Is the UK really shifting to an electric future?
The electric vehicle (EV) revolution has accelerated in recent years, and after the announcement that the government will ban the production and sale of new petrol and diesel vehicles after 2030, Business Leader spoke to some industry experts to see how UK businesses are reacting to this ever-evolving industry.
Across almost every sector, there is a relentless drive to create a ‘greener’ and more sustainable future for businesses and wider society.
The Prime Minister Boris Johnson’s announcement regarding the shift to EVs was a part of the government’s ‘Green Industrial Revolution’.
To support the announcement, the PM introduced a £1.3bn funding scheme to accelerate the rollout of chargepoints for electric vehicles in homes, businesses, streets and on motorways across England, so people can more easily and conveniently charge their cars. A further £582m in grants, along with several tax benefits, will be given for those buying zero or ultra-low emission vehicles to make them cheaper to buy and incentivise more people to make the transition.
But what does this mean for companies across the country?
Is 2030 a realistic date?
Before looking into the direct impact of what the PM’s announcement means for businesses, it is important to understand whether the UK is ready for the momentous shift away from fossil fuels and into an electric future.
Adam Hall, Director of Energy Services, Drax, comments: “Considering the appetite among businesses and consumers for EVs, it’s entirely realistic for the government to push ahead with its plan to end the sale of internal combustion engine cars by 2030.
“Truthfully, there’s never been a better time to go electric. With so many government-led incentives available, we’re starting to see business leaders bring forward investments with the aim of futureproofing their business.
“Vehicle manufacturers are also stepping up to the plate and addressing concerns around vehicle availability. There are now more models than ever to choose from, and all the major brands have announced at least one fully electric model variant, which will support the government in hitting its 2030 target.”
Alfonso Martinez, Managing Director at vehicle leasing firm LeasePlan UK agrees, and insists both government and the business community can do more to lead the world into an EV-focused future.
He said: “The industry has made terrific progress over the past five years, not just in the range of models but in the improvement of technology and decrease in price. A 2030 deadline should be an entirely achievable target if we continue to progress with urgency and an emboldened attitude.
“What we need to see now is action. This means the Government needs to back the 2030 ban with world-leading policies and support measures to ensure its success. Leaders need to step up and respond to public demand by investing in a universal, affordable, and sustainable charging infrastructure, with clear and attainable support for manufacturers in a post-Brexit world. By pursuing ambitious policies domestically, the UK can set the tone and pace for other governments and prove itself as an international leader in the fight against climate change.”
Despite the optimism among businesses and government – the biggest barrier to the 2030 date may be from the manufacturers themselves.
Freddy Page-Roberts, CEO and Founder, Page-Roberts Automotive, comments: “Britain’s biggest car manufacturers have already tried lobbying the Government to push back the 2030 deadline for EVs, suggesting they don’t think we’ll be ready for that moment when it comes.
“Of course, the government is making steps – the building of the Nissan Gigafactory in Sunderland acting as an example – but their foray into supporting the EV revolution is not only late but fails to fundamentally support innovation and long-term sustainability within our own sector and industry.”
The shift to electric
So, with the business community fully behind the drive for a greener future, now is the time for many industries to be looking at switching or upgrading their fleets to EV. However, it can be argued that UK businesses have been at the forefront of the electric revolution.
Martinez explains: “Fleets have led the charge around EV adoption, as incentives like low tax rates for low-emission vehicles have been introduced to benefit businesses. The pandemic has also impacted attitudes towards global pollution and, therefore, emissions awareness. The lifestyle changes associated with lockdown have caused many people to pay more attention to the environmental impact of their habits, including driving and its link to carbon emissions. Not only that, but the rollout of Clean Air Zones across the country and the government’s 2030 ban on the sale of new traditionally-fuelled vehicles have propelled manufacturers forward in developing accessible EVs for all. Then there’s the government incentives such as the Plug-in Car Grant and Homecharge scheme, which have also had a positive impact on EV uptake.
“Businesses are not only making the shift – they’re the driving force behind new EV registrations in the UK. EVs now make up a significant portion of our corporate vehicle orderbooks, and this will only increase as we get closer to 2030.”
