going to invest in new production in the UK, they’ll need to be sure that there’s a market. A mandate to sell a rising share of zero emissions vehicles provides a big boost of demand, which should underpin investment. Agreeing a status quo customs arrangement with the EU would certainly help too.

3. Help cities declare clean air zones. Vehicles are the main sources of urban air pollution, and Defra’s modelling shows that clean air zones which charge polluting vehicles are the best response. These charging zones will increase purchasing of electric vehicles (EVs) by a sixth, as evidence from London’s congestion charge shows. Ministers should be giving powers and resources to cities so they can set these zones up, and quickly.

It’s not as if the UK can afford to wait. New governments in Germany, Italy and Spain alongside ambitious Scandinavian nations and the Netherlands have begun pushing for much stricter EU emissions standards. In 2017, Germany overtook Britain in EV sales for the first time while China manufactured half of all EVs globally. France has the same petrol and diesel phase out date as the UK, but has the significant advantage of being inside the customs union and single market. The UK, while it remains in the EU, should put its weight behind these proposals and secure a robust target.

The prime minister wants the UK to be a leader in electric vehicles. That means manufacturing them in Britain, not just investing in technology. If the industry is to get out of diesel and into clean manufacturing, the government must act decisively and quickly to help it reorient.

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