How can the UK join Norway in the EV fast lane?

With parts of the UK electric car market going into reverse, the UK seems like it’s stranded on green transport’s hard shoulder waiting to be rescued, while the likes of Norway accelerate out of sight.

Electric car sales in the UK have risen massively over the past few years, with the market growing tenfold between 2014 and 2018. But the UK remains way behind Europe’s pacesetters Norway, where nearly 60% of the market for new cars is now made up of pure battery electric vehicles (BEVs).

In June 2019, for the first time since April 2017 the market for electric cars, including BEVs, plug-in hybrids (PHEVs) and hybrids with electric-only modes (HEVs), fell by nearly 12% to 13,314 new cars on British roads.

The setback came after years of promising growth in the UK market.

In the four years to 2018 the market grew by 1000%, figures from the Society of Motor Manufacturers and Traders (SMMT) show. By August 2019 sales of BEVs recovered sharply, growing by 377.5%, while HEVs grew by 36.2%, but PHEVs slumped by -71.8%. The Department for Transport boasts there are ‘record levels of ultra-low emission vehicles on UK roads’, with the country being the second-largest market in the European Union (EU).

But as a proportion of the overall market sales remain tiny, with the UK placed firmly among those nations struggling to beat their addiction to fossil fuels. In August, 90.2% of all new cars sold here were petrol or diesel. Across Europe, carmakers have been warned they must cut carbon dioxide (CO2) emissions ‘significantly’. Otherwise, they risk falling short on the upcoming EU target of 95g CO2/km set for 2020.

Figures released in September showed up to 91% of all new car sales in Europe, in the second quarter of 2019, were diesel or petrol. However, this is not the story across Europe.

In Norway the move away from fossil fuels has been much smoother and in March 58% of all vehicles sold there were BEVs. And the Norwegian Parliament has a national goal that all new cars sold by 2025 should be electric.

Polluter pays

Norway has made electric cars more attractive through the ‘polluter pays’ principle, whereby cash raised through taxes on gas-guzzlers is used to subsidise electrics. A sales tax on new cars is worked out through weight, CO2 and nitrogen oxide (NOx) emissions.

The system makes big, high polluting cars very expensive, though in recent years it has been adjusted with less emphasis on weight and more on emissions. In addition, VAT on petrols and diesels stands at 25%, compared to 0% on electrics.

Through these taxes, price differences are minimised and the greener choice can also end up being cheaper. Norway’s Electric Vehicle Association says a Volkswagen e-Golf can end up selling for €33,286, (£29,291), compared to €34,076 (£29,986) for a conventional Golf.

Chaitanya Kumar, a senior policy advisor with charity the Green Alliance, said the last three decades have brought a dramatic shift from car ownership to leasing in the UK. And that trend makes it harder for electric vehicles to take off, says Kumar.

Figures released last year by the Finance & Leasing Association showed leasing now accounts for almost 90% of all sales. Kumar says the best lease deals are on second-hand cars, but the numbers of electric vehicles that have entered the used market remain tiny.

Around 2.5 million new cars are sold in the UK every year, but the secondhand market is much larger, with more than 8 million changing hands. Kumar said: ‘For electric vehicles to take off you need to have a liquid market, i.e. you need to have more second-hand and third-hand vehicles in the market.’

He says the total UK fleet of electric vehicles stands at around 200,000 cars and these remain largely with their original buyers. New electric cars also remain expensive. As of 2018 the Mitsubishi Outlander was the UK’s most popular plug-in hybrid electric vehicle (PHEV) and on the company’s website prices start at £35,455.

Research by Kwik Fit last year suggested the average price paid in cash for a car in the UK is £10,511, while those buying on finance paid an average of £15,438. But work by EDF Energy earlier this year showed petrol and diesel drivers spend £56,000 over the course of their lifetime filling up, compared to £15,000 for charging an electric.

However, experts believe upfront costs continue to dampen the market. Incentives to make electric cars more attractive will be crucial, says Kumar. The UK government’s plug-in grants scheme reduces the cost of a BEV by £3,500 and owners pay no tax. This compares to up to £2,135 in tax on the most polluting new petrol and
diesels.

