The government has announced that it is to cutting grants aimed at encouraging people to buy electric vehicles (EVs).
As a result, the government is now facing a stern backlash from manufacturers and sustainability groups.
The Department for Transport will now reduce the grants from £3,000 to £2,500 and restrict it to cars under £35,000.
This has been perceived by many within the industry as a backwards step from the government’s planned Net Zero initiatives.
However, Transport Minister Rachel Maclean said: “We want as many people as possible to be able to make the switch to electric vehicles. The increasing choice of new vehicles, growing demand from customers, and rapidly rising number of chargepoints means that while the level of funding remains as high as ever, given soaring demand, we are re-focusing our vehicle grants on the more affordable zero emission vehicles.”
Graham Hoare, Chairman, Ford of Britain said: “Today’s news from the UK Government that plug-in grants for passenger and commercial vehicle customers are being reduced is disappointing and is not conducive to supporting the zero emissions future we all desire.
“Robust incentives – both purchase and usage incentives – that are consistent over time are essential if we are to encourage consumers to adopt new technologies, not just for all-electrics but other technologies too like PHEVs that pave the way to a zero emissions future.”
SMMT chief executive Mike Hawes said: “This sends the wrong message to the consumer, especially private customers, and to an industry challenged to meet the government’s ambition to be a world leader in the transition to zero emission mobility.”
Matthew Fell, Chief UK Policy Director, said: “While long-term reductions in consumer incentives for electric vehicles are inevitable, this is the wrong time to stunt a green recovery by making a sudden change to the grants on offer. With a stretching 2030 target in place to phase out sales of new petrol and diesel cars and vans, we must avoid sending mixed messages to consumers and businesses. Switching to an electric vehicle still has many barriers, including high upfront costs and availability of reliable charging points.
“A clear and consistent pathway for incentives will ensure business can continue to deliver the government’s ambitions for reducing transport emissions. By providing new electric vehicle models and installing the necessary infrastructure, we can make rapid transition a reality.”
Chris Black, Commercial Director at LeasePlan UK, commented: “The decision to announce and change plug-in grants on the same day has taken the industry by surprise, and the lack of notice hasn’t allowed businesses to proactively manage the situation. Whilst the instantaneous change will minimise a spike in claims, it has resulted in a great deal of disruption for customers and many across our industry. How this will affect the rapidly growing EV market remains to be seen.
“Taking a step back, it’s possible to see both positives and negatives. By limiting the grant to cars costing less than £35k and reducing it by £500, the government is ensuring that more people will benefit over a longer period of time.
“What’s problematic and potentially harmful is the timing: many motorists were just waking up to the cost saving and environmental benefits of EVs. Combined with other grants and subsidies such as lower Benefit-in-Kind (BiK) tax and 0% Vehicle Excise Duty (VED), the plug-in grant provides drivers and fleet operators with a strong incentive to make the switch to EV. By reducing or taking away these benefits, the government risks undermining its own messages around decarbonisation and ‘building back green’ post pandemic.”
Government cuts grants but listed companies are still catching a ride on the e-car wave
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown spoke to Business Leader about today’s announcement.
The UK government has pledged to promote green investment as a key ingredient of the economic recovery with £1 billion in funding for renewable energy projects and the creation of a national infrastructure bank to unlock more green finance.
But the Spring Budget fell short on a lot of detail surrounding the UK’s net zero strategy, including the electric vehicle infrastructure plan. Instead fuel duty was frozen and now the Department for Transport is reducing grants aimed at encouraging people to buy electric vehicles from £3,000 to £2,000 with the price of qualifying cars capped at £35,000. Rather than giving the industry a push along the road, it’s being seen as a set-back in the UK’s e-vehicle journey.
But the global industry is forging its path nonetheless, with car manufacturers, energy giants and infrastructure companies making efforts to join up the fragmented system, a vital step to persuade more car owners to make the switch from combustion engines to electric powered vehicles.
Here are some of the listed runners and riders, in the race to capitalise on the green mobility revolution.
