Petrol and diesel car ban brought forward to 2035 – harsh truth or fantasy?

ICE ban brought forward to 2035, now includes hybrids
The UK government on Monday announced the ban on selling new petrol, diesel or hybrid cars would be brought forward from 2040 to 2035 at the latest, meaning that people will only be able to buy electric or hydrogen cars and vans once the ban comes into effect. Speaking at the London Science Museum alongside David Attenborough this week, Boris Johnson said 2020 would be a “defining year of climate action for country and planet.”

The Road to Zero strategy published in 2018, committed to ending the sale of new conventional petrol and diesel cars and vans by 2040 but with many criticising the plan for not being bold enough to reduce emissions, the announcement to bring the ban closer is a step in the right direction.

Is this commitment actually possible?
Whilst Monday’s announcement is without a doubt a laudable commitment, the devil will be in the detail. The question is: can the UK car industry and economy can cope with such a rapid transition to road transport electrification?

Consumer and Industry react tentatively
UK online marketplace Auto Trade said searches on Monday evening following the announcement rose 162% above average levels, whilst views for hybrid cars which are likely to be banned in 2035 rose around 42%.
The car industry reacted tentatively to the news, maintaining that hybrids provide a good entry point for consumers who may wish to try out alternatively fuelled vehicles but are not quite ready to commit to a pure electric one just yet.

Sale of pure electric vehicles in 2019 were 37,850, representing only 1.6% of the 2.3 million cars sold in the UK. Under government plans, only the sale of pure EVs and hydrogen cars and vans would be allowed in 2035, ruling out not just petrol and diesel vehicles but hybrids too.

What would a ban look like? 


Figure 1 above shows an illustrative example of what the 2035 ban on new car sales could look like.
By 2035, the UK’s new car market is assumed to grow at a compound annual growth rate of 1.5%. Uptake of vehicles over the short term is informed by the Society of Motor Manufacturers and Traders (SMMT). Over the medium and longer-term, the required rate of growth is computed on a linear basis to achieve the government’s 2035 target.

In order to reach a production level of 2.8 million pure electric vehicles by 2035, Industry would have to significantly ramp up from the 38,000 sold in 2019. Assuming a linear take up, Original equipment manufacturers (OEMs) will need to produce over 20 million EVs by 2035 – this is hugely implausible.

Other factors that could limit uptake
The modelled uptake to 2035 does not include some major obstacles such as infrastructure requirement, dealership education and training, grid constraints and the impact on government tax revenues.

The UK currently has a network of over 30,000 public charge points serving over 200,000 electric vehicles but this still isn’t enough; inadequate coverage and lack of charge points still features as one of the top major barriers to buying an EV. What approach will government and industry take to ensure that the charging infrastructure is robust by 2035?

Another hurdle right now is that since most consumers do not have pre-existing knowledge of electric vehicles, car dealership experiences can strongly influence purchasing decisions. However, with the current dealership model predicated on selling diesel cars in volumes due to profitability and salespeople promoting the vehicles that are easiest to sell, this doesn’t do much for the sale of EVs. For car dealerships to incorporate EV sales into their long-term strategies, the level of education and retraining required is likely to be significant and costly.

To help the UK achieve its net-zero ambition by 2050, heat pumps are currently the governments main choice for decarbonising heat but with this coupled with a sharp rise in electric vehicles, the national grid is likely to feel the impact. Can the national grid cope with increased electrification in the absence of smart and integrated solutions? What is the scale of investment required to ensure the grid remains resilient?

With the projected increase in EVs, the government will have to find a way of taxing them. The Office for Budget Responsibility reports that the UK government expects to raise £28.4 billion in fuel duty in 2019-20. This represents 3.5% of total tax revenue and is equivalent to £1,000 per household and 1.3% of national income. It is just not feasible to assume the government would allow EV uptake to completely eliminate this. On the other hand, a levy on EV usage would lead to strong pushback from consumers and environmental groups.

Hydrogen and the role of public transport

Hydrogen hasn’t featured at all yet, but it is expected to play an increasingly important role in the medium and long term, particularly for heavier vehicles. As Jaguar Land Rover’s head of engineering, Nick Rogers, mentions:

“The larger the vehicle the larger the aero challenge. If you’re not careful you end up with such big batteries and you make the vehicles so heavy that as you race down the autobahn the range disappears”.

Hydrogen could support faster decarbonisation of road transport particularly if its rollout is targeted to heavier vehicles such as buses, HGVs and SUVs – currently a consumer favourite and contributing hugely to transport-related CO2 emissions. The production of hydrogen vehicles could create workshop challenges for car manufacturers even though the underlying technology is similar to an electric vehicle.

To facilitate deep decarbonisation that is consumer-led, public transport needs to take an increasingly larger and important role. Emissions can be reduced if fewer vehicles are produced and more people use public transport, cycle, walk or car-share. However, around 10 million Britons (a fifth of all workers) would be unable to get to work if they could only rely buses, trains and other modes of public transport. The government need to invest and make public transport a far more attractive choice to support the decarbonisation of the transport sector.

While the announcement to bring forward the petrol and diesel ban to 2035 is a step in the right direction, this has to be calibrated with the impact it will have on the car industry and the wider economy. Indeed, big decisions will have to be made sooner rather than later for the industry to really get to grips with the biggest change since the internal combustion engine replaced the horse-drawn carriage.

For more information or queries, please contact Faisal Haroon (Faisal.haroon@ecuity.com)

Sources:

PM launches UN Climate Summit in the UK – Gov.UK

The Road to Zero: Next steps towards cleaner road transport and delivering our Industrial Strategy – Department for Transport

Electric car queries soar over UK plan to ban polluting vehicles – Financial Times

New car registrations for 2019 – Society of Motor Manufactures and Traders

SMMT UK new car and LCV registrations outlook to 2021 – Society of Motor Manufacturers and Traders

Charging point statistics 2020 – Zap-Map

Dismissive and deceptive car dealerships create barriers to electric vehicle adoption at the point of sale – Nature Energy

JLR believes battery is not the best choice for heavy SUVs – Automotive News Europe

Public transport needs to be made more available and affordable – Better Transport

Low-carbon Transport: A Greener Future – Department for Transport


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