The government’s 2035 ban on petrol, diesel and hybrid vehicles is under threat in the wake of COVID-19. With strong political and societal forces now in play, the government and industry face difficult decisions.
The risk is two-fold; the government may concede to pressure from some parts of a troubled automotive industry by relaxing its 2035 target; or a simple lack of policy action will make it far harder to meet the target in reality, even if government sticks by it on paper. The inevitable hampering of supply and demand will also make it harder.
Either way, industry will need to make a compelling case to government if it wants electric vehicles to remain a genuine priority policy area.
The government, meanwhile, needs to adapt its electric vehicle strategy in a way that reflects the new reality and has an opportunity to frame this as a key pillar of a green, economic recovery agenda.
COVID-19 changes everything
The world has fundamentally changed in the last two months.
For electric vehicles, supply is now a huge issue in Europe. Delays in global vehicle production is now likely as sourcing batteries and parts is very hard to do outside China without incurring much higher costs, especially considering China has far more lithium reserves and much greater lithium production than any other country.
Fiat has already implemented temporary closures at some of its Italian plants with others likely to follow, with the risk of a longer-term reduction in production capacity resulting from plant closures or delayed investment. In the UK, the likes of Nissan has today said it will begin building cars again in June having suspended production six weeks ago.
Even more significant, however, are the societal and economic changes arising from COVID-19, some of which serve to reinforce the case for electric vehicles whilst others hinder it. For example, the links being made between COVID-19 deaths and air pollution could increase the demand for cleaner and greener vehicles. A recent RSA survey found that over half of respondents had seen an improvement in air quality since travel restrictions were enforced.
Big questions are also emerging over the future of public transport. Auto Trader found 48 per cent of consumers were less likely to use public transport after the lockdown. Though this could lead to a rise in demand for electric vehicles in the longer term, equally, in the short term it could push people into buying dirtier (and now cheaper considering falling oil prices), CO2-emitting vehicles, or micro mobility solutions such as bikes or scooters. The former could potentially hinder the take up of electric vehicles, as could the latter as people look to replace shorter journeys with walking or cycling, thereby missing the window of opportunity to promote EVs as the natural solution.
Electric is still the answer
One fact remains clear; the drive to zero carbon and the increasing evidence of the harmful impact of air pollution mean electric vehicles remain an important long-term strategic play for the automotive industry, alongside hydrogen and other biofuels.
Yet take-up in the UK remains extremely low. March saw the number of new battery-electric vehicle (BEV) registrations number 11,694. That’s 4.6 per cent of a UK total market that was down 44.4 per cent. These numbers have been quickly dismissed by experts as distortions to what’s really going on. Yes, sales of electric vehicles are rising, but nowhere near as fast as March’s figures suggest. So, if March is just an anomaly then a more important question is what government should do to increase supply and demand of electric vehicles in both the short and long-term.
In the short term, despite extending its consultation deadline (from the 29th May to the 31st July) on bringing forward the ban on sales of new petrol and diesel vehicles, the transition to electric vehicles remains a key strategic pillar of the green agenda for government and the automotive industry. Government grants (including extending the plug-in car grant at the last Budget) and tax incentives have no doubt helped create the beginnings of an electric vehicle market in the UK but for manufacturers, another big driver of supplying these cars in the first place is the EU’s strict requirements when it comes to carbon dioxide emissions.
For consumers, they need the confidence now more than ever that they can buy an electric vehicle at a reasonable price. They also need to know they will have enough charge points along their route and that when charging their vehicle, the experience will be as quick and affordable as possible.
Existing commitments include ensuring every person in England and Wales is within 30 miles of a charging point; investing an extra £500m on a fast-charging network; and boosting funding for high-tech research by £9bn over the next five years. These will be important in giving consumers the confidence they need. However, government must implement these policies immediately, or at the very least accelerate them through releasing funds over a shorter 3-year period.
Furthermore, as provided for in the Automated and Electric Vehicle Act (2018), government also has at its disposal the powers to be more prescriptive with what it requires from charging providers in connection with standardisation across provider payment methods. Making use of these powers could provide a more seamless consumer experience, helping drive confidence, greater uptake of electric vehicles and, ultimately, help provide some much-needed economic stimulus.
The (green) road to recovery
In the longer-term, the government’s attention will turn to driving economic recovery.
One approach to this could be to double down on its climate change commitments as part of a ‘Green Recovery’ agenda, similar to Labour’s “Green New Deal” which would have seen a state-led investment programme to reduce greenhouse gas emissions in as fair a way as possible.
The policy thinking to support such an approach is already emerging; the International Renewable Energy Agency recently found that accelerating investment in renewable energy could generate global GDP gains of almost £80tn between now and 2050.
Electric vehicles would obviously need to be a key pillar of such an approach.
A green recovery agenda that prioritises the clean energy transition with a specific emphasis on its electric vehicle plans, could drive significant investment required to spark an economic recovery. Conversely, failure to prioritise these issues will be a major missed opportunity.
COVID-19 has presented the government with a significant window of opportunity to pursue a clean energy system that aligns economic stimulus and policies with environmental goals.
However, there’s no guarantee this will happen.
So, for those with a vested interest in the development and take up of electric vehicles, getting out early and making the case for a green recovery will be crucial for realising the electric vehicle revolution.
We may not be in the midst of a revolution right this second, but with a little bit of refocusing from government and constructive engagement with industry about what needs to happen and how, we can soon be on our way.