- Car manufacturers – Tesla, Nio, Volkswagen, Li Auto, GM, Nissan, Volvo, Ford, Apple
- Companies investing in charging technology – Chargepoint, BP, Shell, EDF, Good Energy,
- Mining companies – Glencore, BHP Billiton, Anglo American
Tesla is the EV superstar basking in the green spotlight with sales eclipsing would-be rivals around the world, even in China, the world’s biggest electric vehicle market. But there will be no rest for Mr Musk. Despite his company’s eye watering valuation, the market is ripe for a shake up and the Model 3 and new Model Y are coming up against stiffer competition as the race heats up. Its share price has retreated from the highs reached in January, but there is concern that its valuation is far too frothy given that it’s based on future earnings and who will emerge the ultimate winner in the marathon ahead is not yet clear.
Nio has been riding on the coat tails of Tesla’s meteoric rise to some extent, and will have to grow significantly over the next five years to justify is huge valuation. It is thought to be well positioned to capitalise on the growth in the Chinese e-vehicle market, with Beijing setting targets for new energy vehicles to account for a fifth of annual car sales by 2025 compared to 5% now. Nio is hoping to rev up sales there by competing on price and by tapping into range anxiety by offering a service to swap modular battery packs in cars within minutes. It recently launched the ET7 sedan, a car aimed at the family market which boasts of a range of more than 600 miles and broadens Nio’s product line
Volkswagen is also in the race to steal Tesla’s crown. VW has pledged to increase electric vehicles sales 27 fold by 2025. It has now announced plans to build six factories to produce 240 gigawatt hours of batteries a year in Europe over the next decade, enough to provide batteries for 4 million cars, a commitment to electric which could see it nudge into the fast lane. The release of a cheaper version of its ID.3 electric car could also help it give Tesla’s Model 3 a run for its money, as it’s considerably more affordable. VW may have a head start in China, the world’s largest market for EVs given the group’s existing manufacturing and dealership networks in the country. However the transition to electric without diluting more profitable petrol and diesel sales is likely to prove a tough balancing act for VW.
Li Auto is a relative new kid on the EV block but has already seen its share price rev up dramatically. It focuses on manufacturing large SUVs for the family market in China. Its USP is a small petrol engine which can generate electric power for the battery, reducing reliance on finding a charger to help counter range worries. This could be crucial in the Chinese market where infrastructure remains limited.
General Motors, the largest US car maker is another big automaker which caught an early ride on the green revolution juggernaut and now hopes to pull out in front. It used to lead the EV market until Tesla overtook it but now boss Mary Barra is determined to take pole position once more. It has plans to roll out 30 new EVs and to phase out petrol and diesel powered cars globally by 2035. Joe Biden’s pledge to replace the entire government fleet with 645,000 cars and trucks with US made electric vehicles is likely to put a rocket under GMs plans.
The planned US government buying spree of US made EVs could also benefit Nissan which has four American manufacturing plants. The iconic Nissan Leaf, seen as a pioneer for EV enthusiasts, is built at its factory in Smyrna Tennessee as well as in Oppama, Japan and Sunderland in the UK. The affordable plug in with a decent range led the EV charge for years and held the crown of the biggest selling electric vehicle in Europe until it was eclipsed by Tesla’s Model 3. Nissan is expanding its line of electric vehicles with the Ariya SUV to try and gain more market share and its alliance with Renault and Mitsubishi could be key to driving down long-term costs and improving competitiveness.
Volvo has also unveiled a major push to phase out fossil fuel powered engine sales. It is planning to only sell electric cars by 2030 and will concentrate on a direct to consumer model via its own dealerships and an online portal. Institutional investors own around a 60% stake in AB Volvo and its share price risen steeply since the announcement indicating their approval of the strategy.
Ford’s electric ambitions have taken on a distinctly European focus with a pledge to invest $1 billion in turning a traditional assembly plant into a high tech EV factory in Cologne, Germany. It’s promising its entire passenger vehicle range will be an all-electric offering by 2030. With more government incentives for EV purchases and an increasing number of city bans for polluting combustion engines, Ford clearly sees Europe as ripe for rapid growth in the EV market. But like its car manufacturing rivals the challenge for Ford will be to keep the pedal of production on at just the right speed to meet the ebb and flow of capricious consumer demand.
