Car industry reels from Rishi Sunak’s retreat on net zero plans

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Rishi Sunak’s decision to delay a ban on the sale of new petrol and diesel cars by five years to 2035 has prompted a backlash from the UK automotive industry, which warned it would undermine investment certainty.

The UK prime minister’s sudden shift in green policy on Wednesday will be digested in automotive boardrooms across the world and complicate their plans to boost EV sales in the country this decade.

“This U-turn will cause a huge headache for manufacturers, who are crying out for clarity and consistency,” said Ian Plummer, a former Renault and Volkswagen executive who is commercial director at online marketplace AutoTrader. “And it is hardly going to encourage the vast majority of drivers who are yet to buy an electric car to make the switch.”

Leading car brands such as Ford, Vauxhall and Volvo Cars have pledged to go fully electric this decade and had made manufacturing decisions with the 2030 ban in mind.

Sunak’s policy pivot came as the industry was preparing for new rules, which were due to come into force in January and require the UK’s car industry to sell a certain proportion of electric vehicles from next year.

Carmakers have been scurrying to make final preparations for the regime, ordering models from factories and training their dealers, as they wait for more details of any changes to the scheme following the 2030 reversal.

“Our business needs three things from the UK government: ambition, commitment and consistency,” said Ford’s UK chair Lisa Brankin ahead of Sunak’s announcement. “A relaxation of 2030 would undermine all three.”

But other carmakers openly welcomed the change, such as Toyota, which has been slower to roll out fully-electric vehicles. The company said Sunak’s move “recognises that all low emission and affordable technologies can have a role to play in a pragmatic vehicle transition”.

One senior auto industry executive told the Financial Times: “Some people will be cross, but the general view will be a collective sigh of relief . . . they will have a little bit more elbow room.”

The UK government is not the only administration to waver over targets they have set for industry in the push to reach net zero on carbon emissions.

The EU, which plans to ban new petrol car sales from 2035, surprised the industry earlier this year by conceding that some carbon-neutral fuels — dubbed “efuels” — could be allowed for longer.

Carmakers across the continent noticed an immediate drop in interest in electric cars as consumers began hedging their bets. 

The potential for consumer confusion comes just as carmakers have been grappling with the incoming sales quota scheme, which carries crippling fines for those who do not sell enough EVs.

The UK rules were set out earlier this year but could now be revised. Under the original guidance, 22 per cent of all cars sold in the UK by each manufacturer had to be zero-emission vehicles, a level that was set to ratchet up every year until 2030.

“It’s like mobilising an army, and then telling them to get back in the barracks for a few years,” said Toby Poston, a director at the British Vehicle Rental and Leasing Association.

Sunak’s net zero pivot is part of a pitch to motorists ahead of next year’s general election. The Conservative leader is attempting to present the opposition Labour party as environmental zealots who care more about climate change than the cost of living crisis. 

The UK’s previous 2030 target to phase out new petrol and diesel car sales included some leeway into the next decade for hybrids. Ministers previously said some hybrids would be allowed to be sold as late as 2035, leading to acute uncertainty among manufacturers that supply a panoply of hybrid options and did not know which would be permitted. 

Shifting the ban on combustion-engined vehicles lifts the threat to some hybrid models, such as Toyota’s, which use a battery but have relatively limited range using only electric power and were at risk of being outlawed under the previous rules.

The longstanding 2030 pledge had helped spur electric car sales and drive investments into the UK. These include recent decisions by BMW to invest £600mn in its Oxford plant to make electric Mini models, and Tata’s plans for a £4bn battery factory in Somerset to supply Jaguar Land Rover.

Adam Forsyth, head of research at Longspur Capital, which provides equity research into clean energy companies, expected that many businesses investing in greener solutions would shift their attention elsewhere if the UK delayed net zero measures. “No one will skip the UK if there is business to be done but the focus will be where the opportunity is greatest,” he said.

The US’s landmark Inflation Reduction Act, which includes a $369bn package of subsidies and tax credits to tackle climate change, is luring businesses to the US. The EU, Australia and Japan are trying to follow suit.

“Changing targets risks damaging investments in the UK,” said Emma Pinchbeck, chief executive of Energy UK.