Why delaying the petrol ban risks denting confidence in Britain’s car industry

Vauxhall's Ellesmere Port plant
Electric vans have just started leaving the production line at Vauxhall’s Ellesmere Port - TIM STEWART NEWS LIMITED

The timing has not been lost on the car industry.

Just weeks after the sector hailed BMW’s pledge to build electric Minis in Britain, and as electric vans started rolling off the production line at Vauxhall’s Ellesmere Port plant, Rishi Sunak rowed back on the industry’s most important target in decades.

No longer will the sale of petrol and diesel cars face a ban by 2030, the Prime Minister said on Wednesday, as he pushed back the controversial policy by five years.

Unsurprisingly, the industry backlash was instant.

Ford’s UK chairman, Lisa Brankin, said the changes would undermine the sector’s push to a cleaner future, while Stellantis and Volkswagen both pleaded for clarity; understandable, given the Zero Emissions Vehicle (ZEV) mandate that remains in place and requires manufacturers to be selling four electric vehicles in every five, by 2030.

Recent investments in UK carmaking have been borne from board-level lobbying across global manufacturers, with many executives choosing Britain because of its ambitious decarbonisation plans.

But now, as Sunak rolls back his net zero targets, there are fears the sector’s future could be in jeopardy once again.

Carmakers, like other businesses, dislike unexpected rule changes because they can prove costly and disruptive.

More than this, however, policy reversals make long-term planning harder because a government that changes its mind is perceived as less dependable, making a new factory or production line an unsafe bet.

mini factory
BMW recently announced it would spend £600m to convert its Oxford factory to build electric Minis - Chris Ratcliffe/Bloomberg

That could mean farewell to future investment in Britain, says former Aston Martin chief executive Andy Palmer, as ministers can’t be trusted not to shift the goalposts again.

“All of those supporters that were on any particular board pushing the UK case now look like a bunch of idiots, and they won’t do the same again,” he says.

While there may be little domestic-owned carmaking left in Britain, there are still global manufacturers that view the UK as a solid bet.

Nissan is building out battery production in the UK, while Jaguar Land Rover said recently it will build a new EV factory after £4bn of investment from Indian parent company Tata.

Weeks ago, BMW also announced that it would spend £600m to convert its Oxford factory to build electric Minis.

However, to meet growing demand, forecasts from the Faraday Institution show that the UK will need 10 gigafactories by 2040, meaning more businesses will need to invest.

“Our reputation is in tatters,” says Palmer. “You’ve got a government policy that you can’t take to the bank, so basically you don’t invest.

“Who the hell is going to invest in the UK gigafactory when the policy is moving around and up and down?”.

Charging could be one of the sectors worst hit by Wednesday’s decision.

Companies fear a slowdown if the five-year delay affects demand, as buyers could opt for another petrol or diesel car rather than switching to electric.

This concern comes as charging firms plough billions of pounds into infrastructure.

Industry group ChargeUK says £6bn of charging projects are currently planned in the UK.

Tom Hurst, UK boss of charging company Fastned, said: “If this has a meaningful impact on uptake rates of EVs, that will translate to less attractive business cases.

“And then when it comes to myself competing against my European colleagues for the next rounds of investment, that puts me at a disadvantage.”

Toddington Harper, boss of rival charging firm Gridserve, said: “Any weakening of the 2030 ban adversely affects private investment, which will prove more costly for our country in future.

“As well as damaging investment, the change of the date of the ban will hinder the rapid development of a healthy second-hand market in EVs which will make the adoption more affordable for all.”

Smaller businesses which supply carmakers will be hit “particularly hard”, says Stephen Phipson, chief executive of manufacturing lobby Make UK.

“The announcement that the Government will be watering down its net zero policies is a huge setback for manufacturers who require stability and confidence in order to invest,” he adds.

Once the third-biggest carmaker in the world, Britain is now 14th behind countries including the Czech Republic and Brazil.

A slow procession of factory closures, including Honda’s shutdown in Swindon two years ago, has eaten away at the UK’s car industry, driven in part by the threat of trade tariffs in the wake of Brexit.

Further decline is likely without investment, says Palmer, who adds that the sector is at a crucial juncture.

Electric car sales are stalling and manufacturers are striving to make vehicles cheaper as a means of attracting more buyers.

Meanwhile, the industry is bracing for an end-of-year deadline for post-Brexit trade rules which, unless an extension is granted, could lead to tariffs of 10pc being imposed on electric cars exported to the EU from Britain or brought to the UK from the EU.

All of this could pave the way for an influx of cheaper electric cars from China, says Palmer, which may be good for consumers but will undoubtedly dent demand among Europe’s carmakers.

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