United Kingdom / Analyst Insights
Charging Up: Opportunities and Threats for Electric Vehicle Sales
by Yusuf Allinson, Industry Analyst
Sep 09 2019

The UK automotive industry has endured difficult market conditions over the past five years. As new and used car sales continue to decline, the expected increase in demand for electric vehicles will provide opportunities for manufacturers, suppliers and retailers. According to data from the Society of Motor Manufacturers and Traders, alternatively fuelled vehicles, which include battery and plug-in electrics, only accounted for 6.8% of total registrations in the first seven months of 2019. Although electric registrations have increased, the current figures indicate that there is significant potential to drive further uptake of electric vehicles.

 

Auto-investment

Carmakers have raised concerns over the closure of battery production plants operated by Ford and Honda in Swindon and Bridgend respectively. Honda stated that falling demand in China influenced the decision, while Ford raised concerns over rising costs and dampened demand.

The CEO of Jaguar Land Rover, Ralf Speth, stated that production of the company’s electric vehicles will not continue if there are no active UK battery plants, which are crucial for developing the next generation of electric batteries. Car production utilises just-in-time production techniques where parts are sourced hours before they are required in a highly integrated supply chain. If the United Kingdom leaves the European Union without a trading arrangement in place, batteries sourced from the European Union could be subject to import tariffs and trade barriers may result in substantial delays to production schedules. As a result, extra investment in the supply chain will be required to encourage UK carmakers to commit the production of new models to UK plants. Companies in the Motor Vehicle Maintenance and Repair industry will have to invest in training in order to work on electric vehicles.

Economic uncertainty, falling new car sales and an end to production cycles for many models have caused investment to decline significantly. In 2016, automotive industry stakeholders invested £2.7 billion to maintain the UK’s position as a major European producer. Investment has decreased since the EU referendum, falling to just £90 million in the first half of 2019. This continued lack of investment has affected car manufacturing, including electric vehicles, as funding is crucial for research and development of modern electric vehicles. Despite this, Jaguar Land Rover, which is the largest company operating in the Motor Vehicle Manufacturing industry, has committed to producing new electric models at its Castle Bromwich plant. The Nissan E+ Leaf was put into full production early in 2019 as demand for electric vehicles continues to grow.

 

Feasibility of funding  

The government has implemented a range of policies to increase the uptake of electric vehicles. Sales of plug-in hybrids decreased by 50.4% in June 2019, after the government scrapped the £2,500 grant for hybrid vehicle purchases and reduced the grant for electric vehicle purchases from £4,500 to £3,500 in October 2018. This decision was unpopular with industry operators, but further investment of £40 million in charging infrastructure was announced by the government in July 2019. The government stated that poor provision of charging infrastructure both in size and geographical reach negatively affected private and commercial demand for electric vehicles. The low number of charge points for each UK region influences purchasing decisions and limits the uptake of electric vehicles. Significant investment in charging infrastructure is important for the long-term transition to cleaner vehicles if the government is to achieve its objective of removing all petrol and diesel vehicles from UK roads by 2050.

A range of support and incentives are still available to customers to encourage the switch to electric cars. A tax review by the treasury removed taxes on companies that opt for electric cars as single or fleet purchases. The tax exemption for company cars applies to vehicles registered before and after April 2020, which will encourage purchases of electric vehicles. The interest-free electric vehicle loan and funding from Transport Scotland for domestic charging points is aimed at encouraging motorists to switch to electric vehicles in Scotland. Across the United Kingdom, the government’s Road to Zero strategy includes extra funding for charging infrastructure and a push for charge points to be installed in new-build homes to further encourage uptake of electric vehicles. In addition, the Electric Vehicle Homecharge Scheme is expected to provide £500 for electric vehicle owners to install charge points as part of a £1.5 billion investment between 2015 and 2021.

Overall, the electric vehicle uptake has been affected by bumps in the road, compounded by difficult market conditions as customers delayed discretionary purchases. Over the long term, the success of the Car Sharing Activities industry has contributed to a trend of a significant number of people borrowing vehicles rather than purchasing them. Access to vehicles through membership of car sharing schemes is expected to weigh on vehicles sales. For environmentally conscious customers, the majority of car sharing providers offer greener vehicles, which forms part of their selling point.

 

For a printable PDF of Charging Up: Opportunities and Threats for Electric Vehicle Sales, click here.

IBISWorld industry reports used in this special report:

C29.100 - Motor Vehicle Manufacturing
G45.111 - New Car and Light Motor Vehicle Dealers
G45.112 - Used Car and Light Motor Vehicle Dealers
G45.200 - Motor Vehicle Maintenance and Repair

For more information on these, or any of the UK’s 400 industries, log on to www.ibisworld.co.uk, or follow IBISWorldUK on Twitter.