Electric car charging on the road

Will disrupting the transition to electric vehicles support financially squeezed households?

By Lindsey Appleyard and Andrew Jones, Centre for Business in Society

The UK Government announced that it plans to delay the ban on selling new petrol and diesel cars by 5 years from 2030 to 2035.  These new proposals disrupt the transition to electric vehicles (EVs) and the pledge to achieve net zero by 2050. PM Rishi Sunak specified that the reason behind ‘easing the transition to electric vehicles on our roads’ was that:

We know the upfront costs [of the transition to clean energy] for families are still high – so to give us more time to prepare, we’re easing the transition to electric vehicles on our roads’

Will this change delay the inevitable?

Adoption of EVs across many markets has been sluggish due to a suite of socio-technical barriers that have discouraged consumers from purchasing these vehicles (Berkeley et al., 2018). However, globally between 2020 and 2022, the number of new EVs purchased has risen from 5% of all new cars sold to 14%, illustrating that demand for these vehicles is finally being unlocked. Whilst manufacturers had largely been sceptical of EVs, policy measures such as Zero Emission Vehicle Mandates, whereby a proportion of all vehicles sold must be as low emission, and the outright ban on the sale of new internal combustion engine (ICE) vehicles, has forced firms to invest in greener solutions. As a result, there has already been significant upheaval in the automotive industry with manufacturers beginning the process of transforming their vehicle ranges for the net zero age. For example, Ford has decided to discontinue two of its popular ICE models, the Focus and Fiesta, whilst committing to cease the sale of ICE vehicles by 2030. Other producers, such as the Stellantis Group and Volvo, have made similar commitments.

So will Sunak’s statement change this trajectory? The answer is almost certainly no. For example, in the aftermath of the extension to 2035, Nissan announced that it would join those manufacturers committing to non-ICE product ranges by 2030. As the presence of the UK’s own Zero Emission Vehicle Mandate is not being watered down, this means 22% of each manufacturer’s new vehicle sales must fit into this category in 2024. Firms are unlikely to divest from EVs given the broad-ranging support from policymakers elsewhere in Europe, but the UK’s own decision may deter investment, and lead to some manufacturers questioning the government’s commitment to net zero. Given, the Government recently supported BMW’s investment into the Cowley Mini Plant, there are mixed messages occurring in policy decisions, which need to be addressed in order to ensure that the UK has a chance of securing a mass-market future for its own vehicle manufacturing sector.

Cost Saving: A red herring?

Whilst EVs herald a significant change for the automotive sector, they also have serious implications for consumers. Generally, motorists have seen EVs as being  too expensive, but such concerns have been heightened by the implications of the cost of living crisis. However, Nissan stated in their recent announcement that they intend to achieve ‘cost parity’ between ICE and EVs by 2030, which is likely to mean little benefit to the consumer from the extension to 2035. Additionally, as the number of EVs expands, there will also be a sharp reduction in the number of ICE vehicles on sale, which may push up prices of older technologies as they become scarcer on both new and used markets. Therefore, in theory, as more EVs come into the market their price should reduce and become more affordable, especially if Chinese EV imports are increased. However, EVs will still remain expensive and unaffordable to a significant number of households unless new finance models are found with low monthly payments. Additionally, many motorists still have very real concerns surrounding EVs such as being able to access charging infrastructure, driving range, and indeed price. There are questions surrounding vehicle lifecycles, second hand costs, battery life, and maintenance, that also remain unanswered due to the immaturity of the current technology. Until these issues are answered then some consumers may remain sceptical, but the diminishing number of ICE vehicles on sale will also impact behaviours and potentially push drivers towards EVs.

How to make EVs affordable?

Subsidies for EVs in the UK have gradually been withdrawn, with the Department for Transport announcing in 2022 that money for these purposes would be directed towards charging infrastructure. As such, government intervention designed to reduce prices for the consumer is no longer seen as viable, meaning that other schemes may need to be introduced. For example, a scrappage scheme for ICE vehicles may be an effective method for offsetting costs of an EV and would be beneficial for lower income households. Alternatively, new ownership models could be explored with car share schemes a possible solution for those who do not depend on a vehicle on a daily basis. Still, this is only a component of the overall solution required. An expansion of infrastructure is required, as the UK is currently lagging in this respect, with greater access to charging needed, particularly outside of major urban metropoles. There also needs to be an expansion of green industries, creating new highly skilled jobs that support the transition to net zero. These jobs may help to boost economic growth and wages, ultimately leading to higher living standards, which could enable more people to comfortably switch to an EV.

Impact on UK Automotive

For the sector, the delay in introducing the ban on the sale of new petrol and diesel vehicles will potentially create significant uncertainties, possibly forcing firms to reconsider their investment plans for the UK. For example, Ford argued that it needed UK Government policy in this space to be ambitious, committed, and consistent, but the decision to extend the start of the ban until 2035 risked undermining all of these aspects. Manufacturers require certainty in order to plan investment decisions and technological choices, and should the UK begin to unwind its commitment to net zero, there will be little incentive to invest in the UK automotive sector. As such, the direction of government policy may not only risk future investment but may also lead to existing players reducing their commitment to the UK, creating deep uncertainty for employees, suppliers, and indeed consumers. For consumers, there is a risk that manufacturers will elect to reduce their product offering in the UK, limiting choice and resulting in the UK motorist being unable to access the latest cutting-edge models.

Given the support recently afford to BMW and JLR, the 2035 decision appears contradictory and short-sighted, generating potential economic costs in order to pursue a perceived short-term political gain. It may also deter infrastructure providers from completing investment, further deterring adoption and entrenching negative perceptions of these vehicles with drivers. More deeply, this may raise further concerns surrounding the UK’s ability to positively benefit from the net zero transition, resulting in a laggard status that sees the UK lose its position as a leading actor in the field of climate change and green growth.

Through understanding the impact of organisations’ activities, behaviours and policies, the Centre for Business in Society at Coventry University seeks to promote responsibility, to change behaviours, and to achieve better outcomes for economies, societies and the individual.