EV Strategy: (ECC Committee Report)

Lord Woodley Excerpts

Wednesday 16th October 2024 Lords Chamber

[Lord Woodley (Lab)]

My Lords, I warmly welcome the report, which deals statistically with a large number of important elements, not least the rapid recharge, which has just been mentioned. Knowing our industry as I do, there should already be a minimum of 50 kilowatts, with a minimum of 100 kilowatts on trunk roads.

Electric charging is expensive. VAT needs to drop from the present 20% to 5% to give people a chance, and it should cost the same to charge on the streets as it does in your driveway. If we are to sell more electric vehicles, the road tax needs to be reduced, and the issue of charge points, which has just been mentioned, needs to be addressed too.

However, I am going to concentrate on manufacturing EVs and the financial penalties which put an unsustainable pressure on manufacturers. For a successful transition, we need to review the present inflexible approach, developed by the civil servants who produced the zero emission vehicles mandate. This was designed when we had a growing economy, interest rates were low—as was the cost of finance—and sales were picking up, which was hoped would lead to lower costs for manufacturing batteries and other things.

However, that is not the case now. The market has collapsed, apart from fleet sales, so we need incentives, both to build and to buy. The ZEV mandate requires manufacturers to sell a percentage of new EVs each year from 2024. It starts this year at 22% and progresses, hitting 80% in 2030. The mandate therefore means that if 22% of your total UK sales are not electric vehicles, for every non-EV vehicle sold up to the target number you will be fined—£15,000 per car. It is ridiculous.

Presently, the industry is falling short of its quotas: by about 4%, which equals—wait for it—£1.4 billion in fines. Companies are already subsidising each electric vehicle by about £6,000 to get sales, which means extra costs of £2 billion on top of the £1.4 billion in fines. It is simply unsustainable for our industry.

Ironically, fines of £15,000 per vehicle under the target can be offset by purchasing credits from those who have exceeded their targets, which can be only the Chinese or Tesla. Either way, the money will not be there for jobs or investment. The idea of UK manufacturers paying the Chinese or the Americans billions in credits is a nonsense and, I suggest, political suicide in automotive constituencies across the country.

The answer is two-fold. First, there needs to be a VAT reduction and equalisation of VAT on public and private charging, and the VED extra tax on expensive car purchases—unfortunately, electric vehicles are expensive at the moment—needs to be scrapped. Secondly, we need a ZEV mandate adjustment, including using 2024’s figures as a reset mechanism to assess the actual market for EVs, and to adjust the trajectory to 2030 accordingly.

We should include EV exports from the UK and commercial vehicle EV sales within the credits. The two Vauxhall plants in the UK, which make only vans, are caught up in this quotas turmoil. Let us be clear: these plants, which the last Government put money into, are at serious risk of being closed if the credits are not sorted out.

Another measure that would be the right way forward would be to allow pre-2024 EV sales in this year’s first quotas, and UK-manufactured vehicles should get additional credits, recognising that there are no “distribution emissions” or the environmental cost of shipping vehicles from as far away as China, the US and Korea. It makes sense. Indeed, the French have already done this. Why cannot we? The US also does this, and it better reflects actual emissions in the sale by including the emissions to get it there in the first place. The US states with ZEV legislation also give up to four credits for “local” built vehicles—again, why can we not do that?

We really need to pause while all this is sorted out, and flexibilities in the system to recognise the reality of the market for EVs right now. We also need time for any changes to bed in and feed into the marketplace. There is an awful lot to be done, but the good news is that our manufacturers, in the main, are prepared for 2030. But incentives to grow the market and help manufacturers and the infrastructure, which has been mentioned, must be put in place in a timely fashion, alongside the much-needed infrastructure improvements outlined in this tremendous report.