November 16, 2022

The Road to Electric

The Road to Electric

Electric vehicles (EVs) have become increasingly popular in the UK due to their potential to reduce emissions and dependence on fossil fuels. In recent years, the government has implemented several policies and programs to encourage the adoption of EVs, including offering grants, improving charging infrastructure, and introducing a tax system that rewards low-emission vehicles and penalizes high-emission vehicles. The ultimate goal of these efforts is to accelerate the transition to a low-carbon transportation system, as demonstrated by the government's commitment to end the sale of new gasoline and diesel cars and vans by 2030 and achieve net zero carbon emissions by 2050.

In the UK, the government has taken a number of steps to encourage the adoption of EVs, including offering grants to individuals and businesses to help cover the cost of purchasing an EV and improving the infrastructure for charging EVs.

A Decade of Progress in Regulating the Electric Vehicles

A major development in EV regulation was the introduction of the Office for Low-Emission Vehicles (OLEV) in 2011. This organization is responsible for implementing policies and programs to support the adoption of low-emission vehicles, including EVs.

In 2015, the UK government introduced a tax system that rewards low-emission vehicles and penalizes high-emission vehicles. This system, known as Vehicle Excise Duty (VED), classifies vehicles based on their carbon dioxide (CO2) emissions and assigns them to different bands. Vehicles in the lowest emission bands are eligible for the lowest VED rates, while those in the highest emission bands are subject to the highest rates.

In 2016, the UK government announced a target to end the sale of new gasoline and diesel cars and vans by 2040. This target was later brought forward to 2030 as part of the government's commitment to achieving net zero carbon emissions by 2050.

In 2018, the government launched the Road to Zero strategy, which aims to accelerate the transition to zero-emission vehicles. The strategy includes several measures to support the adoption of EVs, such as increasing the number of charging points, providing grants for the purchase of EVs, and investing in research and development.

In 2019, the government introduced the Clean Air Zone (CAZ) framework, which allows local authorities to implement charges or bans on high-emission vehicles in certain areas to improve air quality. The CAZ framework is voluntary, but local authorities that choose to implement a CAZ must meet certain criteria, including providing alternative means of transportation for those affected by the charges or bans.

In 2020, the government announced the extension of the Plug-In Car Grant (PICG), which provides a discount on the purchase price of eligible EVs. The PICG was originally set to expire in March 2020, but it was extended until March 2021 and then again until September 2021.

The trend towards the adoption of EVs is not limited to the UK. Many other countries around the world have also implemented policies to encourage the use of EVs, such as offering incentives for their purchase, improving charging infrastructure, and setting emissions targets for the automotive industry. For example, the European Union has set a target to reduce CO2 emissions from new cars and vans by 30% by 2030, and it has also introduced a scheme to reward low-emission vehicles and penalize high-emission vehicles. Similarly, the United States has introduced federal and state-level incentives for the purchase of EVs, and it has also set emissions standards for the automotive industry.

Overall, the global trend towards the adoption of EVs is driven by a desire to reduce emissions and transition to a low-carbon transportation system. While the specifics of the policies and programs implemented by different countries may vary, the common goal is to encourage the use of EVs as a means of reducing the environmental impact of transportation.

Challenges in Regulating Electric Vehicles

As the popularity of electric vehicles (EVs) has grown, governments around the world have implemented a range of laws and policies to encourage the adoption of EVs. These policies have been motivated by a desire to reduce emissions and transition to a low-carbon transportation system, as well as to improve air quality and reduce dependence on fossil fuels. However, regulating EVs in terms of laws and policies presents a number of challenges.

One challenge is the need to effectively design and implement policies that encourage the adoption of EVs. This may involve creating incentives for the purchase of EVs, such as grants or tax credits, or establishing emissions standards for the automotive industry. It may also involve investing in infrastructure, such as charging stations, to support the use of EVs. However, implementing these policies can be costly, and there may be resistance from industries that rely on fossil fuels. Additionally, the costs and benefits of EVs may not be evenly distributed, which could lead to inequities in access to the benefits of EVs.

Another challenge is the need to ensure that laws and policies related to EVs are updated and adaptable as technology and the market for EVs evolve. The EV market is rapidly changing, with new technologies and business models emerging on a regular basis. This can make it difficult for laws and policies to keep pace with these changes, which could result in policies that are no longer effective or that create unintended consequences. For example, a policy that incentivizes the purchase of EVs may become less effective as the price of EVs decreases due to technological advancements or economies of scale. Similarly, a policy that is designed to support a certain type of EV technology may become obsolete as newer technologies emerge.

