What does the future hold for the automotive sector in the UK?

The automotive sector is in the midst of the most disruptive changes in its history, with the phasing out of diesel and petrol cars, the rise of automation, and most importantly – the move to electric vehicles (EVs).

In April this year, there will be a significant governmental changes to the taxation of company vehicles, meaning that the rates for electric and lower C02-emitting cars will be a lot more appealing to business owners from across the UK.

Fully electric cars will soon be eligible for a 0% Benefit-In-Kind (BIK) tax rate. As electricity is not classed by the government as a road fuel, electric cars have no fuel benefit charge. That means employees are exempt from paying BIK on electricity provided by their employer to charge an electric company car.

Further tax incentives are being offered by the government for businesses and individuals looking at making the switch.

This, coupled with the ongoing controversies surrounding diesel and petrol cars, has given a new lease of life to kick the electric car market into top gear.

Future of Transport Minister, George Freeman, said: “The switch to zero-emission vehicles is the biggest technology development to hit UK roads since the invention of the combustion engine.

“We are determined that everyone can experience the benefits of these green cars and we are offering grants to lower the upfront cost of the vehicles, as well as the installation of chargepoints on the street, in work and at home. And with over 22,500 places to plug-in, electric vehicle charging locations now outnumber petrol stations.”

The government’s ‘Road to Zero’ campaign has meant that there is an increase to the current rate of the workplace charging scheme. This will mean businesses can get a grant of up to £10,000 per company to install a maximum of 20 chargepoint sockets to support them make the switch to ultra-low emission vehicles.

Freeman continued: “Our world-leading £1.5bn Road to Zero strategy sets out a clear path for everyone from motorists to business owners, to be part of the UK’s clean transport revolution. We have already supported the purchase of more than 200,000 ultra-low emission vehicles and offer businesses a range of infrastructure incentives and we will continue to drive forward uptake in all areas, including fleets, freight and buses too.”

What does the future hold for the automotive sector?

The government also has tax incentives in place for ultra-low and zero-emission vehicles, with both vehicle excise duty and company car tax graded to promote the lowest emitting vehicles.

The Plug-in Car Grant was introduced over seven years ago as an introductory measure to help offset the higher upfront purchase price of ultra-low emission cars.

A government policy states that the sale of conventional cars and vans will cease by 2040, with an expectation for 50-70% of all new cars being Ultra Low Emission Vehicles by 2030.

So, with all of this preliminary legislation and policy in place, what does the future hold for the industry?

Tim Anderson, Head of Transport at Energy Saving Trust, said: “The market is moving very quickly and 2020 will see an acceleration in the number of electric cars appearing in showrooms. There are still a number of challenges for technology to overcome and increasingly these are perceptions rather than fact, but there is work to do to address initial purchase costs, driving range, recharging and choice of models. All of these are being addressed as the technology matures and manufacturers gear up to meet demand.

“The demand for electric company cars in the UK is about to surge in light of the changes to company car tax next April. It is likely, however, that the potential for EV registrations will be dampened by lack of vehicle supply, certainly for the next couple of years as manufacturers develop production capacity.”

Andy Eastlake, Managing Director of Low Carbon Vehicle Partnership, comments: “2020 is set to be a big year for electric cars. A huge range of new models will be coming on to the market in the UK with a variety of battery capacities and innovative technologies. Couple this with the strict new European Cars and CO2 Regulations over the 2020/21 period, 0% BIK rates from April and the rapid increase in charging options and infrastructure and you can see how all the ‘challenges’ we have previously faced will begin to disappear.

“Electric cars are already commonplace in many businesses and should soon become ubiquitous. This year’s company car tax changes will give a further boost to demand. As vehicle availability and model choices are also improving, along with recharging infrastructure, we expect the business and fleet sectors to be leading the way in the EV transition; a transition which is under way and accelerating right now.”

So, it is clear to see the industry is gearing up for an electric future, with businesses leading the drive for innovation and implementation of EVs.

Richard Falconer, Managing Director of Co-wheels, explains: “We will start to see rapid take-up of EVs, especially in the public and business sectors which will eventually lead to wider public adoption. We are seeing more public sector contracts specifying zero-emission vehicles, and many larger companies are building it in as part of their internal targets for carbon reduction.”

What more needs to be done?

With the clear united front between business and government to create a more electric car friendly future, it is conceivable that we could soon have our roads and motorways with a majority of EVs. However, there are several issues that need to be resolved before this can become a reality.

Falconer comments: “Price and range of EVs needs to be addressed. We have seen prices fall so the total cost of ownership is closer to conventional cars, but some users will not change until it is equal and it will then take up to a decade for those vehicles to feed into the used market as the average vehicle age in the UK is around 8-10 years.

“Range anxiety will still be an issue for some, as buyers tend to get a car that will cover every eventuality. Even though the bulk of cars are not used for long journeys, just the occasional need will prevent some drivers adopting. This will fade as the latest generation of cars now usually exceed a 160-mile range, and it should not hold back businesses who have charging on site and vehicles which do much shorter daily journeys.”

Away from price and the range of EVs, the key to a successful future for the industry is to educate businesses and individuals of the benefits.

Eastlake comments: “I feel the most important aspect is greater public understanding. This year we will see EVs appropriate to almost every customer, but in 2019 plug-in vehicles only accounted for 3% of new car sales. With better understanding of the vehicles, the total running cost benefits, charging options and of individual journey patterns and driving behaviour, I truly feel more people will see plugging in to drive as the obvious choice for their next car.

“Businesses have a key role to play in encouraging this with company car policies and workplace charging. The recharging infrastructure is improving, but more still needs to be done to support the needs of car drivers, particularly those who are unable to charge at home.”

Philippe Vangeel, Secretary-General of The European Association for Electromobility, shares the belief that the key to future engagement and implementation is to inform businesses and the wider public of the benefits of EVs.

He comments: “There is one key word for me, and that is education! This goes from leading government figures across the world, to businesses of all sizes, all the way to the man in the street. The best way for acceptance of electric cars, is just to get people to test drive them.

“Once they experience it, it is often an eye-opener. We know from research that once you have driven an electric car, you do not turn back to diesel and petrol.”

What have legislation changes meant for EVs?

There is clearly a concerted effort across business and government to completely change the automotive industry to help the environment and reduce emissions.

The government has made clear that if the market is too slow to deliver improvements across the entire network, it is prepared to intervene to ensure a good deal for consumers by using powers in the Automated and Electric Vehicles Act.

This may help accelerate the evolution of EVs and increase the number of vehicles in active use, but what have other governmental decisions really meant for the industry?

Eastlake said: “The most impactful legislation for EVs will be the EU ‘Cars and CO2’ regulation and the extra ‘credits’ manufacturers get for EV sales. But we must remember that over 99% of cars currently on the road are still powered by petrol and diesel, so any regulations must be planned and signalled early enough to enable a fair and just transition. 

“I believe we will see more ambitious action taken, for example ending the sale of conventional cars and vans earlier than 2040, hopefully coupled with coherent Clean Air and Zero Emissions zone implementations – as well as progressive carbon taxation and, potentially, new forms of road user charging.

“The changes we need to make in transport are so dramatic, careful planning and preparation will be needed to ensure that we bring businesses and consumers along the journey with us.”