But do the statistics back this up?
Jordan Brompton, Co-Founder and CMO of myenergi comments: “Over the past few years, the adoption of EVs has increased exponentially. Indeed, in May 2021, there were 260,000 pure-electric cars registered for use on UK roads. This number increases to more than 535,000 if we include plug-in hybrids. According to data released by SMMT, UK EV registrations increased by 185% in 2020, despite the impact of COVID-19 on new car sales.
“With less than ten years to go until the government’s enforced ban on the sale of all new petrol and diesel cars, the EV marketplace is developing at a rapid speed. While previously, only a handful of manufacturers offered an alternatively fuelled option, there are now more than 130 fully or part electric vehicles available to buy or lease in the UK. Thanks to continued investment in new technology and new capability, owning an EV has never been easier.”
BIK and benefits for businesses
With an increasing amount of EV drivers and business fleets, as well as strong government backing, there are clearly many positives associated with the switch to electric.
The primary advantage for businesses making the switch is Benefit-in-Kind (BIK) rates. A company vehicle is a taxable perk, and as a result, there are pay brackets associated, in part, with the level of C02 emissions emitted by the vehicle. Therefore, some petrol and diesel cars have a BIK tax rate of more than 40%.
For EVs, the BIK rate is 1% during the 2021/22 financial year – rising to 2% in 2022-25. This has been a primary accelerator in businesses switching to EV.
Ken McMeikan, Chief Executive of Moto Hospitality, comments: “The UK government has supported the transition by reducing company car tax for EV vehicles to 1% this year and to 2% in 2022 through to 2025. As company cars equate to over 50% of all new cars being purchased, we expect EV car growth to continue at pace. You can make considerable savings by choosing a low or zero emissions plug-in vehicle over an equivalent petrol or diesel vehicle.
“Preferential BIK rates make pure battery and efficient plug-in hybrid electric vehicles more compelling than ever.”
Incentivising EV uptake in this way will directly affect businesses’ financial relationship with switching to electric driving, as well as assisting businesses in reaching their sustainability/ESG goals, by reducing their carbon footprints.
Jon Horsfield, Founder and CEO of Diode added: “The attractive savings is a key decision-making factor in the boardroom, with an electric vehicle costing significantly less to run than its fossil fuel counterpart. “Government incentives around BIK tax are also driving a huge uptick in demand across company car and salary sacrifice drivers too. This is all great news for mass adoption, as it will result in a large volume of well maintained, used vehicles hitting the market in the next few years.”
However, it isn’t just BIK that offers an incentive to switch to EV.
Louis Rix, Co-CEO of CarFinance 247 explains: “The government’s Workplace Charging Scheme grant also allows businesses to reduce the cost of vehicle charging points by up to £14,000 (if installing the maximum 40 charging stations), creating extra incentive for businesses to convert to EVs, rather than continuing to use petrol or diesel vehicles.
“The further introduction of EV charging stations in public spaces and at workplaces is likely to increase consumer investment in electric vehicles, with over 42,000 charging points in the UK already.
“The government has offered its own benefits for purchasing an EV, so workplaces must now support and make use of the incentives already on offer, as well as providing their own schemes to employees that reward purchase and use of an EV.”
As it is with many developments within the Industrial Revolution 4.0, the rate of change is accelerating at incredible speed. As a result, there are several issues to overcome.
A common trend associated with the introduction of new technology is the lack of education around its application and costs. The same issues have plagued EV for the last few years, showing the need for greater education to new customers and businesses looking at making the switch.
Brompton comments: “Incredible progress, investment and R&D has seen seismic changes in the EV marketplace. I think it’s now a question of awareness and education. For example, many people still believe dated viewpoints, such as the range of an EV isn’t enough to cover their journey into the office, or that finding a public charge point is almost an impossible task. If we can help to overcome these misconceptions with fact, accuracy and honesty, the perceived barriers to EV adoption will soon come crashing down.”
