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2022 UK Motor Industry Update – Mike Hawes of the SMMT

Graham Benge – So here we are at the Society of Motor Manufacturers and Traders Press Day. We’ve been invited to test some cars, and this year we’ve decided to focus particularly on EVs. And I’m talking to Mike Hawes, who’s the chief executive of the SMMT.

Referring back to a conversation that you and I had a year or two ago when the government first started talking about 2030 for all electric cars. And the consensus view then and you expressed the same view and so did I, it’s going to be very difficult.

Given the amount of product that we’re seeing here today and the improvements in that product. Are you pleasantly surprised?

Mike Hawes – Well, I think we always knew that the industry was even then in the process of investing the vehicles you see here, the electric vehicles, that wasn’t a decision taken one or two years ago, that was taken potentially a decade ago for those development programs to flow through, to result in that choice you see now and that choice over the this year and next year and beyond is going to increase as the industry moves away from petrol and diesel, which they’re not really investing in, into electrification, which is great.

So the choice is there for the customer. But in terms of achieving 2030, 2035, it’s not just about putting the products on the market, it’s about whether customers will be buying them. And that’s not necessarily solely in the gift of the manufacturers.

GB – I mean, I think the last figures I saw was something in the order of 5 to 6% of EVs and hybrids.

MH – No, in terms of new car sales, last year, about one in six cars was plugged in, which means both electric, pure electric battery and plug in. And about one in ten was pure electric. You can add on hybrids on top of that and say electrified vehicles about a 20, 22% market share, but pure electric, solely electric about 10%, which is great. That’s a good start.

But we’ve got to get from 10% to 100% and the majority of that in the next basically ten years.

GB – That’s going to be quite a task. And I mean days like this are certainly going to help move things forward and hopefully we are going to be able to say, well, you know, these are very acceptable vehicles now.

MH – Yeah, there’s an increased choice. It must be said the majority of electrified vehicles tend to be in the medium to larger segments, whether they’re SUVs, family car saloons or whatever, because, you know, the cost. And these are still a technology that is more expensive than conventional petrol and diesel. But the challenge for the industry is that, you know, we can’t just sell to that particular segment, we have to sell vehicles that appeal to everyone. And, you know, the biggest selling segment in the UK is traditionally ‘A’, ‘B’ segment.

If you think Fiestas and Corsas and something like that, Polos and so forth it’s what do you do for those type of buyers getting that technology into all different price points in the market? It’s really challenging when you think about the cost of batteries, you know, and making sure that that vehicle is going to be affordable so we can ensure that the entire new car market, the entire car buying, UK car buying public can move to these sort of technologies. That’s really potentially with the biggest commercial challenge is.

GB – And still there is a problem I think with the infrastructure, it’s still not there and it’s not progressing fast enough. It’s certainly my view and I think it’s a common view when we’re not building the infrastructure that’s needed to support these.

MH – It’s not keeping pace. In terms of the rapid chargers, those you see on the motorway, some destinations, UK is pretty good, it’s one of the best in Europe and that’s maybe not as good as some Japan, Korea and so forth. But in terms of Europe, it is one of the best.

Where we see the biggest shortfall is on on-street charging.

Now always remember that about 40% of dwellings in the UK don’t have a designated car parking space. People live in terraced houses, people live in flats, apartments. There may be parking but it’s not designated to a particular dwelling.

So there are those people are going to be dependent on on-street charging, you know, because we’re creatures of convenience. We like the idea of being able to charge at home. That’s why the majority of electric cars being sold now are sold to people with driveways.

So what happens if you don’t have a driveway? Because, again, we can’t just sell to those with a driveway. If we’re to meet the ambition, the expectation, what will be a legislated mandated target, we need everyone to be able to buy these vehicles and charging must keep pace with that take up.

GB – I mean, I’ve seen very few on-lamppost or on post or on street charging points and some trailing cables, which is not a particularly good idea, but there just aren’t enough of them.

MH – No, it’s you know, we’ve done some research and, you know, because of new car sales of electrified vehicles going like that [gestures a steep curve], yes, the number of and the investment in infrastructure is increasing, but it’s you know, it’s increasing like that [gestures a less steep curve]. So there’s a gap. So it potentially could get worse before it gets better. What we want to see is basically commensurate targets put on the infrastructure industry to keep pace with the automotive industry, which is increasing choice and is demanding, is being now demanded to increase sales of EVs on an annual basis.