Finally, there is the challenge of coordinating the regulation of EVs across different levels of government, as well as with other countries. In many cases, the regulation of EVs involves multiple levels of government, such as national, regional, and local authorities. Coordinating policies and programs across these levels can be complex, particularly if there are conflicting goals or priorities. Additionally, the global nature of the EV market means that the regulation of EVs often involves international coordination, such as negotiating agreements with other countries to ensure that EVs are regulated consistently and effectively.

Regulating EVs in terms of laws and policies presents some challenges, including the need to effectively design and implement policies, ensure adaptability as the market evolves, and coordinate regulation across different levels of government and with other countries. These challenges require careful consideration and ongoing review to ensure that the benefits of EVs are maximized while minimizing any negative impacts.

SWOT Analysis of the Electric Vehicle Sector

Strengths:

  • EVs have lower operating costs than gasoline-powered vehicles due to lower fuel and maintenance costs (McKinsey & Company, 2018). According to a study by the UK Department for Transport, the lifetime cost of ownership of an EV can be up to 50% lower than that of a gasoline-powered vehicle (UK Department for Transport, 2020).
  • EVs produce zero tailpipe emissions, which can improve air quality and reduce environmental impacts (International Energy Agency, 2020). This is particularly important in urban areas, where air pollution from transportation is a significant contributor to poor air quality (World Health Organization, 2016). In the UK, transportation is the second largest source of greenhouse gas emissions, and the adoption of EVs can help to reduce these emissions (UK Department for Transport, 2020).
  • The range of EVs is increasing as battery technology improves, making them more practical for longer distance travel (International Energy Agency, 2020). According to a study by the UK Department for Transport, the average range of EVs on the market in 2020 was over 200 miles (UK Department for Transport, 2020).

Weaknesses:

  • EVs can be more expensive upfront than gasoline-powered vehicles (McKinsey & Company, 2018). According to a study by the UK Department for Transport, the average upfront cost of an EV in 2020 was around £7,000 (about $9,700) higher than the average cost of a gasoline-powered vehicle (UK Department for Transport, 2020).
  • The availability of charging infrastructure can be a barrier to the adoption of EVs in some areas (McKinsey & Company, 2018). While the number of charging stations is increasing in the UK, there are still many areas where access to charging infrastructure is limited (UK Department for Transport, 2020).
  • The materials used in the production of EVs, such as lithium and cobalt, have their own environmental impacts (Sivak et al., 2017). The extraction and processing of these materials can have significant environmental impacts, including water pollution, land degradation, and greenhouse gas emissions (Gao et al., 2018).

Opportunities:

  • The adoption of EVs can contribute to the transition to a low-carbon transportation system (International Energy Agency, 2020). In the UK, transportation is the second largest source of greenhouse gas emissions, and the adoption of EVs can help to reduce these emissions (UK Department for Transport, 2020). The UK government has set a target to end the sale of new gasoline and diesel cars and vans by 2030 and achieve net zero carbon emissions carbon emissions by 2050 (UK Government, 2020).
  • The market for EVs is growing, presenting opportunities for businesses to enter the market or expand their EV offerings (McKinsey & Company, 2018). According to a study by the International Energy Agency, the global market for EVs is expected to continue to grow in the coming years, with the number of EVs on the road expected to reach 125 million by 2030 (International Energy Agency, 2020). In the UK, the market for EVs is also growing, with the number of EVs on the road expected to reach 9 million by 2030 (UK Department for Transport, 2020).
  • Governments and organizations around the world are implementing policies and programs to encourage the adoption of EVs, which can create opportunities for businesses and individuals to take advantage of these incentives (McKinsey & Company, 2018). For example, many governments offer grants or tax credits for the purchase of EVs, and some cities and regions have implemented policies that restrict or ban the use of high-emission vehicles (International Energy Agency, 2020). In the UK, the government offers a grant of up to £3,000 (about $4,100) for the purchase of a new EV, and it also has a program that provides funding for the installation of charging infrastructure (UK Department for Transport, 2020).

