HomeBrexitHow to shift the UK from also ran to winner in the electric car race

How to shift the UK from also ran to winner in the electric car race

in-text-image-corsa-eThis post is by Greg Archer, UK director at Transport and Environment

Measures to reduce CO2 emissions from cars have so far failed. Minimal improvements in the efficiency of new cars have merely offset the steady rise in vehicle mileage, causing UK car emissions to effectively flatline over the past 30 years. There are several causes: the failure to invest in alternatives to car use; the falling cost and increased level of car ownership; and the focus of the car industry on maximising profits, selling ever bigger and more powerful cars, whilst limiting the choice and availability of low and zero emissions electric models. There are no silver bullets but there are positive signs that a revolution is underway that will drive a sharp reduction in emissions.

The key driver of this is an EU regulation that requires car maker sales to achieve average emissions of 95g/km in 2020-21. Agreed a decade ago, the regulation begins to bite in just over three months and with substantial potential penalties of as much as €1 billion a year, companies are frantically ramping up their plans. The Frankfurt Motor Show has featured a range of impressive new electric car launches, from the affordable Volkswagen ID.3 and Vauxhall Corsa-e to the swankier Porsche Taycan and the plug-in hybrid Mercedes, each intended to help avoid the fines that will both dent profits and investor confidence. The number of electric models is expected to triple by 2021 to more than 200 and continue to grow to over 300 by 2025.

Our new analysis estimates that electric vehicle (EV) sales will reach around one million vehicles across Europe next year to ensure car makers meet their targets. The market share of EVs will grow from 2.5 per cent at present to about five per cent (three to seven per cent) in 2020 and around ten per cent (seven to 12 per cent) in 2021. Half of these are expected to be zero emission models.

Car makers are finally accepting the future
The European regulations will tighten again in 2025 by which time average sales of EVs will need to be at least 15 per cent, and that figure must double again for recently finalised 2030 targets. The regulatory necessity is complemented by steeply falling costs of better batteries which have profoundly changed the attitudes of most car makers towards finally accepting the future of their industry. The head of the UK automotive industry (SMMT) said recently “The UK car industry is committed to electrification.” The mantra that policy must be technology neutral is over, car makers want as much help as possible to sell the electric cars they are investing billions to develop and make.

If the UK leaves the EU at the end of October, vehicles sold here will not count towards the EU target. Fortunately, an equivalent UK regulation is now in place that should ensure supplies of low and zero emission vehicles do not dry up and the UK does not become the dumping ground for inefficient gas guzzlers. This new regulation must be fully implemented and any penalties enforced post-Brexit. If it is sales of a quarter of a million EVs are anticipated in the UK in 2021 up from 60,000 in 2018.

The UK isn’t keeping up
At present, rather than being a leader in the race to zero emission cars the UK is an also ran. Average CO2 emissions from UK new cars (125g/km) are above the European average (120g/km) and have been rising for several years. The UK was one of the first countries to link car taxes to CO2 emissions, but the financial benefit is too small to make a meaningful difference to buyers. Consequently, the UK has slipped down the league table of EU countries’ new car emissions, from 9th (in 2013) to 19th (in 2018) as other countries adopt more effect tax policies to lower emissions.

The UK is also struggling to keep pace with leading countries in sales of electric cars, particularly battery electric models. The UK ranked 10th in Europe in the share of sales of all electric vehicles (battery electric and plug-in hybrid models) in 2018. The UK’s share of battery electric models was ranked a lowly 18th, below even Bulgaria and Hungary. Fortunately, needed changes to car grants are now boosting sales of zero emission models.

Brexit is undermining progress
The required rise in EV sales to avoid penalties in Europe is driving massive investment in new production. But the uncertainty created by Brexit, and particularly the risk of no deal, has seriously undermined the UK’s attractiveness as a location for investment. Current forecasts are for UK EV production to increase by nearly five times by 2025, but our competitors are doing even better and only Jaguar Land Rover and Mini plan significant new EV production lines. The UK, presently the 3rd biggest EV manufacturer in Europe (behind France and Germany), is forecast to slip behind Italy and Spain by 2025.

One key weakness is the UK’s failure to attract any new investment in battery manufacturing. AESC production in Sunderland is currently Europe’s only lithium-ion battery factory, producing 2GWh of cells. But, by 2023, 131GWh of production is forecast for at least 12 sites across the EU. Car makers in Europe will become essentially self-sufficient in EU-made cells, but only a tiny fraction are currently planned to be made in the UK. For the UK to be a leader in the EV revolution, first it must regain its credibility as an attractive location for investment in the production of electric cars and batteries.

The UK should commit to faster EV growth than other countries
One effective way to attract manufacturing investment is for ministers to be clear that the UK car market will shift to EVs much faster than the rest of Europe. Zero-rating company car tax for zero emission models in 2020 was an eye-catching recent announcement; but similar incentives are needed to attract private buyers. Grants will become unaffordable with the rapidly growing market unless new revenues are generated to fund them. A purchase tax on all cars with an engine, such as the French Bonus-Malus scheme, will be an incentive to buy EVs and provide revenues to support the transition. Zero emission models could receive a small grant, funded through a tax on all new cars with engines, which would increase with higher CO2 emissions. In doing so, buyers of gas guzzling SUVs will help to fund the shift to EVs. The revenues raised could also be used to help encourage investment in the additional charging infrastructure and grid reinforcement, and support the transition to electric taxis.

The government will also need to propose new car maker targets for 2025-30 that go beyond those adopted by the EU, such as a mandate on the minimum level of EV sales. The Road to Zero Strategy has proposed that 50-70 per cent of new cars should be ultra-low carbon by 2030. This should be clarified and become law. It would send a clear signal to end the sales of all cars with any engine by 2035 at the latest, as the Climate Change Committee recently proposed.

To achieve a net zero economy, the shift to EVs must be complemented by other measures to reduce car use overall. But, by being ambitious in shifting to zero emission cars, the UK will also reap the benefits for jobs, the economy, the climate and air pollution, and help in balancing an increasingly renewable electricity grid.
Without progressive new policies, the UK will always be an also ran, and not a leader.

[Image of Vauxhall Corsa-E from Flickr courtesy of Opelblog]
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Green Alliance is a charity and independent think tank focused on ambitious leadership and increased political support for environmental solutions in the UK. This blog provides space for commentary and analysis around environmental politics and policy issues as they affect the UK. The views of external contributors do not necessarily represent those of Green Alliance.