Thursday, September 19, 2024

Why slowing demand for electric cars is forcing manufacturers to ration petrol models

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Ultimately, Poston argues, this gap must be bridged somehow: by consumers, businesses or the Government, which remains the driving force behind the push towards EVs. 

However, the SMMT and other motoring groups have repeatedly pointed out that while the ZEV mandate forces manufacturers to sell more EVs, ministers scrapped the main incentive for consumers – the plug-in grant – two years ago. 

They are now lobbying for Rachel Reeves, the Chancellor, to offer up some kind of tax break or subsidy for EV buyers to boost sales again

Nick Parker, an automotive expert at AlixPartners, says a slowdown in demand has been experienced in most European countries where subsidies have been withdrawn. 

“Until that cost differential between EVs and internal combustion engine cars has come much closer, there will always be a challenge – and you’ll need some level of incentive to close that gap,” he says.

Mike Hawes, the chief executive of the SMMT, wants the Government to launch a full-blown campaign that will make the incentives of switching to electric clearer and talk up the benefits of the technology.

He says: “Manufacturers are committed to delivering net zero and the ambition set out by the ZEV mandate. Investment in the billions is being made by the industry both in the development of an ever-increasing range of EVs, and in helping consumers get into these new cars and vans. 

“While a record number of drivers are switching, however, achieving mass market transition requires action by everyone. 

“Charging infrastructure investment must be mandated, consumers supported with compelling purchase incentives such as a reduction on VAT on new EV purchases and a taxation regime that is fair and treats EVs as essentials rather than luxuries, with a positive narrative of the undoubted benefits of driving electric.”

However, convincing Reeves to spend taxpayers’ cash on bungs for EVs may be a tough ask when she already faces a £22bn “black hole” in the public finances ahead of next month’s Budget. 

Conversely, says Auto Trader’s Palmer, cheaper vehicles may already be on the way from China – although many brands have so far failed to price them at the same low levels they are sold for in Asia. 

“When you get price parity, like you have in middle-aged EVs, these cars sell really quickly, so it’s not a wholly negative picture” he says.

“We also see that when manufacturers do discounts, and demand rockets. But we just aren’t seeing that at a sustained level, so there is a risk you could get into a spiral. 

“Our view is that people still need some support to get into electric cars.”

Ben Nelmes, of consultancy New Automotive, instead argues that car makers should be able to meet their targets without any help.

“I don’t think it’s realistic to expect the Government to offer support,” he says, “and I also worry about that kind of thing creating distortion effects which you eventually have to take away.”

He points to analysis by his own company, published on Tuesday, showing that many brands are now on course to meet their ZEV mandate targets. New Automotive predicts that 23pc of cars sold in August were EVs – exceeding the industry’s overall target. 

Despite this, the figures also show that major brands including Volkswagen, Stellantis, Ford, Nissan and Renault were all still failing to meet their quotas. 

A government spokesman this week insisted the UK car market “is growing strongly”.

The spokesman added: “The target for zero emission cars in 2024 is 22pc, which gives manufacturers flexibility to sell a range of products, as they have done in previous years.”

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