Making social science accessible

04 Aug 2023

Economy

Policies

David Bailey reflects on the recent confusion around whether the government is planning to stick to the 2030 ban on the sale of new petrol and diesel cars, highlighting that the automotive industry wants a clear direction of travel, which gives businesses and consumers the confidence to make the transition.

Amidst an otherwise pretty dismal set of results, the Tories just about held on in the recent Uxbridge and South Ruislip by-election, after running a campaign opposing the expansion of London’s Ultra Low Emissions Zone (ULEZ).

And despite ULEZ actually being about improving air quality rather than reducing CO2 emissions, key Tory figures quickly started aping David Cameron’s alleged old adage to ‘ditch the green crap’.

Or, as Lord Frost put it on X (the social media platform formerly known as Twitter), ‘green policies are very unpopular when there’s a direct cost to people.’ That is highly debatable of course, but nevertheless the incumbent Tory government senses some electoral mileage in rowing back on green policies – never mind whether those policies are needed to reach net zero by 2050, which is itself a government policy objective.

Under pressure from Tory MPs, Prime Minister Rishi Sunak took the chance to put the 2030 ban on the sale of new petrol and diesel cars in play by not declining to rule out any date changes. Meanwhile the original architect of the target, Michael Gove, insisted that the Internal Combustion Engine (ICE) ban cometh and that 2030 is still very much on.

Such confusion is in stark contrast to the demands of industry for clarity. The CEO of Stellantis (which owns the Vauxhall brand) for example recently pressed governments to avoid adding “confusion to chaos” by keeping stability in its policy approach. The UK government didn’t appear to hear Mr Tavares’ plea.

Where does this leave UK policy for the auto industry? Up a cul-de-sac without a charger, it seems. Industries want government policy to set a clear direction of travel, which gives businesses and consumers the confidence to make the transition. At the moment we have neither.

The government of course originally set a 2040 target for banning new ICE car sales as part of a 2050 net zero plan. That was brought forward to 2030 by Michael Gove who announced the date without much of a road map (excuse the pun) to get there.

A strategy for infrastructure was eventually produced, but its implementation is still lagging badly, meaning that the UK isn’t installing nearly enough chargers to get us to 2030 in good shape. Meanwhile the government’s industrial strategy was scrapped under Boris Johnson, with the result that there is limited government support for the auto industry, supply chain and workers to make the transition.

This is in stark contrast to the wide-ranging tax brakes and subsidies for green industries in the US through President Biden’s Inflation Reduction Act and in the EU through the relaxation of State Aid rules and its Green New Industrial Policy.

The ongoing confusion in government pronouncements risks denting the consumer confidence needed to drive Battery Electric Vehicle (BEV) sales. While BEV sales have grown rapidly in recent years, it has been from a low base and there is a sense that growth has stalled of late amongst private buyers.

Partly, that is due to the government prematurely withdrawing up-front purchase incentives in the form of the Plug-in Car-Grant. And, partly, it is due to ongoing fears over charging anxiety given the patchy nature of the UK’s charging infrastructure, especially regarding long distance journeys.

And even if the government does eventually execute a U-turn on the date, industry has invested huge sums in making the transition happen. Tata’s recent announcement on a new battery giga-factory in the UK is a case in point. Or, as Jaguar Land Rover (JLR) chief Adrian Mardell eloquently put it on BEVs and debate over the 2030 target “From our perspective, stability is important. Our plans will stay the same”.

In other words, JLR like other car makers, are now committed to 2030. Flip-flopping on the date isn’t going to change that so the government might as well stick with 2030 and come up with a proper strategy to get there. What’s to be done?

Firstly, from next year the government will impose a mandate for car makers to hit certain BEV sales targets, starting at 22% in 2024 and then increasing up to 2030. Yet the government is still consulting on the policy even though it is less than a year away. This gives industry no time to react. So far this year BEVs have taken 16% of the market, up from 14% last year. Starting with a more realistic baseline for a mandate would help the industry, especially as the industry faces a ‘double whammy’ with tightening Rules of Origin requirements under the post-Brexit Trade and Cooperation Agreement. The latter mean that from 2024 BEVs sold between the EU and UK are likely to face 10% tariffs, pushing up prices for consumers.

Secondly, charging infrastructure needs a more rapid roll out to underpin consumer confidence. That needs more government support. Local authorities would be well placed to lead on this given their local knowledge of traffic flows and parking needs, but have been left hollowed out by cuts and can often barely provide statutory services let alone roll out a charging strategy locally.

Thirdly, policy on hybrids needs clarifying. At the moment hybrids that can travel a ‘significant distance’ will be allowed from 2030 to 2035. But what ‘significant’ means has never been clarified by the government.

Offering some flexibility for the likes of Toyota (which produces hybrid cars at Burnaston) could encourage the latter to invest further in the UK. So far it has not committed to making BEVs in the UK. This could also keep the 2030 target while allowing more affordable hybrids to run until 2035.

In summary, 2030 isn’t actually the issue. Rather it is the ‘chaos’ of government policy which needs sorting, and quickly.

By Professor David Bailey, Senior Fellow, UK in a Changing Europe.

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