ICE bans benefit wider sustainability efforts says EY

Delaying the UK ban on new Internal Combustion Engine (ICE) vehicles could significantly disrupt the automotive sector comments EY’s Maria Bengtsson

The UK has delayed the ban of ICE vehicles, Prime Minister Rishi Sunak announced, pushing the original ban on sales of ICE vehicles from 2030 to 2035. 

“The delay to the 2030 ban on the sale of new Internal Combustion Engine (ICE) vehicles could cause significant disruption for the automotive sector including Original Equipment Manufacturers (OEMs), dealers, businesses and consumers, given the extensive preparations made across the industry for the original deadline,” comments Maria Bengtsson, Ernst & Young (EY) LLP’s UK Electric Vehicle Lead.

“It may also risk a loss of momentum just as the industry was preparing for the next phase of the EV transition, moving out of the early adoption phase and into a pursuit of mass market uptake. The recent substantial growth in Electric Vehicle (EV) sales could also be jeopardised if the delay leads to fleet operators and consumers opting to defer plans to adopt EVs. Again, this would have significant implications for OEMs and retailers that have recently invested substantially in the development and sales of EVs.

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“Manufacturers had already committed to making the switch in line with the 2030 ban, but a delay adds uncertainty into the market, affecting manufacturers’ ability to further invest, plan, produce, sell and support in the UK with confidence,” Bengtsson continues.

“Meanwhile, charge point operators have committed significant investment in a plan to meet the number of EVs on the road, which could likely be much fewer in the short term as a result of this delay. Consumers who were already unsure about the EV switch may also have more reason now to put it off. This may result in an imbalance in the market where the supply of EVs outstrips demand, causing further challenges throughout the automotive sector.

EV adoption as part of wider sustainability goals

“Widespread EV adoption will be crucial to achieving the UK’s 2050 targets, and while it may appear sensible to align the UK’s ICE sales ban with the EU’s 2035 deadline, the two markets are not like-for-like,” says Bengtsson.

“The UK does not offer the same demand-side incentives or infrastructure environment as many EU jurisdictions and despite recent substantive inward investment into the UK EV supply chain, consumer uptake may be slower, so the Government may need to clarify whether it intends to address this with future policy.

“In addition, the effect of any Zero Emissions Vehicle (ZEV) Mandate delay that may follow today’s announcement will be closely monitored by the auto sector. A potential delay could buy valuable time for OEMs to prepare for new regulations but this would likely mean frustration for key players who have already made significant investments and changes in anticipation of the original 2024 deadline.”

"The Government's announced Net Zero policy changes offered a mix of reversals and fresh incentives, but overall will still likely disappoint many working on the transition towards greener British roads and homes. Specific measures aside, these changes risks sending a broader message to the global investor community at a time when international competition for green investment has never been fiercer,” adds Rob Doepel, EY UK&I Managing Partner for Sustainability.

“The UK remains a well-regarded destination for sustainability investment, but by signalling a slowing of its national Net Zero commitments and generating policy uncertainty, these announcements may affect that image, particularly as the US and EU continue to progress their own initiatives to entice green funding. The UK needs to protect and strengthen its image as an attractive, investible green proposition, or risks sleepwalking out of the race to become a green economic superpower.

 

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