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Alarm bells ringing as EV transition hits UK car industry

Posted on 28 Nov 2024. Edited by: John Hunter. Read 429 times.
Alarm bells ringing as EV transition hits UK car industryThe UK automotive industry has called for urgent Government intervention to safeguard the sector and Britain’s zero-emission vehicle transition. The call comes as new analysis by the Society of Motor Manufacturers and Traders (SMMT) reveals that weak demand for electric vehicles (EVs) and the need to fulfil ever-rising sales quotas will cost the industry some £6 billion in 2024, and even more next year – with the potential for devastating impacts on business viability and jobs.

The SMMT says that the automotive sector remains committed to delivering a decarbonised road transport sector. Every manufacturer has invested billions, providing a choice of more than 125 zero-emission car models and over 30 van models, with rapid improvements in battery technology putting paid to range anxiety. Since the mandate was designed more than two years ago, the original assumptions on which it was founded have not yet been borne out. Market demand has, however, failed to meet ambition, interest rates are steep, raw material and energy prices remain high, and geopolitical tensions and economic uncertainty are impacting global confidence.

The UK is not immune to global pressures with costs stubbornly high and a lack of confidence in perceived chargepoint provision resulting in a reluctant market. When the mandate was unveiled, industry anticipated that 457,000 electric cars would be registered in 2024, which should have accounted for 23.3% of all new car registrations. However, the latest outlook shows 94,000 fewer cars will be registered, totalling just 363,000 with a market share of 18.7%. The situation is even worse for vans with the outlook halved to just 20,000 units expected to be registered this year, a 5.7% market share against a 2024 target of 10%.

The mandated targets have given manufacturers no option but to subsidise sales, incentivising fleet, business and consumer EV sales through an estimated £4 billion worth of discounts. Despite this, the industry looks likely to fall short of the 22% EV market share demanded, potentially creating a £1.8 billion bill for compliance for those missing their targets for cars alone, either to Government or to competitors, most of whom manufacture their EVs abroad. Van manufacturers will face further costs, with market demand drastically behind the ambition set by the mandate.

Production cutbacks

The result is a total ‘compliance bill’ of almost £6 billion in 2024 alone, with costs set to mount next year. With global manufacturers already making production cutbacks due to weak EV demand, losses of this scale could force brands to withdraw from the UK market and cause global investors to question the UK’s appeal as a manufacturing destination.

Mike Hawes, SMMT chief executive, said: “We need an urgent review of the automotive market and the regulation intended to drive it. Not because we want to water down any commitments, but because delivery matters more than notional targets. The industry is hurting; profitability and viability are in jeopardy; and jobs are on the line. When the world changes, so must we. Workable regulation – backed with incentives – will set us up for success and ‘green growth’ over the next decade.”

Rapid action to stimulate demand and adjust the regulation to reflect market realities is urgently needed to safeguard the sector’s potential to deliver £50 billion in growth over the next decade. A robust, competitive market would ensure a greater volume of EVs reach the road more rapidly – a more important marker for decarbonisation than market share – and encourage greater investment in UK manufacturing and the thousands of jobs it provides.