Manufacturers of electric vehicles for sale here in the UK may have to brace themselves for some pain as the full impact of Britain’s austerity budget kicks in.
In line with just about every European government, the UK administration has decided to wield the axe in a fairly brutal manner – requiring most departments to slash spending by 25% – and in some cases 40% – in the comprehensive spending review.
Go deeper with GlobalData
All we have is those percentages at the moment as government departments battle with each other for an ever-smaller slice of the cake, but such a blunt approach to finance is bound to have an impact on the car industry and new business minister Mark Prisk said as much yesterday (12 July).
“The Automotive Assistance Package was introduced for that very difficult period of the recession, but we need to move forward,” he said.
“Specific incentives are something we have not projected yet, but at this stage the key is to make sure we have the technical capability in the UK.”
Not exactly the voice of doom, but Prisk spelt it out in starker terms by noting the UK’s extremely generous GBP5,000 (US$7,600) was now under the spotlight: “We are discussing the GBP5,000 investment at the moment – I am in the middle of a comprehensive spending review,” he said.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataThis will have automakers starting to feel decidedly twitchy. You can’t move at the movement for manufacturers describing what they will – or might – do with their EV projects.
And now governments deciding to examine every nook and every cranny of every department will surely mean the grant will be downgraded at best and eliminated at worst.
But how does the UK government square the circle of espousing its environmental credentials at the same time as paring down budgets?
Green costs money and initial pricing estimates for EVs rolling off the production line are notably on the high side. How will consumers get over that initial hurdle of paying out significantly more for environmentally friendly cars even though they will eventually have almost negligible running costs?
Well, Prisk yesterday stressed that credit availability was one way to encourage purchases – and pledged to introduce a green paper later this year on the issue.
But Nissan’s Leaf is due out later this year and the Japanese manufacturer must be hoping for any government decision sooner rather than later.
If it’s bad news from Whitehall, Nissan and all manufacturers will have to re-evaluate strategy to maybe include some incentives of their own to entice consumers into showrooms.
On a more positive note, Prisk and his boss Vince Cable at the UK’s rather cumbersomely-named department for business, innovation and skills, seem to have enjoyed something of a honeymoon period with the auto industry.
Only yesterday, Ford of Britain chairman Joe Greenwell praised the automotive initiatives of the new UK government, noting it had made “a sound start.”
It helps that Ford has known Prisk for at least two years in his role as shadow business minister.
Given the precious administration’s tendency to rotate ministers on a depressingly regular basis, it would be extremely useful if Prisk and Cable were allowed to stay for at least the full term of this parliament so Ford et al could really get to know them.