This lack of education around the benefits and debunking the myths around EVs could lead to further issues and take attention away from where the real challenges are.
Horsfield comments: “There are huge challenges for the current market, such as the myths around the cost of an electric vehicle, educating and changing drivers’ mindsets, and of course, the fragmented public charging network, with inconsistent user experiences and ropey reliability.
“But the greatest challenge of all? We estimate that the UK needs to install a staggering 4,300 charge points per day until 2030 to meet the upcoming infrastructure demand.
“Assessing EV suitability is hard and implementing the right charging infrastructure is even harder.”
As a result, this is where the long-term struggle for the industry comes from. However, with the introduction of new smart tech devices, this can be remedied.
Martinez explains: “The UK grid is on a trajectory for success when it comes to the mass adoption of EVs. While a common concern is the effect of drivers charging their EVs after work in the early evening – when demand is already at its highest – peak demand has actually been on a steady decline in the past 20 years. Plus, implementing smart technology will play a huge part in keeping the pressure off the grid.
“Smart charging will guide drivers to charge their EVs at non-peak times, as well as automatically pausing the charge to stabilise demand. Installing this technology – which is available to all households in England, Scotland and Wales through government incentives until 2025 – will ensure that the existing infrastructure can sustainably provide power to the UK as EV uptake increases.”
However, one challenge that is yet to see a potential resolution, is the shortage of semiconductor chips that has impacted manufacturers across the world. However, again, innovation could be the answer.
Brompton said: “Currently, the global EV market is facing a global shortage of semiconductor microchips. Tesla CEO Elon Musk described Q1 2021 as having ‘some of the most difficult supply challenges we’ve ever experienced’.
“However, shortages are temporary, and innovation is rife. Most companies are finding ways around this issue. At myenergi, we recently redesigned our entire product range to align our systems with a different, less in-demand chip solution. As such, I can’t see this setback proving a long-term interruption.”
What does the future hold?
Following government support, businesses making the switch, and technology across the industry improving all the time, the future of the EV sector looks bright. But what can we expect to see ahead of the 2030 deadline?
Hall said: “The next step is to ensure that the electricity drivers use to charge their EVs is 100% renewable and that businesses are optimising their energy usage. Switching to EVs is the first step, but if businesses are powering their fleet with fossil fuels or wasting any energy through inefficient operations, they’re undoing most of the good work.”
Also, new technology will play a key role in the evolving world of EV. He continues: “Vehicle-to-Grid technology will also play an important role in balancing the grid. EVs are effectively mobile batteries that can be charged and discharged. So, by enabling bi-directional charging, businesses could use their EV fleets to send electricity back to the grid at times of peak demand.”
While the focus from the industry is to ‘go electric’ – could there be a better alternative?
Andrew Aldridge, Partner at Deepbridge Capital explains: “Plug-in vehicles may not be the answer for all situations and hydrogen cell powered vehicles may complement the roll out of plug-in EV. It may well be that hydrogen is the fuel source of choice for long distance vehicles and the trucking industry, whereas plug-in EV may be the solution of choice in urban areas where range and accessibility to infrastructure are less of an issue. The next few years will see how this plays out but there is already investment in the hydrogen sector, with plans for the UK’s first low carbon hydrogen hub in Cheshire announced earlier this year.”
With less than nine years to go, there are many developments yet to come to fruition, and with technology improving all the time, it is hard to predict where the next big innovation within EV will come from.
However, adoption of EV will only increase. Oliver Shaw, CEO at Kalibrate concludes: “The shift towards EVs is unsurprising given the growing need for car manufacturers to be environmentally conscious and contribute to lower emissions.
“From a legislative perspective, the government pledging to make the UK a net-zero carbon country and ending the sale of petrol and diesel cars by 2030 is a positive step. This change is also being mirrored by businesses, with Tesla leading the EV charge through the announcement of its new sub-£18,000 product, Audi launching its cheapest EV yet, and Ford planning for all cars across Europe to be electric by 2030.
“What’s more, the consumer appetite for EVs is growing, with widespread adoption becoming a genuine reality in the decade to come.”