GB – Interestingly, also referring back to our conversation of a few years ago, I think when I first started driving EVs, the typical range was 30 or 40 miles. You could take the kids to school and if you were lucky, get home again. Now we’re looking at hundreds of miles, in fact, a recent Mercedes, thousand kilometres.

MH – Yeah, I mean, when we look at the last ten years was when we started having EVs here. The average then was about 70 miles average. Now, the average of what you see today is more like 270 miles. It’s increased dramatically. I mean, and that was one of the concerns a lot of consumers would have was about this range anxiety. Will I be able to get where I want to go? That anxiety has been replaced instead with range charging anxiety when I get to that place. Will it be somewhere for me to charge? Will it be working? How much will it cost? Will it provide sufficient charge me to get back again? That’s what we have to address to make sure there are no obstacles to the take up of these sort of vehicles.

GB – And will it all be so attractive when there’s a consensus view that the Chancellor will realise the losses that he’s going to be making on fuel duties and that he will have to recover that through the electricity used.

MH – At some stage the government will have to, we know they’re looking at it now. But, you know, because you’re right, the fuel duty as you move away from petrol and diesel into electrification that is a declining revenue.

Fuel duty and vehicle excise duty contributes about £35 billion a year to the Exchequer. That’s a massive amount of money and that’s going to be declining. We know at some stage that’s got to be replaced. But what you don’t want to do is, you know, try is do something that now that stifles the take up of these vehicles when everyone is trying to ensure that these vehicles are bought in ever greater numbers. Because if you are to achieve the UK’s net zero ambition, you need to basically address the biggest emitting segment, which is road transport. You need to do it relatively quickly. So basically road transport has to shoulder the biggest burden in delivering net zero. So you need to use every lever at your disposal to encourage customers, consumers to make the switch.

GB – So do you have to bring back in as a government, a greater incentive to buying these vehicles, and particularly an incentive in the respect of commercial vehicles?

MH – Yeah, we would like to see an extension to incentives, but if I’m honest, I don’t see it happening and it’s still going to be there for vans and some trucks because that’s and that’s a much more nascent industry. But, you know, I think it’s quite clear the constant cuts you’ve seen in the plug-in car grant, ultimately you’re at the stage now where only about one in five pure electric vehicles qualifies for that incentive.

We know what the Government’s looking at and they’ve launched the consultation is basically having a mandate, basically demanding a significant proportion of every brand’s new car sales and new van sales are electric, which is basically look at seeking to control the market, which is a very difficult and dangerous game. If you look at, y’know, what’s happened in all sorts of markets over the last two or three years, incredibly volatile, trying to forecast what’s going to happen. And in such a way as you can still have a customer affordability, given this is new technology, it’s really difficult thing to do.

GB – Okay. Well, let’s broaden it out a little bit. The marketplace generally, as we’re hearing, more and more people are going to be suffering through all kinds of financial constraints over the next six, 12, 18, 24 months or whatever. Are we seeing a decline in the market? Do you perceive such happening?

MH – I think it’s early to say. At the moment it’s a supply constrained market, the global shortage of semiconductors. And you’ll see the figures that we’re putting out at the moment. Production in the UK is down production in Europe, but actually globally is down. Shortage of semiconductors is the biggest cause of that. If you can’t make your vehicles, you can’t sell them. So there is again, in terms of new car sales, it’s below where it should be.

We know the demand is there and there’s a degree of pent up demand in the last two years. Now, as we move through this year and into next. Cost of living, increasing inflation, fuel energy costs in particular, undoubtedly that will put some strain on customer demand. But how that sort of plays out when you’ve got a supply constrained market, you’re trying to balance two things that balance each other. So I don’t think we know we will see any collapse in the market, on the contrary, we still expect the market to begin to grow, but we need the easing of the supply of semiconductors that make the biggest difference to the new car market.

GB – And that certainly looks like a longer term problem.

MH – It’s certainly through this year and into next year. Some recent statement says it could go on a bit longer, but again, it depends on demand and supply, not just of vehicles, but semiconductors go into other types of technologies, personal electronics, televisions and so forth.

So it’s really how respective markets, because, you know, global demand for that particular product.

GB – So, Mike, one word response. Hopeful or not?

MH – I think this year… it’s going to be more than one word, I’m afraid… We came into this year more optimistic than last year. I mean, at least the pandemic has largely subsided. Not totally, but largely. Obviously, there’s the Russia Ukraine situation and the impact that is having on the global economy, which gives everyone pause for thought.

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