Car firms ‘blindsided’ by clean air plan
Auto bosses fuming over lack of information from Government about 2040 target to go all electric
A ROW has broken out between Britain’s car makers and the Government as senior industry figures last night complained they had been “blindsided” by the clean air announcement that pledged to remove petrol and diesel cars from the UK’S roads by 2040. The Department for Environment, Food and Rural Affairs (Defra) announced details of the scheme yesterday, which aims to improve air quality by banning sales of new cars with conventional engines from 2040 – but failed to consult the industry about the plan.
Senior automotive sector sources privately admit to having being left “fuming” about the lack of information from the Government as they scrambled to deal with the massive media interest the announcement generated.
Trade body the Society of Motor Manufacturers and Traders (SMMT) had still not seen the details of the scheme by lunchtime yesterday, despite being inundated with interview requests after Michael Gove, the Environment Secretary, introduced the policy on BBC Radio 4’s Today programme in the morning.
Speaking at an industry lunch, Mike Hawes, SMMT chief executive, said: “We have had no formal discussions with Government in the past week. We are still waiting – like many others – to see what the formal proposals are.”
Whitehall sources indicated other key Government departments – including the Department for
Transport – were surprised by the announcement.
The row comes as new data shows the number of cars rolling off UK production lines fell in June by 13.7pc compared with a year ago – the third consecutive month of decline. Economic uncertainty is largely behind the drop, which lays bare the trouble the industry faces as the UK heads towards departure from the EU.
With four out of every five cars built in Britain being destined for foreign shores, Brexit and future trade deals are a huge concern for the sector.
If no post-brexit agreement is reached with the EU, building cars in Britain would become more expensive with the imposition of trade tariffs under World Trade Organisation rules. The row over the clean air plan fuels a sense in the car industry – which employs 814,000 people in the UK, has a £77.5bn annual turnover and accounts for 12pc of the country’s goods exports – that it is being ignored by the Government over its concerns, especially about the impact Brexit could have.
“There is a dialogue with Government but we would welcome one about specific issues,” Mr Hawes said.
A Defra spokesman said: “We will work closely with industry going forward to make sure they are able to adapt to the new measures.”
Opec, Russia and Big Oil thought they had half a century to prepare for the end of the internal combustion engine. At best they have a decade before the threat turns deadly serious. The twin announcement by France and Britain – within two weeks of each other – to ban sales of petrol and diesel cars by 2040 is an earthquake in the energy world.
Others are moving in parallel. A non-binding resolution of the German Bundesrat has called for a prohibition by 2030. Norway already has such a target by 2025 and the catalytic effect is spectacular: sales of electric vehicles (EVS) reached 42pc of all cars in July.
China’s new plan stipulates that zero-emission vehicles must make up 8pc of total sales next year, rising to 10pc in 2019, and 12pc in 2020. This is an even bigger earthquake. Those German and Japanese manufacturers that do not yet produce EVS – or not enough – face being shut out of the world’s largest car market.
Once governments reset policy in this fashion, markets rush to take advantage. They accelerate the timetable. The inevitability factor turns against the status quo and shifts with pent-up force in a new direction.
Morgan Stanley expects EVS to capture 70pc of the European market by mid-century. On the one hand it costs ever more to develop fossil-fuel cars that meet tightening rules on CO2 emissions and particulates (NOX). On the other, the cost of electric batteries keeps falling. The scissor-action is remorseless.
In Britain and France we will start to see charging outlets appearing rapidly as they have in Norway, instantly located when we need them on iphone apps. The utilities are already locked in a battle for mastery of this electric revolution, fighting for control of lucrative plug-in posts expected to jump from 100,000 to 30m within three decades.
My guess is that petrol stations will go into run-off and become scarce in culturally-green hotspots relatively soon. Spare parts for fossil-fuel cars will be less easy to find. As these supply risks seep into public consciousness, the switch to EVS will turn into a stampede. The National Grid estimates that there could be 6m EVS in the UK by 2030 under its “Gone Green” scenario.
Tesla’s mass-market Model 3 will be launched this Friday at a starting price of $35,000 (£27,000) and a battery range of 215 miles, with a target of 1m sales annually within three years. In China, the Chery eq already sells for under $9,000. Even without subsidies it would be less than $15,000.
There will be 20 models with a 200-mile range in the US market alone by 2020. Sweden’s Volvo will by then have stopped producing petrol cars entirely, citing a customer revolt against petrol vehicles.
The argument at the big global banks has shifted from whether peak oil demand will occur to how soon it will occur. Goldman Sachs said this week that it could hit by 2024 in “an extreme case”. That is not extreme enough for Tony Seba from Stanford University and Rethinkx.
He says the technology is moving so fast that the British ban will be overtaken long before 2040 by pure market forces. Michael Gove, the Environment Secretary, might just as well ban horse-drawn carriages. There won’t be any petrol or diesel cars left on the road anyway. Prof Seba thinks EVS will reach cost parity by 2022 as prices fall below $20,000 (versus $24,000 for the average oil-based car today). Thereafter they will sweep the field on cost alone. With far fewer moving parts and a potential lifespan of half a million miles, they will render the combustion engine obsolete.
It is what happened to Kodak when digital cameras appeared. The end was
‘We have an unstoppable confluence of market forces, new tech and green policies reinforcing each other’
swift and brutal. Opec will hear none of this. It allows that renewable energy may be a threat to coal but insists that it cannot seriously menace transport fuel. It says fossil fuels will make up 77pc of world energy supply in 2040, exactly the same share as today, and the Paris Agreement be damned.
Its World Oil Outlook estimates that crude demand will rise by a further 16.4m barrels per day (b/d) to 109m b/d by then, supposedly driven by economic booms in China and India. The global fleet of passenger cars will rise from 1bn to 2.1bn but Opec is adamant that only 6.7pc of these will be EVS.
It is still an article of faith that haulage and trucking cannot be electrified at viable cost, but this too is absurd. Of course it can. Nikola Motor Company in the US has already unveiled an 18-wheeler with a Tesla battery that can run for 1,200 miles with the help of a hydrogen fuel-cell generator.
Dirty bunker fuel for the 700,000 ships afloat is next in line. Scandinavia already uses electric ferries for short trips. Diesel-electric motors driven by liquefied natural gas are expected to capture a chunk of the market. Boeing is even working on electric aircraft for short-haul commuter flights. One by one, the arguments are crumbling.
My own view is that we now have an unstoppable confluence of market forces, new technology and green policies that are reinforcing each other and cannot be stopped even by Donald Trump.
The latest climate research suggests that ocean acidification is worse than feared and that the world’s safe carbon budget is less than supposed in the Paris Accord. It is a near certainty that some form of carbon tax or pricing will become a global fact of life.
For Opec and the petro-powers it has turned into a running three-year disaster.
Not only do they face slow death by electrification, they face a nimble US shale industry in the short run that seems able to turn on production almost at the flick of a switch whenever crude pushes back above $50 a barrel.
Recoveries are quickly capped at half previous price levels, and at levels far below the fiscal break-even cost needed by Saudi Arabia and most Opec states to maintain their cradle-to-grave welfare systems and patronage machines.
Little wonder that Crown Prince Mohammed bin Salman is so determined to sell off the crown jewels of Saudi Aramco and reinvest the proceeds in an industrial and economic reinvention designed for life after oil. The window is suddenly closing very fast.
The British and French announcement that they will not require a single drop of crude must have sent shivers through a lot of mid-east spines.
Which begs a question: why would anybody purchase shares in a company like Aramco that was valued at $2 trillion in an old energy order that no longer exists?