1 July 2022

‘Full throttle’: Inside the SMMT’s vision for decarbonising the auto indusrty

'Full throttle': Inside the SMMT's vision for decarbonising the auto indusrty

The car industry body has warned millions more EV charging points and a dramatic ramp up in battery production capacity are required to secure the future competitiveness of the UK’s auto sector

Seven months after the UK government announced its plans to ban the sale of new internal combustion engine (ICE) cars from 2030, the auto industry has this week published its policy wishlist, setting out its vision for how the government can boost the competitiveness of the UK car industry as the sector works to accelerate the transition to a zero emission fleet.

The report from the Society of Motor Manufacturers and Traders (SMMT) calls for a rapid overhaul of the UK’s road transport policy framework so as to deliver 60GWh of battery gigafactory capacity by 2030, install 2.3 million public charging points by the same date, and engineer a major skills drive to retrain existing workers to enable the sector’s transformation.

Dubbed Full Throttle: Driving UK automotive competitiveness, the report unequivocally aligns the UK auto industry with the government’s climate goals and underscores how policies designed to boost electric vehicle (EV) uptake in the UK could generate tens of thousands of jobs over the coming decade as the UK emerges from the ongoing coronavirus crisis. While the SMMT’s proposals for building out the UK’s hybrid vehicle market will inevitably disappoint some environmental campaigners, there is no denying the report firmly underscores how the auto industry is now broadly committed to the net zero transition and gearing up for drastic transformation.

The analysis calculates that the UK auto industry has the potential to deliver 40,000 new jobs this decade if effective trade deals are signed and 80GWh of ‘gigafactory’ capacity is built out. But it cautions that critical action from government is needed now to put the UK on the right path, warning that if no new battery production facilities are approved, roughly 90,000 jobs will be lost across the sector and regional inequalities will be exacerbated as the UK’s industrial heartlands bear the brunt of auto factory closures. Under current plans, the UK’s battery production capacity will be rapidly dwarfed by that of Germany, with just 12GWh of projected capacity comparing unfavourably with its European competitor’s planned 164Gh of capacity, the report cautions.

Speaking at the industry’s annual summit yesterday, SMMT chief executive Mike Hawes warned the next few years represented a “critical period” for the sector and urged the government “to go full throttle and take bold action” to support the sector’s transition to zero emission models. “The pace of technological change is accelerating and the competition more ferocious,” he said. “If we are to secure vehicle manufacturing in this country, with all the benefits to society that it brings, decisions need to be made today. The automotive sector is uniquely placed to help this government deliver on its agenda; to level up, deliver net zero and trade globally.”

However, the report stresses the UK automotive sector is at risk of “falling behind” its international competitors, given the industry is having to navigate myriad pressures and challenges at a time when many of the key auto markets around the world are also working to accelerate the shift to EVs. The SMMT notes how UK industry is having to respond to the increasing redundancy of one of its strengths in traditional powertrain design, Brexit-related headwinds, a less predictable trading relationship between the UK and the EU, and relatively low levels of subsidy support for domestic battery production and EVs compared to several other leading markets.

As such, the repot sets out a number of recommendations for how the government can ramp up both EV supply and demand in the coming years. Specifically it calls for Ministers to establish a target of delivering 60GWh of domestic battery production capacity by 2030 and develop a long-term skills strategy that supports the retraining of existing workers in readiness for a market that will soon be dominated by EVs. The government should also establish a ‘Build Back Better Fund’ that could support the transformation of automotive production lines, deliver skills retraining programmes, and provide energy cost relief for manufacturers, it notes.

Elsewhere, the report calls for the government to help install 2.3 million public charging points by 2030 so as to help drive consumer adoption of EVs and urges Ministers to extend its electric vehicle subsidy scheme, the Plug-in Vehicle Grant, beyond its current term while also exempting ultra-low emission vehicles from tax for the next five years. At the same time, it calls on the Treasury to review fuel, vehicle, and road-based taxes so as to ensure they properly support the transition.

Alongside the proposals to boost the domestic EV market, the new report also sets out a series of policy proposals for how the government can boost the UK’s attractiveness as a destination for inwards investment, which range from tax breaks for manufacturers of low emission vehicles, batteries and fuel cells, to a drive to provide automakers producing these technologies with the same benefits and compensation schemes as energy intensive industries.

The report’s acceptance of the government’s 2030 target and focus on EVs has been applauded by campaigners as evidence of the UK automotive industry’s commitment to a zero emission future. “Today is a big milestone in the EV transition,” James Beard, senior associate from the European Climate Foundation wrote on Twitter yesterday. “Industry has clearly signalled on the right side of history.” He added that the SMMT’s propositions for a nationwide EV charging rollout and for 60 to 80GWh of battery production to be scaled up in the UK by the end of this decade were “sensible” and praised the calls for a strengthened skills strategy and a fuel taxes review.

“This is where we need to have a big conversation with the electorate,” Beard said. “We need to ask workers what a fair transition roadmap looks like and ask taxpayers what a fair tax regime looks like. And listen to them.”

However, he also noted that the report failed to set out any proposals for how the industry could be regulated to deliver on the government’s 2030 phase out date for ICE vehicles. “The report asks for massive bungs and tax breaks but is conspicuously silent on regulations (ignoring EU CO2 regs & California’s ZEV Mandate),” he wrote. “Dieselgate has shown us that we need strong regulations to hold car companies accountable for their promises on emissions. A ZEV Mandate would further strengthen the investment case for gigafactories – making the UK the California of Europe – and ensure that shareholders shoulder their share of the cost of the transition, relieving the pressure on the public purse (especially post-pandemic).”

Calls for a Zero Emission Vehicle mandate that would require manufacturers to steadily increase the percentage of EVs they produce have been growing in recent months, with proponents of the policy including former energy and business ministers Amber Rudd and Andrea Leadsom, think tank Green Alliancebackbench Conservatives and government climate advisers the Climate Change Committee, who have all pointed to the success the policy has enjoyed in California where it has driven massive investment in the EV market.

Another flash point of the SMMT’s vision for environmentalists is the industry’s group continued endrorsement of plug-in hybrid vehicle technologies alongside zero emission battery electric vehicles. Campaigners have long contested the emissions reduction credentials of hybrid vehicles and warned that the auto sector’s dogged reliance on the technology distracts from the need to step up investment in fully zero emission models. “The industry is continuing to deceive the public that hybrids are a stepping stone to full EV,” Beard said. “They must be honest that plug-in hybrids risk higher emissions and running costs than normal cars, and that no hybrids can ever be truly zero emission.”

It is clear that the UK car industry is at a major crossroads, and the stakes are high as UK manufacturers race against other countries to decarbonise and lead the biggest transformation of the sector in over a century. The SMMT’s warnings of potential job losses in the auto sector come just a few weeks after green transport group Transport & Environment argued that a “chronic lack of future investment” by carmakers with UK factories was threatening to decimate the country’s foothold in the European auto market, predicting the nation would produce just four per cent of the continent’s EVs by 2030, down from half in 2018.

But the ambitious policies proposed by the SMMT point to how the industry is increasingly aware of the risks of inaction and is desperate to see government deliver the robust policy framework that could enable the rapid phase out of ICE vehicles and ensure the future competitiveness of the UK’s auto sector in an electric world.

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