UK is plugged in, as global car industry speeds away from fossil fuels

The car industry remains a vital part of the global economy. Both on its own terms - global revenues from vehicle sales reached over US$2 trillion last year - and as a sector that influences the wider global economy.

UK is plugged in, as global car industry speeds away from fossil fuels

That is why there is great interest in the revolution currently underway in the car industry, which is seeing its traditional reliance on fossil fuels being rapidly replaced by fast-moving, low carbon technology.

The industry’s race to an electric future will have a significant impact in the UK. The sector employs more than 800,000 people in the UK, built over 1.7m cars here last year, and has seen the government take a global lead with progressive legislation such as the UK’s announcement to ban the sale of all petrol cars and vans from 2040.

Low carbon future

The extent of the transformational change underway in the auto sector was highlighted by a new report ‘Driving disruption’ published last week by environmental disclosure platform, CDP. The report analyses 16 of the world’s largest publicly-listed car manufacturers and explores a number of key findings highlighting the scale of the shift to low carbon.

Most noteworthy is the sheer size of the market it’s expected to tap into. In a scenario where 30% of new cars sales are zero emission or plug-in hybrid by 2030, the potential market could add up to US$1 trillion.

It comes as no surprise that the industry spend on research and development is high compared to most sectors (5% of sales) with car makers focusing increasingly on electric and self-driving vehicle technologies. Battery densities continue to improve and battery-pack costs continue to plummet potentially leading to EVs becoming as affordable as traditional petrol and diesel vehicles from around 2022. In turn, car makers are clambering to take pole position in the EV market with a series of ambitious targets. GM is working towards an “all-electric future” and Toyota targets zero CO2 emissions in the entire vehicle life cycle by 2050. 

UK progress

At company level in the UK we’ve seen strong recent progress. The report finds that fleet emissions have been significantly reduced at Jaguar Land Rover (JLR) for example. JLR’s parent company Tata Motors was ranked the best company for managing transition risks while JLR has announced every vehicle launched from 2020 will be electrified.

From a policy perspective, various developments have helped the UK stay with the pack in the EV market. In November, Westminster earmarked £200m to upgrade charging infrastructure, £100m to maintain a car-buying subsidy until 2020 and a further £40m for R&D in charging technology. The subsidy contributes £4,500 towards the cost of buying an electric vehicle which is equal to Japan, yet trails the US which provides a subsidy of £6,500.

The UK also has over 900 rapid charge points, including one of the largest rapid networks in Europe with 10 per day being added according to Zap Map, and the government has committed to install charging points alongside petrol pumps.

Last year, sales of diesel vehicles plummeted by 30%, while EV purchases skyrocketed by 37%. However, despite the rapid growth in the British EV market, only 120,000 of the 32 million cars in the UK are EVs. Clearly, it’s still a long road ahead, but Britain is in the fast-lane to leave fossil fuels behind, with the auto industry and the wider economy looking at a major shakeup driven by the low carbon transition.

Luke Fletcher is senior analyst at CDP

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