Electric cars in peril

Electric cars in peril

Vince Cable has given a pretty clear signal of his intentions in his new role as business secretary.

Speaking at the Society of Motor Manufacturers and Traders (SMMT) Summit in June 2010, he said, ‘I've made it clear that I don't see the future as large-scale subsidies to [automotive] companies. This point of view isn't politically motivated – I believe in markets and competition, but I'm practical and pragmatic. I recognise that other countries have offered more, but we can't fight – and we can't win – a subsidy war.’ He was not ‘going around the country waving a cheque book.’

And for good measure, this doughty champion of British industry said, ‘I have been asked when there will be a decision on the £5,000 to support purchases of ultra low-carbon vehicles, so I know there is some frustration. I can't tell you the outcome yet, but I know it’s important and will relay that.’ Relay the frustration to whom? Step forward Philip Hammond, the new transport secretary, who will apparently be responsible for the decision.

The £5000 support refers to the previous government’s decision to bring in a subsidy to buyers of a quarter of the price of an electric car up to a maximum of £5000. The date from which the ‘Plug-in Car Grant’ was to take effect was 1st January 2011. Mr Hammond has indicated that there will be a subsidy but it probably won’t be as much as the original scheme. This would have a major effect on electric car pricing. Nissan has priced its electric Leaf, scheduled to arrive in Britain in Spring 2011, so that, with the subsidy, it was expensive but still feasible compared with its likely competitors. A reduction in the subsidy would make the vehicle less attractive to buyers and reduce its sales potential. And that would certainly make Nissan think again about the wisdom of building a plant in Britain rather than importing cars from a country with a friendlier attitude to buyer subsidies than this government’s.

Will Cable lose the Ampera for Ellesmere Port?

From Mr Cable’s utterances we can infer that the projects put in place in the motor industry, and in ultra low carbon vehicles in particular, are now to be ‘reviewed’ and potentially scrapped, and subsidies to individual car manufacturers are very much a thing of the past.

David Cameron reduced the temperature when he announced to parliament on 9th June 2010 that the grant to Nissan to build their electric car, the Leaf, and manufacture electric car batteries, will go ahead.

But where does Mr Cable’s statement leave General Motors and their decision as to where to locate Europe’s version of the Chevrolet Volt, the Ampera? If he stands by  his mantra: ‘We can't fight – and we can't win – a subsidy war,’ it will almost certainly destroy any hopes that Vauxhall management had of building the plug-in hybrid electric vehicle at their plant at Ellesmere Port on Merseyside. Unless he is merely sabre rattling, Opel management in Russelsheim, Germany, will be delighted that Mr Cable has handed them the Ampera on a plate. Of course Britain can fight and win a subsidy war. Why does Mr Cable think Japanese manufacturers chose Britain as the preferred location to build their European cars?

What else will be scrapped?

Further projects are also in jeopardy. In June 2009, the government’s Technology Strategy Board awarded eight winning consortia a total of £25 million from the government to operate an electric car demonstration project to help speed up the introduction of ultra low carbon vehicles. The project brings together vehicle manufacturers, power companies, regional development agencies, councils and academic institutions in order to accelerate the reality of a greener future of transport in the UK. In total, almost 500 vehicles are being trialled. The government has yet to confirm whether public funding will continue.

The previous business secretary, Lord Mandelson, established an Automotive Council and used it to announce a £19 million competition to support projects aimed at developing the UK's supply networks for the low and ultra low carbon vehicle industry. Will this be scrapped?

A further TSB-sponsored competition was announced in June 2009 to provide funding for projects that accelerate research and development leading to the reduction of carbon emissions from mass-market road vehicles. Will this be scrapped?

In February 2010, the government announced the roll-out of a network of electric vehicle hubs, called Plugged-in Places, which will see a charging infrastructure appearing in car parks, major supermarkets, leisure and retail centres, as well as on the street.  This was the first round of Plugged-in Places funding, out of a total of £30m. The first Plugged-in Places are London, Milton Keynes and the North East, and between them they will be installing over 11,000 vehicle recharging points during the next three years. Will this be scrapped?

Car manufacturers raise pressure on Cable and Hammond

In July, with Philip Hammond unable to confirm the size of any subsidy, a consortium of car manufacturers with electric and plug-in hybrids ready to launch in 2011, wrote to Messrs Cable and Hammond warning the government that a failure to confirm electric car subsidies will jeopardise the switch to greener cars. Citroën, Mitsubishi, Nissan, Peugeot and Renault wrote that ‘without the incentives, the UK will become a significantly less attractive market. As businesses, we will target the markets that provide the best environment for selling our vehicles. The emergency budget made no specific reference to supporting low-carbon vehicle incentives and has therefore left our businesses uncertain of the government's position.’ The companies said the vehicles were of ‘critical importance’ to the growth of new green jobs.

In response to the letter, the Department for Transport said: ‘We are committed to supporting new transport technologies to help make our transport system greener and more sustainable. Electric and plug-in hybrid vehicles are currently supported through the taxation system.’

Short term decisions or long term strategy?

As the recession hit car buyers, the last government was faced with a massive decline in car sales and, as a result, took several actions to support the motor industry. Chief among these was the scrappage scheme and, buoyed by its success, the government adopted a package of measures designed to put Britain at the forefront of the incipient electric car industry. The driving forces behind this support were the need to reduce dependence on foreign oil and to meet legally binding emission standards.

Those measures are now under threat as the coalition government seeks to find savings to plug the deficit in the country’s finances. It is not in the country’s best interests that investment in the UK in research, development, engineering and design, plus manufacturing capacity, in this growing global industry, should be allowed to wither. One of the reasons why we no longer have a domestic volume car manufacturer is short term decisions that have been given precedence over long term strategy.