The electric car crash will rival the dotcom bubble

By Paul Homewood

Even The Times is starting to get it!

 

 

The problem for ministers is that most consumers just won’t buy EVs

Ministers can’t get out much these days without being heckled, especially by green campaign groups such as Just Stop Oil. So no surprise that last week the secretary of state for energy security and net zero, Claire Coutinho, struggled to make herself heard above the din of demonstrators in the hall as she delivered a speech at a business conference.

Her message was definitely not what those demonstrators wanted to hear (though they aren’t in the listening business). Coutinho criticised what she called the “net zero leviathan of central planning” and said that products designed to meet this target should not be “forced on British consumers”.

In one respect the quietly formidable Coutinho has been as good as her word. The government has postponed by ten years (to 2035) the deadline after which households will be forbidden to install any new gas boilers. And last month Coutinho delayed, though only by a year, a policy of fining manufacturers for missing targets for the installation of heat pumps.

But in another respect there is a gaping chasm between the government’s rhetoric about the primacy of consumer choice “on the road to net zero” and its actual policies. This concerns the product most beloved of British consumers and on which they — we — have the strongest opinions. I refer, of course, to the car.

Although Rishi Sunak, in September, moved from 2030 to 2035 the date by which all manufacturers would be required to stop selling any new vehicles that were not purely electric, the elaborate system of penalties remained fully in place. So, this year, manufacturers are obliged to ensure that at least 22 per cent of their sales are of EVs, and for each and every non-electric car sold that breaches the target, they are liable to a fine of £15,000. The thing ratchets up every year, so that by 2030 their sales must be at least 80 per cent EVs (not even hybrids qualify), or else …

When it became clear Sunak would postpone the 2030 deadline (one of Boris Johnson’s vainglorious attempts to demonstrate Britain’s leadership in the “battle against climate change”), a number of manufacturers upbraided the PM. Ford UK’s chief, Lisa Brankin, remonstrated: “Our business needs three things from the UK government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three.”

Stellantis, which owns Vauxhall, Peugeot, Citroën and Fiat, issued a statement warning that “clarity and reasonable anticipation are important”.

Seven months on, the company’s horn is sounding a very different note. Ten days ago its chairman, Carlos Tavares, said the law fining companies for selling cars that did not meet the EV quota was “terrible for the UK”, and that “I’m not going to sell cars at a loss”. The reason for Mr Tavares going from volt to volte-face is clear for all to see (now). Or, as he put it, EVs were “crashing in the world of reality”.

To no sensible person’s surprise, consumers have been deterred by a combination of higher purchase prices, “range anxiety” and plummeting resale values, largely due to increasing awareness of the prohibitive costs if the battery needs replacing. The Stellantis boss now concedes that the “natural” market share for EVs in the UK is about half what he is being required to sell under the regulations, which are starting to bite (indeed, taking great munches out of his company’s profit margins).

In other words, this is exactly the sort of “forcing” of products onto the consumer that Coutinho says the government shouldn’t be doing. This is not a British problem alone. The EU has an almost identical policy, yet in Germany the European election manifesto of the centre-right Christian Democrats declared: “We want to abandon the ban on combustion engines and preserve Germany’s cutting edge combustion technology.”

As things stand, China will be the only winner. It, uniquely, is able to sell EVs more cheaply than the equivalent combustion engine models, and is about to flood European markets. The EU will soon be forced to choose between its vaunted commitment to fighting climate change and the existence of its own car manufacturing businesses.

If only it — and our own government — had listened to Akio Toyoda. In January the chairman of Toyota (grandson of its founder) told employees in a Q&A session of the company’s booming sales of hybrid vehicles, and pointed out: “Customers and the market will decide, not regulations or political power.”

This has now dawned on one of the world’s biggest car leasing companies, Hertz — and its shareholders. Last week its share price fell by a quarter as it announced a sell-off of many thousands of Teslas that it had only recently acquired, absorbing a thumping loss. And Tesla itself has just announced it will be dumping 14,000 employees, with Elon Musk firing his entire team responsible for its “supercharger network”. What we are witnessing is an imminent business catastrophe impelled by a global corporate stampede: the herd was galvanised by governments, which have yet to recognise, let alone admit, their own responsibility.

In terms of global misallocation of capital, there has been nothing like it since the dotcom bubble. As far as the UK is concerned, the obvious thing for the government to do is to live up to Claire Coutinho’s words and abandon the attempt to force consumers to buy products they don’t entirely trust, which can only end terribly for the businesses involved.

However, it is not so simple. The problem is the commitment to make the UK “net zero” by 2050, a declarative piece of legislation insouciantly passed without proper debate in the dying days of Theresa May’s tenure of office, as her “legacy”. It means any successor government is liable to legal challenge if it makes decisions that can be construed as breaching that commitment.

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