Cost of living pressures will likely deter people from buying electric vehicles – iStockphoto
Car manufacturers have dismissed the prospect of drivers rushing to buy electric vehicles as the war in the Middle East drives up petrol prices.
The Society of Motor Manufacturers and Traders (SMMT) said the idea that a higher cost for filling up will prompt consumers to embrace battery cars is a “simplistic assumption”.
Mike Hawes, the SMMT’s chief executive, said the wider economic impact of the Iran war and oil costing more than $100 a barrel will more than offset any spur to EV sales from prices at the pump.
He said: “It’s going to affect the price of gas and electricity prices in the UK are linked to gas. So the price of charging will go up.
“But also the impact this is having on interest rates and potentially inflation, which spills through to consumer confidence. It will not help the industry to sell more EVs if the whole economic situation deteriorates.”
Honda said on Thursday it expected to post its first annual net loss since the 1950s after scrapping three electric models planned for production in North America. The Japanese firm had pursued one of the industry’s most aggressive EV strategies.
Martin Sander, head of sales at Volkswagen, said previous conflicts have seen petrol and diesel prices surge and then fall back without impacting the car-buying habits of motorists.
He said: “I don’t believe this is going to change the cost of ownership in the long run. I don’t see that this changes the playing field.”
Nicole Melillo Shaw, the head of Volvo UK, said the war is just as likely to hurt sales of EVs, which last year cost 17pc more on average than the internal combustion engine equivalent.
She said: “My fear is that it stalls new purchases. If I’ve got other considerations about the cost of living going up, then maybe I won’t buy a car.”
The SMMT said that with demand below the level needed to meet official sales goals without huge subsidies, the Government should order an immediate review of its zero emission vehicles (ZEV) mandate or risk an exodus of manufacturers.
It comes after the EU scaled back its emissions targets to permit sales of CO2-producing cars beyond 2035. Canada also shelved its mandate, while Donald Trump has scrapped limits for US automakers altogether.
Britain, by contrast, will require carmakers to increase EV sales to a third of the total this year, rising progressively to 80pc by 2030, with all new cars to be zero emission by 2035.
Mr Hawes said: “Those targets, I fear, are a fantasy. I do not know of anyone in the industry who actually believes they can be met. The mandate is too far ahead of the consumer.
“The industry has invested billions in EVs, but you can’t do that forever; it’s a fast way to go out of business. If the gap between ambition and demand is too great, the attraction of the UK for manufacturing evaporates.”
Carmakers have had to subsidise each EV sold in Britain to the tune of £11,000, according to the SMMT, or face a fine of £12,000 for every combustion-engine car over the limit.
Batteries cost 30pc more than projected when the mandate was devised and charging costs 120pc more, while the Government’s pay-per-mile tax on EVs will further depress demand, the trade group said.
Ms Melillo Shaw said the situation was “unsustainable” and that Volvo was not prepared to carry on bankrolling UK EV sales indefinitely.
She said: “The only way out is for the Government to realise that these punitive measures are not going to support their objectives.”
VW’s Mr Sander urged ministers to stop trying to coerce consumers into switching to EVs.
He said: “Do we really believe we can encourage consumers to get excited about electric vehicles if we’re always saying you’re going to be mandated to do something because we, the Government, want you to do it? Nobody wants to be mandated to do anything.”
The Department for Transport said provisional data for last year showed manufacturers meeting ZEV mandate targets, supported by grants of up to £3,750 per car.
Keir Mather, the transport minister, told the SMMT’s annual EV conference that while he understood carbon rules needed to make sense for manufacturers, the mandate would not be reviewed until 2027.
Mr Hawes warned that “made in Europe” rules unveiled by Brussels could meanwhile be devastating for the economy, undermining a trading relationship worth £79bn.
While the scheme will treat most UK-made goods sent to the bloc as “EU equivalent,” carmakers have been unexpectedly excluded. Nissan reportedly called the plan an “existential threat” to its Sunderland plant, which exports the bulk of its vehicles across the Channel.
Mr Hawes said: “We need clarification now. For the volume manufacturers, the relationship with Europe is critical. With friends like these, who need enemies?”
