It was definitely a week for big news in the motor industry as the Prime Minister revealed his Big Green Initiative. There were some eye watering numbers announced in terms of support and some very ambitious deadlines to hit.
So, what were they? For a start, the sale of petrol and diesel cars and vans will be banned in the UK from 2030, with hybrids being allowed until 2035. There was £1.3 billion to fast track the rollout of charge points across the country, £582m in customer facing grants and £500m to develop the UK’s battery production capability.
From what we have heard so far, what will it actually mean for the people most impacted by the announcement - the vehicle manufacturers, the dealerships, and most importantly of all, the driving public?
Well, the manufacturers have seen this coming and you only have to watch the car ads on the TV at the moment to appreciate how invested they are in EV technology. Every single ad, bar none, is focusing on what they currently have in the EV space or the halo effect of what is coming. For some time now, all the key players have been migrating their products initially away from diesel and into petrol and then from petrol to hybrid and from there finally into full EV.
Clearly a deadline that has been brought forward by 10 years to 2030 will force the manufacturers to accelerate these changes – if they can. The cost of developing and then producing electric vehicles, when you have for years been focussed on the internal combustion engine, is astronomical. It takes deep pockets to make this change and some, as Mitsubishi have, may simply decide that this is just not possible and decide to focus on less regulated markets, which in their case is South East Asia. Other manufacturers who have already invested heavily in hybrid and electric technology will see this as an opportunity and thrive. Kia for example, who are at the forefront of the move to electric are already targeting 7 out of every 10 cars they sell in the UK having some sort of EV technology in 2022 and even that bastion of British made luxury motoring Bentley, have said they will only sell electric vehicles from 2030.
One of the key issues that sits at the heart of the ability to produce full EVs in any sort of number is the access to battery units, so the announcement of significant investment in the UK’s ability to produce its own batteries will have come as welcome news to vehicle manufacturers. Battery availability has always been one of the areas that has held back the supply of full EVs. With the majority of production based in China, demand has massively outstripped supply and has led to long lead times. While these lead times have reduced in the last 6 months, additional capacity will be crucial to the manufacturers being able to hit the 2030 deadline.
So for the manufacturer it is a very clear case of with change comes change. The government has decided to change and so the manufacturer must also change, or, to use a well worn cliché, die. There is going to be an almighty scramble over the coming years. This scramble will not just be in who can out position the other in terms of the glossy EV high ground that is portrayed through TV adverts, but for the hard fought battle in the market place to maintain market share.
So, if the manufacturers have seen this coming for some time and are in varying states of readiness, what about the dealers. As you would expect, they too have seen this coming, and depending on their manufacturer partners will have had varying degrees of exposure to EV technology over the last few years. However, they also face significant challenges in order to meet what is now an inevitable change in customer demand.
With only 5.5% of the new car market being a full EV, the technology is unknown to much of the driving public and there will be a significant knowledge gap that needs to be filled as part of the purchase process. This will mean that significant upskilling of the sales force is required, and not just in terms of the vehicle. If the dealer is to remain at the centre of the purchase process then they need to add value in terms of expert advice around charging points, energy tariffs and charging networks.
There are also challenges from a facilities point of view as well. As the make up of customers vehicles changes so will the make up of the dealers used car stock and demonstrators. This will mean that they need to reconfigure their sites to install significantly more charging points. The workshop will also need investment both in terms of training for the technicians and in ensuring they have the right diagnostic equipment to work on the vehicles. All of this will take investment at a time when the dealerships have been hit hard by the extended lockdown restrictions
This is one of the reasons we created GoCharged. We wanted to help the dealerships educate the customers on electric vehicles, so we can encourage more of you to switch into an EV.
Last, and very much not least, what about the impact on the UK motoring public. Obviously most customers current change cycle will fall well short of any of the legislative changes, so in theory they can stay with largely what they know in terms of the internal combustion engine in either petrol or diesel formats. However, as we have already highlighted the more traditional options are reducing by month as the manufacturers emphatically shift away from the ICE.
Being able to understand the new technologies and their impacts will be crucial to the buying decision and so customers are going have to go through a process of re-education. Issues such as range, charging points, and energy tariffs are not something that has ever formed part of many vehicles purchase decisions. Nor has whether you have off street parking, but this is currently a critical factor in deciding whether or not you can own an electric vehicle. To put it simply, if you don’t have off street parking, with the current state of the charging network, it is virtually impossible to own a full EV. Clearly the scale of the government’s investment will dramatically change the charging landscape, but nine years is a short time to take something from where it is now to fully fit for purpose.
So if there are a lot of new factors to be taken into account when making a decision on your car purchase, there is still one old one, the price. Currently full EVs are significantly more expensive than their equivalent petrol or diesel counter parts. This is subsidised by a government grant to tune of £3000 and the announcement this week has confirmed that they will continue to support this, which is good news, although the exact detail is still unknown. While EVs do represent a significant saving in running costs, with each 100 miles of charge costing around £6, the premium they cost will still be a prohibitive factor for most customers. The good news here is that most industry analysts believe that as EVs move more into the mainstream and become more widely available, market forces will dictate that they become more affordable. No doubt the premium sector will still attract a premium price for its EV products, but we have already seen this year just how affordable EVs can be with the introduction of the MG 5 at just £24,495 with a 214 mile range.
If there is a lot to think about then on the new car, what about your current one and the part exchange price. Well, the short answer here is, no one knows! It is only the sale of new petrol and diesel vehicles that are banned from 2030 and there is no mention of any planned phasing out of either of the two current most popular power trains. It remains to be seen whether or not the seismic shift caused by the legislation will result in a down turn in values, or whether the economic climate will make affordability the key purchase decision and as a result values strengthen.
There is no doubt that we are entering a period of unprecedented change in the motor industry, a change which could almost be quantified as being as significant as many of the game changers that shaped where are motoring lives are today. One thing that is certain though is that it is going to be very interesting!