Finance & Leasing Association21 November 2022
Last week the FLA submitted its contribution to the Government’s Net Zero Review being led by Chris Skidmore MP. The primary challenge faced by UK finance companies is the lack of clarity and certainty for investors to plan long-term. Nowhere is this more apparent than in the low emission vehicle market where a chasm exists between a vibrant new car market and second hand market from which middle and lower income drivers could reduce their carbon footprint in a more affordable way.
The 2030 target for phasing out the sale of new petrol and diesel cars remains but the announcement in the Autumn Statement that LEVs will from 2025 be liable for road tax overlooks the fact that for consumer users (as opposed to business fleet users who will benefit from lower company car tax rates) this market has not yet reached critical mass. The OBR forecasts that by 2025 half of new vehicles will be electric but the Chancellor’s measure is likely to stymy take-up of used LEVs.
In Brussels, Internal Market European Commissioner Thierry Breton, a Frenchman with a business background, has adopted a more nuanced position in the lead-up to the EU’s zero-emission car and van sales target date of 2035. In a recent interview, he suggested that this mandated deadline could be reopened in 2026 if it was apparent that the European car industry needed more time to scale up LEV production. This reflects heavy lobbying from the major car-producing EU Member States, notably France which is making the case for new plug-in hybrids to be manufactured beyond 2035 and Germany which believes that combustion engine vehicles should be permitted to run on synthetic fuel produced with captured carbon dioxide and hydrogen. This would have the added bonus of enabling German car manufacturers to continue serving combustion engine parts to non-European markets with less stringent emission standards.
M. Breton’s logic recognises that the charging infrastructure and the raw materials needed to produce batteries may not be available on the scale needed to meet the 2035 deadline. He has therefore established an expert group, including auto manufacturers, called Route 35 to meet once a quarter. Its remit will be to monitor necessary levels of data on charging infrastructure rollout, power grid efficiency and sourcing the kind of raw materials necessary for producing EVs at home in Europe.
In typical Brussels fashion, the responsibility for the deadline does not sit with the Internal Market Commissioner, but his Climate Change counterpart, Frans Timmerman, a Dutch Socialist responsible for the EU’s Green Deal. M. Breton’s intervention may yet dampen the EU’s Net Zero commitment.
Published 21 Nov 2022
