Tax breaks are needed in the UK to kick-start the market for high blend ethanol fuel or the embryonic market is in danger of collapse according to a Ford engineer who specialises in fuels.
Go deeper with GlobalData
Speaking at an Institution of Mechanical Engineers (I Mech E) seminar hosted by Lotus in Norwich, England, John Bennett said that the approach taken in Sweden showed how the ‘chicken-egg loop’ could be overcome.
Bennett told delegates that the ‘enlightened ‘ Swedish government had developed a national strategy for Flexi-Fuel Vehicles (FFVs) that can run on E85.
The strategy to encourage bioethanol take-up in Sweden includes a range of targeted measures:
- All large filling stations are mandated to provide alternative fuels by 2009 (now approaching 1,000 in number across the country);
- Zero duty on bioethanol at the pump (but there is VAT);
- FFVs get a 20% reduction in benefit-in-kind company tax;
- Annual road tax is 33% lower than petrol;
- Free parking in many cities;
- FFVs are exempt from congestion charging in Stockholm;
- Pubic procurement: 85% of new buy or lease for public sector fleets have to be environmentally friendly;
- Support for R&D.
This package of incentives meant that market demand in Sweden for FFVs had developed alongside the necessary vehicle and fuel supply infrastructure, Bennett said.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataFFV share of the Swedish car market is now heading towards 20% and projected to reach 30% by 2009.
Ford says that the FFV variants of its Ford Focus now account for 80-85% of the model’s Swedish sales and more Ford FFV variants are coming (Mondeo, S-Max and Galaxy).
Bennett outlined the chicken and egg dilemma with alternative fuels.
“If you want to sell vehicles in a market, you have to be able to refuel them. If you talk to the fuel company, they’ll say ‘we can put the pumps in but only if you’ve got the vehicles to take the fuel’. You get into the vicious circle that nobody is able to break out of,” he said.
“By the time we got to 2004 when many incentives in Sweden were in place, the market took off very quickly. That market developed because of the right incentives from a proactive government that wants to make the market work.
“We can do the technology – it’s bread and butter engineering for car manufacturers. It’s also easy for the fuel companies to do. It’s much easier to put E85 in a tank in the ground than it is to install high-pressure cylinders to hold LPG or CNG.
“The technology is not a constraint here. A pan-European E85 specification is coming by 2009 and that should address any fuel quality concerns. There are no significant technical issues.”
Bennett highlighted the critical role of fuel duty applying to FFV vehicles, which naturally consume more fuel than petrol cars because of E85’s higher calorific value. The current duty differential in Britain is not sufficient to counter the relatively higher refuelling cost of E85 due to higher fuel consumption, he maintained.
“It’s the government that is the issue here. In Sweden, customers make a positive choice to buy the FFVs. Why? Because the right incentives are in place. Compare zero fuel duty on bioethanol in Sweden with the UK where the government has given us 20p a litre off, but there’s still 29p a litre being paid.
“It takes serious incentives to move the market. You can’t just be borderline when you are asking the customer to make a switch. If you don’t incentivise these vehicles, the market stalls.
“Government support is key, especially with respect to the fuel price. If you take the duty off ethanol, the fuel becomes an attractive proposition. Without that incentive the market’s dead.
“We’ve got FFV vehicles in the market now. Are people buying them? A few people are. They run them for a while and then they realise that it costs more to run on E85 than on petrol and when it comes to time to renew the vehicle it’s a hard business case to make.
“In the UK we’ve got vehicles available. Morrisons [a supermarket chain, one of the few distributors of E85 in Britain] have been brilliant – there are 14 filling stations out there but I don’t know how much longer they’ll stick with this.
“They’ve got pumps devoted to a few hundred vehicles in the UK. The sums just aren’t adding up.
“Without movement very soon on a duty incentive I think the E85 market in the UK is going to be dead and it’s going to be very hard to recover.
“The car companies have done their bit. The fuel companies have done their bit. We’re now desperate for the government to step in and move the market forward with tax incentives.”
Dave Leggett