And from 2020 company car drivers who use electric will see their tax rate drop from 16% to 0%. In addition, EU clean air targets should drive demand for greener cars. Public Health England has said air pollution is the biggest environmental threat to health in the UK, causing between 28,000 and 36,000 deaths. Experts suggest traffic accounts for 22% of total UK CO2 emissions, a major contributor to climate change.

Incentives

Across the EU cars are responsible for around 12% of total emissions. Philip Gomm, of research group the RAC Foundation, believes incentives offered by the UK government are simply not generous enough.

Reaction to the government’s decision to end a £2,500 grant for hybrids appears to confirm his point. As well as narrowing the scope of subsidies ministers have cut the amount of cash available as up to £4,500 used to be offered for all new BEVs.

In June combined sales of PHEVs and HEVs fell by a massive 55.1% after the government decided the subsidy should only be available on BEVs.

Gomm also feels the sheer size of the UK market leaves less room for manoeuvre on subsidies than in Norway. Britain has just under 32 million cars on its roads, while Norway has less than 3 million. Once electric ownership takes off subsidies may be unaffordable, says Gomm. ‘If you times that (£3,500) over 100,000 vehicles or 200,000 vehicles or 500,000 vehicles that’s clearly a huge public investment in a single market and I don’t think many politicians are prepared, or have the money, to go down that route,’ said Gomm.

But chief executive of the SMMT, Mike Hawes, said that without ‘world-class’ incentives the UK market for electric cars will struggle to take off.

He insists the industry is investing in electrics, but cannot ‘dictate the pace of uptake.’ However, compared to similar-sized markets like Germany and France the UK is achieving broadly similar sales.

In fact, France (2.1%) and Germany (2%) both have proportionally fewer electric cars on their roads than the UK (2.5%), according to the European Automobile Manufacturers Association (ACEA).

About half of all new cars are bought by fleet buyers for businesses, who like to make reliable calculations of a car’s value at the end of a three-year lease. But these calculations are much more challenging for electrics because of their smaller numbers, says Gomm. He also believes some carmakers have embraced electrification only halfheartedly, having invested heavily in production lines for petrols and diesels.

Depth of commitment

Range anxiety, or the fear of the battery dying during a long journey, along with concerns over the numbers of available charging points continue to flatten sales.

Even a rapid recharge takes up to 30 minutes to reach 80% capacity. Highways England, which runs the country’s motorway and A-road network, has a goal of ensuring motorists are never more than 20 miles from a charger by 2020.

The Norwegian government launched a plan two years ago to pay for at least two multi-standard fast charging points every 31 miles on all of the country’s main roads. All main roads in Norway now have fast charging points, with the exceptions of Finnmark, in the country’s northernmost region, and the islands of Lofoten.

Copying Norway’s system of heavy taxes might seem like the simplest way to replicate its electric miracle. But even environmentalists suggest cultural and economic factors have helped Norway.

Kumar says Norway has benefited massively from its oil reserves and there is a natural readiness to accept that the wealth created by exploiting fossil fuels should be diverted into clean transport. He added: ‘And I think that is driving people (in Norway) to say, “Okay, what can I do as an individual? I can afford an electric car and if that’s the solution I’m willing to invest in it”.’ Figures released by ACEA show that sales of electric cars appear to be linked very closely to national wealth, or GDP per head.

Almost all EU countries with a market share of less than 1% for electric cars – which is half of all member states – last year had a GDP per head of below €29,000 (£25,520).

This includes Spain, Italy and Greece – as well as in Central and Eastern European countries, like Lithuania, Bulgaria and Slovakia. Norway’s GDP per capita in 2018 was €73,200 (£64,416), compared to €26,200 (£23,056) in Spain, and €8,100 (£7,128) in Bulgaria.

Even the UK’s was only just over half of the Norwegian figure at €37,600 (£33,088).

But the figures also support the notion that the depth of commitment to cleaner fuels matters hugely. In the EU’s richest state – the tax haven of Luxembourg where GDP per head stands at €96,100 (£84,568) – the proportion of electric cars sold in 2018 was among the smallest in Europe at just .8%, according to the National Society of Automobile Traffic. The market there is smaller than in Spain, whose GDP at €26,200 (£23,056) is worth just over a quarter of Luxembourg’s.

Confirmation, if ever it were needed, that wealth is not the only factor driving the popularity of electric cars – a commitment to clean energy backed up by tax incentives and attractive subsidies is also crucial.