Apple is still playing its EV cards close to its chest, but already seems to have the car industry rattled about its debut. It is believed to be well on the road to developing a self-drive car and is rumoured to be on the hunt for a production partner. Hyundai was thought to be a leading contender but last month indicated that although it was receiving requests for cooperation to develop autonomous vehicles, it wasn’t talking to Apple. The tech giant will need an automotive partner to develop cars but could end up just developing the self-drive technology to sell on. If a vehicle is eventually unwrapped, it would create a big dollop of competition with the Apple cachet likely to rival the Tesla tag in terms of prestige.
Charging infrastructure companies
There is currently a huge variation in charging provision around the world and a robust reliable infrastructure is seen as critical for EV adoption. ChargePoint claimed to be the first publicly traded electric vehicle charging company operating across continents when it listed at the start of the month on the NYSE after it merged with a special purpose acquisition company, Switchback Energy Acquisition Corporation. It already has more than 115,000 charging ports across its North American and European networks. It’s still lossmaking and the pandemic has eaten into revenues but it’s the leading charging network in the US and Joe Biden’s pledge during the election campaign to install half a million more public chargers across America has sparked further interest in the company. Although the $1.9 trillion stimulus plan adopted by congress doesn’t allocate funds for that purpose, another tranche of investment in infrastructure is expected. With the democrats expected to put more wind in the sails of green energy initiatives, a big spending boost on charging networks is expected.
BP is the most used public charging network in the UK and is focusing on installing more ultra-fast charging points to meet rising consumer demand. It plans to increase its network of ultra-fast chargers more than ten-fold to 700 by 2025, doubling again to 1,400 by 2030. Globally it aims to increase charging points from around 7500 to more than 70,000 in 2030. It’s partnered up with the ride hailing platform DiDi to build a network of EV charging hubs across China with a plan to open more than 1,500 charging stations over the next five years. In the UK, the BP Pulse network delivered almost 20% more energy to customers in the first 40 days of 2021 than during the whole of 2020 despite the ongoing lockdown, demonstrating the undercurrents shifting the forecourt market.
Shell plans to roll out 500,000 electric charging stations in just four years to capitalise on the charging infrastructure boom. In January 2021 Shell bought Ubitricity, the largest electric vehicle charging network in the UK. The company, which integrates electric car charging into street infrastructure such as lamp posts, has more than 2,700 charge points in the UK, giving it a market share of 13 per cent. The big energy companies are trying to keep just ahead of consumer demand, with their investments in the technology, but going too fast too quickly could mean the technology becomes outdated before it’s heavily used.
EDF and Podpoint
French energy giant EDF acquired Podpoint in February 2020 but is reportedly looking to float the charging company on the London Stock Exchange. With interest surging in the e-vehicle sector, an IPO is likely to spark huge retail interest in the company. It has already manufactured and sold 96 thousand charging points across the UK and Norway, partnering up with retailers Tesco and Lidl, house builders and the Center parcs holiday chain.
Maps of the charging points across the UK and Ireland is a key weapon in the arsenal against range anxiety which can thwart e-car purchases. Renewable supplier Good Energy has now increased its stake to become the majority holder in Zap Map which helps drivers find a working chargepoint, use it and make a payment via one app. Zap Pay is designed to be used on all networks and is being rolled out during 2021. The green energy supplier has also created a tariff to make EV charging more affordable by offering a reduced unit rate and standing charge compared to the standard variable tariff.
Glencore, BHP Billiton and Anglo American
As governments set targets for the phasing out of the combustion engine and the adoption of EVs the demand for copper lithium and cobalt needed for battery manufacturing is forecast to soar. Commodities giant Glencore has already committed to net zero carbon emissions by 2050, the first major miner with targets to fully align with the goals of the Paris agreement on climate change. Ramping up copper and cobalt production while reducing its coal business is a big part of the strategy with management seeing a big opportunity on the cusp of the e vehicle revolution.
Copper prices fell to a four year low last March but had risen to a seven year high by December, and have continued to climb since then. The metal accounts for 28% of BHP Billiton’s revenues, with the miner owning 58% of the massive Escondida mine in Chile and there is expectation that the drive towards electrification and green energy will continue to support copper demand. Anglo American is also focusing on “consumer driven” commodities including copper, nickel and manganese which are crucial to electric car manufacturing. As part of the strategy Anglo has a major new copper mine in Peru due to begin production in 2022.