Analysis: Delay in UK ban on fossil fuel cars can only slow investment

LONDON (Reuters) – Britain’s decision to delay a ban on the sale of new fossil fuel cars may make little difference to the pace of the shift to electric vehicles (EVs), even though the news provoked the wrath of car manufacturers concerned about supply chains and investment uncertainty.

UK Prime Minister Rishi Sunak, who is expected to face a difficult election in 2024, said the five-year delay to 2035 was not political and was about “doing the right thing for the country”.

After the polarized debate on emissions charges In the case of older, polluting vehicles, it said it was seeking to help those affected by the cost of living crisis and who cannot afford expensive electric vehicles.

Industry analysts, however, said Sunak had mostly undermined investment certainty as British companies struggle to attract investors to a relatively small market that broke away from the European Union after Brexit.

Announced in 2020, the 2030 ban was touted by then-Prime Minister Boris Johnson, with whom Sunak has clashed, as a way to establish global leadership of British electric vehicles. The UK’s target was ahead of the 2035 ban in the European Union, where most British-made cars are sold.

“We should have been in 2035 from day one, but it was moved because it has become part of a political debate,” said Philip Nothard, UK strategy and insight director at car dealer services company Cox Automotive. “The timing sends a message that things can change again, making it difficult for companies to manage their investment strategies.”

The 2030 deadline already had some flexibility.

In the government’s original proposal, under a zero-emission vehicle (ZEV) mandate on how many electric vehicles carmakers have to sell, 80% of new cars sold in the UK would be fully electric by 2030, with hybrids of low emissions allowed until 2035.

Under the new mandate that the government could make public this week, the target of 80% electricity by 2030 should remain, while the remaining 20% ​​would be a mix of fossil fuel and hybrid models until 2035.

While some automakers have complained, Jaguar Land Rover said: “We look forward to the certainty the ZEV Mandate will bring.”

In 2022, around 1.6 million new cars were sold in Britain, just 2% of global sales, meaning the country has little impact on the overall figures.

Global automakers have already bet big on electric, partly because it is too expensive to make combustion engine cars while at the same time investing heavily in electric vehicles.

Britain’s delay “won’t make a huge difference,” said Andy Leyland, managing director at Supply Chain Insights. “Traditional automotive needs to be fully electric to be able to compete on costs with Tesla and Chinese producers.”

“THERE IS NO INDUSTRIAL STRATEGY”

Last week Volvo Cars (VOLCARb.ST) he said he would stop manufacturing diesel models in early 2024 as part of plans to go all-electric by 2030. Both Stellantis (STLAM.MI) and ford (FN) They have committed to being 100% electric in Europe by 2030.

The result will be a reduced selection of fossil fuel models.

Adrian Keen, chief executive of InstaVolt, the British public fast-charging company for electric vehicles, operates 1,250 chargers and, as prices for electric vehicles fall, he expects consumers to continue buying them. Therefore, InstaVolt’s plans to have 10,000 chargers by 2030 remain unchanged.

“For us, it’s business as usual,” Keen said.

But Andy Palmer, former chief executive of Aston Martin, interpreted the delay as the latest sign that the UK government lacks a long-term plan.

Palmer is president of Slovak electric vehicle battery startup Inobat, which was considering building a battery plant in Britain but is “focusing our attention on Spain at the moment” due to its long-term industrial strategy and approach. investor.

“In Britain, there is no industrial strategy, no intention for an industrial strategy, no desire for an industrial strategy,” Palmer said.

Meanwhile, Britain faces a looming “rules of origin” issue with its Brexit trade deal that could mean the imposition of 10% tariffs on electric vehicles between Britain and the EU in 2024, a deal the EU shows little interest in changing.

“The UK’s delay (fossil fuel ban) is not a good sign in terms of stability, but they have realigned with EU regulation,” said Denis Schemoul, director of European vehicle forecasting at S&P Global Mobility. . “But the implications of the rules of origin are much more immediate.”

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