It is just a matter of weeks before the UK enters the unchartered waters of the post-transition post-Brexitworld. It is not clear whether the European Union (EU) and UK will agree a trade deal, a relationship which accounts for around 49% of international UK trade. If a deal cannot be agreed with the EU, then the UK will default to World Trade Organization (WTO) terms from 1 January 2021.
In broad terms, a no-deal scenario would require the UK to apply tariffs and quotas to goods coming into the UK from the EU, and the EU would apply its “third country” tariffs and quotas to the UK. For the automotive industry, UK automakers could be hit with a 10% tariff on exports to the Single Market bloc, estimated at over €5bn (US$5.9bn) per year. This impact would be borne by the consumer, with an estimated increase of €3,000 in the average price of a UK-built car sold in the UK.
Whilst understandably car sales are down overall in 2020, the sales of battery electric vehicles (BEV) in 2020 so far are 168.7% higher than at the same point in 2019, according to new statistics from the Society of Motor Manufacturers and Traders.
The positive policy landscape and evidence of triple-digit growth in any sector should be applauded, but can this growth be maintained against the backdrop of Brexit, COVID-19 and a general macro-economic downturn?
The UK has placed into law a commitment to net zero by 2050. In the automotive sector, there is a commitment to ban the sale of new gasoline and diesel vehicles by 2035, so the policies are in place to encourage adoption of BEVs. Coupled with this, the UK Government can be commended for the recent tax incentives put in place to attract company car drivers to switch to EVs with some of the most generous tax benefits in Europe.
The positive policy landscape and evidence of triple-digit growth in any sector should be applauded, but can this growth be maintained against the backdrop of Brexit, COVID-19 and a general macro-economic downturn?
One area of concern beyond additional tariffs on a no-deal post-transition period was the impact of Brexit on the supply of BEVs from EU manufacturers which must meet strict per-car average emissions levels or risk paying hefty EU fines. During the transition period, sale of BEVs and plug-in hybrid electric vehicles (PHEVs) contribute to compliance with these targets; post-transition without an equivalent incentive, EU automakers are likely to prioritise the EU bloc market in order to meet these regulations.
UK automakers could be hit with a 10% tariff on exports to the Single Market bloc, estimated at over €5bn (US$5.9bn) per year
A recent study by Transport & Environment found that without equivalent targets in the UK to those in the EU, the supply of BEV/PHEVs could drop by 20%. Faced with a potential lack of BEV/PHEV vehicles in the UK market post-Brexit, the UK Government has confirmed that new UK rules through Statutory Instrument will come into force which mirror specific CO2 emissions targets set out in Regulation (EU) 2019/631. Without this adoption of EU rules, there was a real risk to supply of BEV/PHEVs into the UK market which would have dampened the tremendous growth in BEV adoption seen this year. In terms of looking forward, the UK Government continues to promote EV adoption and has enacted legislation to promote the e-mobility transition, including the Autonomous and Electric Vehicles Act 2018. The legislation mostly focuses on the conditions for creating EV charge points.
The e-mobility shift offers tremendous opportunities to the automotive industry with Bloomberg NEF’s Electric Vehicle Outlook 2020 highlighting that EVs will hit 10% of global passenger vehicle sales by 2025, rising to 28% in 2030 and 58% by 2040. This is driven by predictions of price parity between EVs and fossil fuel vehicles by mid-2020.
Therefore, once we have price parity (and arguable we are close when you factor in total cost of ownership) then consumer behaviour/acceptance will be key. Having excellent charging infrastructure will play a big part in adoption. A notable example of this is Osprey Charging’s success in building the first rapid EV charging hub in London in 2019. The company is on a journey to install over 2,000 rapid chargers across the country, within four years. Let us all hope post-transition there is an ecosystem for continued growth and BEV sales continues—we need a deal.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Mark Richards is Partner and EMEA Co-Leader, Energy, Environmental & Infrastructure, at Bryan Cave Leighton Paisner LLP (BCLP)
The Automotive World Comment column is open to automotive industry decision makers and influencers. If you would like to contribute a Comment article, please contact editorial@automotiveworld.com
