Over £13bn of car exports could be in jeopardy if the UK fails to accelerate its transition to manufacturing electric vehicles (EVs), a fresh analysis from the Energy and Climate Intelligence Unit (ECIU) has today warned.
Currently, 80 per cent of cars built in the UK are exported with the market still dominated by petrol and diesel models. However, UK manufacturers tend to see into markets where demand for EVs is surging and policies are in place to accelerate the transition to zero emission models.
Over 57 per cent of UK auto exports go to the EU, while 8.7 per cent go to China, and a further five per cent goes to the US.
All these markets are introducing Zero Emissions Vehicle (ZEV) mandates, which will set targets for manufacturers to sell a rising proportion of zero emission models.
Specifically, by 2030 40 per cent of all vehicles sold in China will need to be zero emissions, while in the EU a ZEV mandate has been agreed that will require the average emissions of all vehicles sold by a manufacturer in 2030 to be 55 per cent lower than in 2021. Moreover, the bloc has agreed to end the sale of new petrol and diesel models from 2035.
In the US, 16 states now boast a ZEV madnate of requiring 68 per cent of all cars sold to be zero emissions by 2030, while the Biden White House has set ambitious targets to drastically increase EV sales at the national level.
As such, a “significant portion” of the vehicles sold into these major markets will need to be zero emissions, but ECIU’s analysis warns the UK’s car industry is currently “a long way short” of producing enough EVs to meet these demands.
Of the 775,014 cars the UK produced in 2022, around 73,600 were EVs, which equates to 9.5 per cent of total production, the analysis showed.
The ECIU stressed that if steps are not taken to enable the UK’s car industry to increase EV production levels to meet targets which are being set in its major export markets, then export income will “fall dramatically”.
A conservative scenario suggests that a failure to boost EV production could see UK car exports to the EU to fall by £10.9bn by 2030, while exports to China are on track to fall by more than £1.45bn and exports to the 16 US states with ZEV mandates could fall by more than £917m. Overall, ECIU calculated UK auto export revenues could fall by 59 per cent or more than £13.2bn in total.
“There are clearly a lot of factors at play here, but the scale of export loss from not keeping pace with the world’s charge towards EVs would be very significant for the UK,” warned ECIU’s transport analyst Colin Walker.
“The world is investing trillions into the net zero transition. The UK is yet to stump up the level of cash incentives, tax cuts or regulatory reform to retain and attract businesses rushing to take advantage of the incentives on offer in the US and EU. The government’s response to the US’s Inflation Reduction Act is now not due until the Autumn.”
Walker called on the government to send a “clear signal of intent” to support the transition towards EVs by finalising its own Zero Emission Vehicle Mandate, which would set targets requiring a year-on-year increase in the minimum percentage of zero emission vehicles that a car manufacturer has to sell.
“The very existence of the UK’s car industry as we know it today would be threatened,” the analysis warned. It added that the loss of export incomes at the projected scale would represent a “heavy” blow to the UK economy and cause mass job losses.
However, the ECIU stressed that it was important to remember that this is only a potential outcome and is still largely dependant on decisions which are made today by the UK’s car industry.
If significant investments were to be made in the supply chains and battery gigafactories necessary for the UK to become a major centre for EV production, then a “different reality is likely to emerge”, the report predicted.
The Department for Transport was considering a request for comment at the time of going to press.
The report is the latest in a series of warnings from across the auto industry that without further government support manufacturers are likely to shift EV production capacity to EU to take advantage of the growing number of battery factories being developed across the continent.
In response, the government has repeatedly stressed that it is investing heavily in the EV transition through support for charging infrastructure, grant schemes, and R&D. Minsters are also reportedly close to finalising a major support package to secure renewed investment from Jaguar Land Rover in a flagship UK EV plant.
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