Threats:

  • The price of gasoline and diesel may decrease, making gasoline-powered vehicles more competitive with EVs (McKinsey & Company, 2018). While the cost of gasoline and diesel is subject to fluctuations, a decrease in the price of these fuels could make gasoline-powered vehicles more attractive to consumers (UK Department for Transport, 2020).
  • The development of new technologies, such as hydrogen fuel cell vehicles, could compete with EVs (McKinsey & Company, 2018). While fuel cell vehicles are still in the early stages of development and face their own challenges, they have the potential to offer longer ranges and faster refuelling times than EVs (International Energy Agency, 2020).
  • Political and regulatory uncertainty could impact the market for EVs (McKinsey & Company, 2018). Changes in government policies, such as the withdrawal of incentives or the introduction of new regulations, could affect the adoption of EVs (UK Department for Transport, 2020).
  • The materials used in the production of EVs, such as lithium and cobalt, have their own environmental impacts (Sivak et al., 2017). The extraction and processing of these materials can have significant environmental impacts, including water pollution, land degradation, and greenhouse gas emissions (Gao et al., 2018).

Electric Vehicle Market in the UK

Sales of EVs in the UK have been increasing in recent years, with over 300,000 EVs on the road as of September 2020 (Society of Motor Manufacturers and Traders, 2020). This represents a significant increase from just a few years ago, when there were only a few thousand EVs on the road in the UK (UK Department for Transport, 2020). The growth in EV sales in the UK has been driven by a combination of factors, including increasing consumer awareness of the environmental and economic benefits of EVs, government incentives and policies, and the increasing availability of EVs on the market.

According to a study by the UK Department for Transport, the total cost of ownership of an EV is typically lower than that of a gasoline-powered vehicle over the long term, due to lower fuel and maintenance costs (UK Department for Transport, 2020). This has made EVs an increasingly attractive option for consumers who are looking to save money on fuel and maintenance costs.

The UK government has also implemented a number of policies and incentives to encourage the adoption of EVs, including grants and tax credits for the purchase of EVs, funding for the installation of charging infrastructure, and restrictions on the use of high-emission vehicles in certain areas (UK Department for Transport, 2020). These policies have helped to increase the availability and accessibility of EVs in the UK, and they have played a significant role in the growth of EV sales in the country.

In terms of market share, EVs still represent a relatively small portion of the overall vehicle market in the UK. However, the market share of EVs is expected to continue to grow in the coming years, driven by increasing consumer awareness and government policies (UK Department for Transport, 2020). The UK government has set a target to end the sale of new gasoline and diesel cars and vans by 2030 and achieve net zero carbon emissions by 2050 (UK Government, 2020), which is expected to drive further growth in the market for EVs.

According to data from Auto Trader, fewer than one in five car buyers were searching for an EV in November 2022, down from 27% in June 2022. This decline in interest is linked to a combination of factors, including falling petrol prices and rising electricity costs in 2022, which make the cost of running an EV more expensive. The UK government has also withdrawn subsidies for EVs and announced that they will be subject to road tax from 2025. Therefore, Auto Trader’s report shows that the demand for EVs has declined 12.6% over the past year. However, it is important to note that the EV market in the UK is still relatively small, and it is likely that the market will continue to evolve and change over time.

Conclusion

The regulations related to the EVs and the EV market itself in the UK has been growing rapidly in recent years, driven by a combination of factors including lower operating costs, environmental benefits, and government policies and incentives. While EVs still represent a relatively small portion of the overall vehicle market in the UK, the market share of EVs is expected to continue to grow in the coming years, driven by increasing consumer awareness and government policies.

The UK government has set ambitious targets to end the sale of new gasoline and diesel cars and vans by 2030 and achieve net zero carbon emissions by 2050 (UK Government, 2020). These targets are expected to drive further growth in the market for EVs, as consumers and organizations looking to transition to low-carbon transportation options.

However, there are also challenges to the widespread adoption of EVs in the UK, including the higher upfront cost compared to gasoline-powered vehicles, global chip shortage and the limited availability of charging infrastructure in some areas. These challenges will need to be addressed in order to facilitate the transition to a low-carbon transportation system. Overall, EVs will play an increasingly significant role in the transportation sector in the coming years, and we think that they will be an important part of the mix of technologies (i.e. hydrogen fuel cells), regulations and approaches all of which will be needed to achieve the UK's net zero carbon emissions target. One thing is clear - the transition to a low-carbon transportation system will require a mix of different technologies and approaches, and we are of the opinion that EVs will play a significant role in this transition. Hence, further developments in pertinent regulations all over the world will be adopted for the safe and reliable operation of EVs.

References: