Richard Hipkiss, Managing Director at Fleet Operations, considers the impact of cutting subsidies for greener vehicles and calls on government to help fleets in the forthcoming Budget.
The pressure is mounting on Chancellor Philip Hammond to pull a rabbit out the hat in his Autumn Statement to ease the financial burden facing fleet operators.
Giving businesses and consumers less than a month’s notice, the government has just announced that it’s removing the subsidy for plug-in hybrids with a range of less than 70 zero emission miles. Furthermore, discounts on all-electric cars are being cut from £4,500 to £3,500.
The Plug-In Car Grant (PICG) was originally introduced to stimulate the market for both hybrid (PHEV) and all-electric (EV) vehicles – and few would dispute its success in doing so. In light of this, the rationale for now focusing support on zero-emission models is understandable, but…
Let’s step back and look at the bigger picture.
Against a backdrop of increased benefit-in-kind and national insurance tax liabilities in the wake of the new ‘World Light-duty Test Procedure (WLTP) regime, this latest announcement is a double whammy.
The cost of electric vehicles remains a barrier to their adoption, despite reductions in their price over recent years, and the introduction of scrappage schemes from several manufacturers, including Audi, BMW, Ford and Kia.
This latest move not only puts a burning onus on the Treasury to introduce new environmental incentives, it also compels car makers to incentivise further on the showroom floor.
Having invested heavily in the research and development of electric technologies, to date, manufacturers have priced EVs more expensively than equivalent, standard engine, vehicles.
With the market still a long way from maturity however, they must look to strategically review their pricing to stave off what will otherwise be an inevitable, and environmentally-damaging, fall in demand.
What steps can government take?
The UK’s green subsidies and tax incentives fall disappointingly short of those on offer in other, more generous, countries.
In Norway, for example, thousands of pounds worth of incentives are being awarded to electric vehicle shoppers. Consequently, according to figures for the first half of 2017, it is now the fastest adopter of electric cars in the world. The likes of Iceland, Sweden, Finland, Luxembourg, Belgium and Ukraine all have higher adoption rates than the UK.
With a commitment to cutting emissions by at least 80 per cent by 2050, relative to 1990 levels, and banning the sale of petrol and diesel cars by 2040, a new government scrappage scheme would certainly be a step in the right direction. Such a scheme would target older diesel and petrol models, paying out more than their residual values when swapped or scrapped for EVs.
The introduction of such a scheme could help fund further investment in much-needed EV infrastructure. New registrations of plug-in cars stood at 178,000 in September 2018; there are currently only around 18,000 charge points nationwide1.
Furthermore, as businesses keep a watchful and disconcerted eye over their balance sheets, adjusting tax threshold, to take account of higher CO2 figures under the NEDC-correlated and WLTP regimes, would help keep a lid on their total costs of fleet ownership.
We can only sit and ponder on the political powwows and machinations taking place in the corridors of Number 11 however, all the while hoping that after taking with one hand, the Chancellor will be looking to give with the other on October 29.
As published on BusinessCar.
1SMMT, OLEV, DfT Statistics