CEO Update

To drive the transition to zero emission motoring, we need carrots, not sticks

06 March 2020 #CEO Update

New car registrations figures released this week by SMMT show the market fell -2.9% in February, as demand from private buyers declined again amid weak consumer confidence and ongoing uncertainty over government policy on vehicle technology and environmental ambition. This is a significant concern, coming at a time when fleet renewal is so important as part of wider efforts to tackle climate change and air quality.

There was some good news in the month, with battery electric and plug-in hybrid electric cars enjoying rising demand. 4,566 of these zero emission capable cars joined UK roads, however their market share remains low at just 5.8%, illustrating the scale of the challenge before us. Manufacturers have invested massively to bring a rapidly increasing number of new zero- and ultra-low emission models to market, with more than 65 already on sale and 34 still on their way this year, but high purchase prices compared with traditional technologies are still a key barrier to take-up.

Government has declared 2020 as the year of climate action. The industry is acting, putting ever more zero emission capable vehicles onto the market. But it must be the year of Government action too. Next week’s Budget – the first of a new decade – provides it an opportunity to send a clear signal to the market. We need to see a package of long-term incentives – and infrastructure spending – that is commensurate with government levels of ambition. The current Plug-In Car Grant expires in a month so we need the Chancellor to make a long-term commitment to its renewal – both for zero and ultra low emission vehicles – and to make them completely tax free.

This would make a huge impact on affordability overnight. For example, removing VAT from all new battery electric, plug-in hybrid electric and hydrogen fuel cell electric cars would cut the upfront cost of an average family battery electric run-around by some £5,600. Add to this plug-in car grant and exemption from VED and insurance premium tax, the purchase price of these vehicles could be cut by as much as £10,000.

Bold action such as this would help to deliver greater cost parity with conventionally powered vehicles, making new technologies a viable option for many more buyers. Ultimately, as the evidence shows, to drive the transition to zero emission motoring we need carrots, not sticks – and that means ruling out talk of bans and penalties, which will only encourage car buyers to hold on to their older, more polluting cars for longer.