Electric Vehicles: Environmental Pipe Dream or Viable Plan?

The move to phase out petrol and diesel cars in favour of electric ones appears to be a no brainer for any Government given the environmental benefits of greatly reduced emissions, and huge investment in electric vehicles made by both the established giants of the automotive industry and by pure-play electric start-ups like China’s NIO.

As the FT observed in a recent series of insightful articles,[1] the electric and connected car industry has attracted more than $100bn in investment since the beginning of 2020, global sales of electronic vehicles are expected to reach 10.7 by 2025; and the number of models is expected to rise to 500 by 2025. Gone are the days when Tesla enjoyed a near monopoly. Ironically, the pandemic has been a key driver for change as businesses have been forced to become more adaptable and sustainable. 

Governments have responded by a mix of stick and carrot. Both the UK and the EU have announced that the sale of petrol and diesel cars must end by 2035[2] but this will be facilitated by considerable subsidies including (in the UK) large savings in income tax for company car owners whose vehicles are electric.[3]

However, these subsidies, required as both hybrid and electric models remain considerably more expensive at point of sale than petrol cars, can have negative effects.[4] More cars on the streets can disrupt public transport (as happened recently in Norway) and can result in Government money being withdrawn from other areas (as happened in China with social care). Moreover, only one in 12 cars sold in Europe earlier this year ran only on batteries.[5] Car manufacturers cannot therefore put all their eggs in the electric basket; many customers will continue to require servicing and maintenance support for petrol cars. Petrol filling stations will still be required for some time.

The biggest obstacle is the necessary infrastructure. In the UK the number of charging points is growing but still woefully inadequate. A journey recently undertaken in an electronic VW car by my uncle from Aberdeen to Oxford took some 13 hours; despite the considerable mileage capacity in the battery, he found the location of charging points to be both sporadic and unreliable (the owners of Tesla cars apparently enjoy a larger network of charging points).

These developments are already causing seismic changes to the automotive market. New start-ups have been able to take advantage of the pandemic disruption caused to the established players by raising large amounts of money and seeking listings. The motor giants will undoubtedly fight back but who will prevail? Similarly, as the FT highlighted, “a striking feature of the re-engineering of the auto is the reduction in moving parts”.[6] This will heavily affect the components industry. Similarly, the future need for garages, mechanics, and aftersales staff will drop in line with the diminution in the number of moving parts. Boris Johnson’s promised nirvana of investment in training the workers of the future will be sorely needed.

[1] The electric vehicle revolution | Financial Times (ft.com)

[2] Transitioning to zero emission cars and vans: 2035 delivery plan - GOV.UK (www.gov.uk)

[3] See further - www.nextgreencar.com/electric-cars/buying

[4] https//blog.onnbiles.com/governments-subsidies-on-electric-vehicles

[5] Electric vehicles: the revolution is finally here | Financial Times (ft.com)

[6] The software engineer will fix your car now | Financial Times