Car industry reels from uncertainty over Rishi Sunak’s net zero plans

Rishi Sunak’s anticipated delay in banning the sale of new petrol and diesel cars has prompted a backlash from the UK automotive industry, which warned it would undermine investment certainty.

The UK prime minister’s expected shift of the target from 2030 to 2035, which was noted in automotive boardrooms across the world, has cast uncertainty over carmakers’ plans to go fully electric in Britain.

“This U-turn will cause a huge headache for manufacturers, who are crying out for clarity and consistency,” said Ian Plummer, a former Renault and Volkswagen executive who is commercial director at online marketplace AutoTrader.

“And it is hardly going to encourage the vast majority of drivers who are yet to buy an electric car to make the switch.”

Leading car brands such as Ford, Vauxhall and Volvo Cars have pledged to go fully electric this decade and have made manufacturing decisions with that target in mind.

The news of Sunak’s apparent policy pivot has come with just over 100 days until the UK’s car industry faces new rules forcing it to sell a certain proportion of electric vehicles from next year.

Carmakers are scurrying to make final preparations for the new regime, ordering models from factories and training their dealers.

“Our business needs three things from the UK government: ambition, commitment and consistency,” said Ford’s UK chair Lisa Brankin. “A relaxation of 2030 would undermine all three.”

But other carmakers may be quietly pleased, such as Toyota and Honda, which have been slower to roll out electric vehicles. “Some people will be cross, but the general view will be a collective sigh of relief . . . they will have a little bit more elbow room,” said one senior auto industry executive.

Rishi Sunak is also expected to dilute the current proposed ban on new gas boilers from 2035 © AFP via Getty Images

The UK government is not the only administration to waver over targets they have set for industry in the push to reach net zero on carbon emissions.

The EU, which plans to ban new petrol car sales from 2035, surprised the industry earlier this year by conceding that some carbon-neutral fuels — dubbed “efuels” — could be allowed for longer.

Carmakers across the continent noticed an immediate drop in interest in electric cars as consumers began hedging their bets. 

The potential for consumer confusion comes just as carmakers need to increase sales to avoid crippling fines. UK rules due to come into force in January require manufacturers to achieve 22 per cent of their sales with zero-emission vehicles, a level that ratchets up every year until 2030.

“It’s like mobilising an army, and then telling them to get back in the barracks for a few years,” said Toby Poston, a director at the British Vehicle Rental and Leasing Association.

Sunak’s net zero pivot, due to come in a speech on Wednesday afternoon, is part of a pitch to motorists ahead of next year’s general election. The Conservative leader is attempting to present the opposition Labour party as environmental zealots who care more about climate change than the cost of living crisis. 

Sunak is expected to dilute the current proposed ban on new gas boilers from 2035 and is anticipated to delay a ban on oil boilers by nine years from 2026 to 2035. 

The UK’s current target is to phase out new petrol and diesel car sales by 2030, though with some leeway into the next decade for hybrids.

Ministers previously said some hybrids would be allowed to be sold as late as 2035, leading to acute uncertainty among manufacturers that supply a panoply of hybrid options and did not know which would be permitted. 

Shifting the ban lifts the threat on some hybrid models, such as Toyota’s, which use a battery but have relatively limited range when using only electric power.

The headline 2030 pledge has spurred electric car sales and helped drive investments into the UK, such as BMW’s decision to invest £600mn in its Oxford plant to make electric Mini models, and Tata’s plans for a £4bn battery factory in Somerset. 

Adam Forsyth, head of research at Longspur Capital, which provides equity research into clean energy companies, said many businesses investing in greener solutions would shift their attention elsewhere if the UK delayed net zero measures. “No one will skip the UK if there is business to be done but the focus will be where the opportunity is greatest,” he said.

The US’s landmark Inflation Reduction Act, which includes a $369bn package of subsidies and tax credits to tackle climate change, is luring businesses to the US. The EU, Australia and Japan are trying to follow suit.

“Changing targets risks damaging investments in the UK,” said Emma Pinchbeck, chief executive of Energy UK.

There are concerns that delays put consumers off embracing technologies, whether electric cars or electric heat pumps. 

Chris Skidmore, a Conservative MP who did an official review of net zero earlier this year, told the Financial Times that the watering down of targets would remove a big incentive for companies seeking to develop better, cheaper electric heat pumps. “This could be the end of the heat pumps industry in this country,” he said.

But Mike Foster, chief executive of the Energy and Utilities Alliance, a trade group for boiler manufacturers, welcomed the potential delay in banning off-grid oil boilers

“We had called for the ban . . . to be pushed back and thought it was unfair on rural voters and rural consumers to face the costs of fitting heat pumps before their urban counterparts on the gas grid,” he said.

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