Sales of new, pure-petrol and -diesel are set to be banned in the UK in 2030
As electrification increases car prices, pragmatism is needed to maintain the health of the car industry
Another week, another Prime Minister, another new Government and another set of priorities.
Rishi Sunak’s government is billed as being geared around building economic stability and tough decisions that go with it. Yet one decision taken by the government, the 2030 ban on the sale of non-electric cars, is having some unintended but entirely predictable consequences.
The biggest crisis of all is now rapidly emerging for car makers selling cars in this country: whether people will actually be able to afford the cars they’re selling.
Since the previous Prime Minister came in just last month, the cost of living crisis has only got worse. Inflation has gone up, as have interest rates.
Both are bad news for the new-car market. Over the past decade, consumers have got used to low interest rates and bought cars on rolling PCP-finance deals. When they come to renew, these costs will be considerably higher. If you’re looking to tighten your household expenditure to pay for energy and food, cutting back on how much you spend on your car is a logical saving to make.
However well intentioned you may be in reducing your environmental impact, spending more money per month to go into a more expensive electric car isn’t going to be an option when you’re faced with the need to eat and stay warm if you plan to stick with a PCP deal.
Even staying in a new version of the model you have today will cost more, due not only to a higher interest rate but also to the rising costs of cars themselves, due to rises in raw-material prices.
You could turn to a cheaper, smaller new car, perhaps from a ‘lesser’ brand, thus benefiting from the latest safety and technology, but not yet electric. But then these are the cars that the government is effectively banning, so they’re no longer economically viable for car makers to make. Car makers are now focused all in on electric, and there’s no way yet of making small electric cars profitability at a price that’s affordable for the middle classes.
Look no further than the passing of the Ford Fiesta last week for evidence. It’s a clean, economical, safe and reliable new car that’s reaching the end of its normal production cycle but this time isn’t being replaced, as the numbers just didn’t stack up for Ford to make it.
Priced out of a new car, it’s time to go used. Here you will find higher interest rates without the benefit of manufacturer subsidies, but you will be more likely to make a deal stack up. Yet the car you’ve bought might have even higher CO2 emissions than the one you’ve replaced it with, and you’re out of the buying cycle again for a few years.
It’s both a vicious circle and a plausible scenario where government policy legislating in favour of one technology – a considerably more expensive one – could actually have the opposite impact of getting people into electric cars sooner and driving down CO2 emissions.
Sunak talks of tough decisions. The plan for 2030 is laudable in so many ways, yet much has changed in the couple of years since it was announced. Even ignoring the fact that a key part of the plan, what constitutes a ‘meaningful range’ for a hybrid car to allow them to stay on sale until 2035, remains undecided after so much time, further pragmatism could be added to the law.
Keep the 2030 North Star by all means, yet apply it only for new market introductions. Allow time for safe, economical, reliable and more affordable cars on sale on 31 December 2029 to not only be sold the next day on 1 January 2030 but also over the next few years after until they reach the end of their natural cycles.
The car industry typically works on seven-year cycles, and costs are amortised over that time. After next year, car makers will launch cars that will be forced off sale ahead of the end of their natural cycles, due to the 2030 hard stop. The sums won’t add up, so why launch the car in the first place? In reality, the 2030 ban is really a 2023/2024 ban when it comes to new launches, as the Fiesta has shown, and the squeeze is being applied from now as the mandated ramp-up of electric car sales towards 2030 begins in 2024, when already 22% of car sales must be electric.
Fail to add in some necessary and pragmatic leeway and many people will not only be very quickly priced out of a new car but also the ability to reduce the CO2 emissions of the UK car parc.