UK Diesel and Petrol Ban, puts EVs back in the Spotlight

The UK Government have set out plans to ban the production of diesel and petrol vehicles by 2040, a bid to encourage consumers to switch to electric vehicles, The Environment Secretary Michael Gove has said:

Britain “can’t carry on” with petrol and diesel cars because of the damage that they are doing to the environment. “There is no alternative to embracing new technology”

Tesla, Inc. is at the forefront of technological innovations within the Electric Vehicle (EV) marketplace, the introduction of the Model S was pioneering at the time to demonstrate to the world the viability of EVs, however, this came with a hefty price tag of over £60,000.

Subsequently, auto manufacturers have been playing catch up ever since, but are yet to find a winning recipe. According to the Society of Motor Manufacturers and Traders, in the first seven months of 2017, the number of new EV registrations in the UK sits at 1.6% of the total market.

Despite reasonable growth over the last few years, penetration of EVs has been relatively low, however, policy support and market incentives continue to grow in order to facilitate this transition.

The UK Government offers a plug-in grant to reduce the price you pay for a brand new EV, the grant will pay for 35% of the purchase price or up to a maximum of £4,500.

UK auto manufacturers have also entered the frame, recently introducing a scrappage scheme as an incentive to switch their vehicles to newer more efficient models. Ford, BMW, Mini, Toyota, and Nissan are among those offering savings of up to £4,000 off the price of a new vehicle.

However, for consumers there remains sufficient anxiety towards electric vehicles. According to a recent report by Mckinsey:

“Consumers are excited about EVs today, but concerned about driving range; high costs for battery packs make the cost of offering ICE-equivalent range prohibitive.”

One of the best-selling EVs on the market is the Nissan Leaf. At a starting price of £22,000 even after the £4,500 government grant remains at a price point higher than its comparable conventional vehicle.

Battery packs constitute as one of the obstacles for EVs competing in the market, however as with any new technology the cost will continue to decline. According to Bloomberg New Energy Finance (BNEF), the cost of the battery has declined by 65% since 2010 and will continue to do so, making an EV more affordable in the longer term.

Expected to arrive in the UK by 2018, Tesla Model 3 signifies a cost breakthrough. Before the Model 3, Tesla’s Model S was the cheapest in the range starting at £62,000, the Model 3 will come in at around £35,000 and Tesla claims it will offer a range of 220 miles.

The upfront cost and the range of EVs are improving with every new release, advancements in the industry are creating a favourable environment for EVs and in turn eroding consumer concerns.

Initial outlay are always at the forefront of consumer decisions, however, information that is often overlooked is the cost benefits of running an EV in comparison to conventional vehicles. EVs have significantly less moving parts that are expected to reduce maintenance costs, and grid electricity is a much cheaper source of fuel than petrol or diesel. A recent article in the Guardian had this to say:

“The cost of an overnight charge that delivers a typical 100 miles of driving is about £3-£4 depending on your electricity tariff. To go the same distance in a petrol car would typically cost £15”

As the EV market evolves you would hope that information of this kind becomes more widespread in order for consumers to make informed choices on vehicle purchases.

What does the future hold?

The UK government is pushing the agenda to improve vehicle emissions and air quality. While EV penetration is low, policy support and market incentives will help drive the transition in the short to medium term.

Falling costs will rapidly drive the uptake of EVs. The transition will happen because it will make economic sense to do so, the UK government need to ensure the public infrastructure is in place and ready for the mass deployment of EVs.

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