Ava Stoyanova looks at possible scenarios for a post-Brexit EV economy
According to the latest edition of the International Energy Agency’s Global EV Outlook, the number of electric cars in motion has to reach 600 million by 2040 in order for the current greenhouse gas emission target of temperature increases below 2°C to be reached and maintained.
Currently, we are nowhere near this figure, as only 0.2% of total light-duty vehicles were EVs in 2016. The figure is estimated to rise to 20 million vehicles by 2020, without taking into account regional politics. Is this estimate realistic when regional political uncertainty is included in the equation? Take, for example, the European perspective –Brexit could have a negative impact on the EV industry, especially under a Conservative government which was more inclined to drop the European gas emission targets a year ago. A year after the Brexit vote, relations between Europe and the UK may be looking at a bleak future, but neither should be short of ambition to make the best of their decarbonisation efforts.
A year ago, the Brexit vote triggered the immediate reaction of the British automotive sector to demand from the UK Government protection of the current tariff arrangements, as according to SMMT’s estimations a change in import tariffs could result in an increase of up to £1,500 per purchase if the retailers were unable to cover the additional costs.
Additionally, a report by PA Consulting has estimated that the cost of assembling a car in Britain could increase by £2,370 in the event of a hard Brexit. With more than 30 manufacturers based in the UK, accounting for over £69.5 billion of annual turnover, such an unfavourable change in tariff arrangements with the EU would cause stagnating sales, as the EU still remains the biggest market for vehicle parts from the UK.
Threats of relocating the plants outside of the UK were raised by carmakers, such as Nissan, whose production of Nissan Leaf EV in Sunderland accounts for 400,000 units annually. Nissan went as far as suing the Leave campaign for using their logo. On the other hand, BMW tried to remain cool-headed, hinting that its production network spread out across 31 locations in 14 other countries provides enough flexibility for the manufacturer to relocate the production of new models, such as the first battery-powered version of the Mini expected to go on sale in 2019.
In the window of Brexit negotiations, the ambition of UK-based manufacturers still remains focused on developing electric power trains. Depending on the final tariff arrangements in the near post-Brexit future, the electric transport industry might be negatively affected by the fleet of consumers to cheaper alternatives, meaning that more electric incentives have to be provided by the UK Government. However, there are positive consequences for British manufacturers to get up to speed with their own EVs.
Who would actually think that Brexit might have more positive effects than negative? It turns out that the UK Government has already sponsored a number of initiatives of British manufacturers. A prominent example is the London Taxi Company that not long ago received a £16.1m grant from the regional growth fund to open a Coventry plant for electric cabs, estimated at a cost of £300m. Government incentives for taxi drivers to buy the EVs will be provided in discounts of £7,500 on the cost of the vehicles and pay for more charging points across the UK.
However, everything comes at a cost and in this case, it is the penetration of the Chinese giant Geely in the UK market who is the main sponsor of the black cab producer. The UK Government, thus, shows signs of exploring all options on the table and certainly looking beyond Europe, while also making amends with its long-term European manufacturers inhouse, such as Nissan, which allegedly agreed to extend its production of EVs in Sunderland after receiving Government’s reassurances.
Bearing in mind the importance of the British automotive market and the heavy regulatory regime of the EU on transport, the UK Government is now flirting with the idea of keeping EU regulations and agencies in place after the final Brexit deal is signed. In January, the Government committed to a greener electric future, featuring the building of a smart grid and more public charging points to make clean energy affordable.
Further importance is placed on new battery technologies and energy storage in EVs, with hydrogen fuel technologies also being currently tested. It looks as if a silent electric revolution might be taking place in the UK ahead of the final deal and amidst the usual political gibberish. London is not only being pragmatic with respect to its automotive industry, but it is also showing maturity when it comes to its efforts to keep up with the European VI emissions standard. A week ago, the Mayor of London, Sadiq Khan, launched a $100 million program to upgrade 5,000 older buses to cut emissions by up to 95% by September 2020. Diesel-only buses are now being phased out and all double-deckers will be hybrid, electric or hydrogen, with an Ultra-Low Emission Zone established in central London in 2019.
Last year’s Brexit concerns seem to have evaporated with the Government taking a firm lead in furthering its green transport strategy. Other sectors might not be so lucky, but the UK automotive sector is giving clear signs that it is committed to make the best of the EU tariff arrangements, whatever they might be. When those are not favourable, there will always be allies in the East, ready to expand to merely come above water in a Tesla-dominated world.