EDITOR’S COMMENT: Should YOU be paying more to drive an electric car? No!
Laying out his dream for a green industrial revolution, Boris Johnson said it would be “propelled by the electric vehicles made in in the Midlands” as he announced a ban on sales of new cars with conventional engines was moving forward five years to 2030. His vision is certainly ambitious: it will require a massive reshaping of the UK automotive industry.
Last year 1.3m cars rolled off British production lines. Fewer than one in ten had powertrains that were either electric, plug-in or hybrids. Technology is not the problem, funding is the challenge “We can build whatever cars we’re told to,” says one industry executive who didn’t want to be named. “It’s just going to be bloody expensive and it means a dramatic adjustment to manufacturing.” Costs of setting up plants for electric cars run into the hundreds of millions, and the automotive industry operates on notoriously thin margins.
Manufacturers have been holding off major decisions about pumping money into UK plants for years because of the uncertainty over Brexit, and the potential for a 10pc tariffs if no free trade deal is agreed. Until they understand the fine detail of the Government’s plans to electrify motoring in Britain, don’t expect any announcements.
Another factor is the final destinations of British-built cars. Roughly four out of five cars produced here are sold abroad, the bulk of them to Europe. That means of the 2.3m new cars bought in the UK last year, more than 2m were imports. “Britain’s car industry is set up to export,” says Ian Henry of Autoanalysis. “If Brexit means trade tariffs, then manufacturers are going to look to markets where they can make profits.”
A 10pc tariff would eat into margins on electric vehicles, many of which are loss-making as a result of heavy investment in the new technology they contain and setting up manufacturing for them, potentially leading car makers to direct production from overseas factories away from the UK.
Henry says major markets such as Germany and France, which offer more generous incentives to buy electric cars, could suddenly become much more attractive. This was underlined by Nissan’s chief operating officer Ashwani Gupta, who repeated the Japanese manufacturer’s warnings about the impact of a no-deal Brexit on its plant in Sunderland. It employs 7,000 people and many times that number in its supply chain.
“Our commitment remains, and it will continue as far as our business is sustainable,” he says, adding that if Brexit harms trading conditions, “obviously our UK business will not be sustainable, that’s it”. Then there’s the complex problems of the EU’s “rules of origin”, which say 55pc of parts in cars must be “local content” to qualify for the bloc’s zero-tariff rates.