The COVID-19 (coronavirus) outbreak has had a profound effect on the UK automotive sector and its supply chain in 2020. For manufacturers, the temporary closure of production plants aimed at preventing the spread of the virus alongside lower demand has reduced output. Revenue in the Motor Vehicle Manufacturing industry is expected to decline by 18.6% in 2020-21. Additionally, European manufacturers reported a 26.8% fall in output between January and October 2020, according to the European Automobile Manufacturers Association, due to similar lockdown measures in EU countries.
However, a success story has emerged in the same year, with production in the Alternatively Fuelled Vehicle Manufacturing industry rising notably. Demand has been driven by UK government policies and investment by domestic carmakers as the popularity of diesel vehicles decelerates.
Rising sales
Prior to the coronavirus pandemic, a rising proportion of the population opted to purchase AFVs in order to eliminate high running costs associated with diesel and petrol vehicles.
In 2016, battery electric and plug-in electric vehicles accounted for 3.3% of total new registrations, at a total of 88,891 units. In 2020, this rose to 10.7% and 285,199 units.
This occurred as car producers introduced new models to capture the growing market amid rising environmental consciousness, which also led to output of the Nissan LEAF rising from 21,000 units in 2016-17 to 46,000 units in 2018-19.
Pandemic performance
As the coronavirus pandemic gripped the UK economy, lockdown measures forced the closure of car dealerships, which led to a 97.3% fall in new car sales in April 2020 compared with the same month in 2019, according to data from the Society of Motor Manufacturers and Traders. The UK government eased lockdown measures in the summer months and car dealers reported a sharp increase in demand for AFVs from returning customers
Although the overall market remained depressed, registrations of battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs) surged by 184.3% and 138.6% respectively in September 2020 when compared with same month in 2019. At the same time, UK production of these vehicles expanded by 37% as car manufacturers plotted a path to recovery.
Revenue in the Alternatively Fuelled Vehicle Manufacturing industry is expected to rise by 11.8% in 2020-21, supported by government incentives and a more environmentally conscious population. Approximately 68% of AFV sales in 2020 were to commercial clients seeking to reduce operating costs and comply with London’s Ultra Low Emissions Zone in London. Companies such as UPS and Amazon have increased the number of pure electric or hybrid electric vehicles used for daily operations, which drove demand in the current year. This presents room for further growth among private customers, with some pent-up demand expected in the market after lockdown measures are eased.
AFV registrations in January 2021
- Battery electric vehicles were 54.4% higher than in January 2020.
- Plug-in hybrid electric vehicles were 28% higher than in January 2020.
- Hybrid electric vehicles were 23.9% lower than in January 2020.
Charged future
The UK government previously identified that uptake in electric vehicles was slow due to lack of readily charging points across the United Kingdom. While London contains an average of 10 electric vehicles per charger, charging points are much scarcer in the South West, which has 1,448 vehicles per charger.
In January 2020, the Department for Transport announced it was doubling its funding for electric vehicle infrastructure to £10 million to drive forward installation of charging points. This is in addition to £400 million in funding to build 3,000 rapid charging points across Britain which was announced by the UK government in September 2019. Following this, in the 2020 Budget, £950 million in funding was pledged to support the rapid rollout of electric vehicle charging hubs at every service station on England’s major roads.
These polices will drive forward the uptake of electric vehicles before the 2030 ban on sales of traditional vehicles. According to a survey by the AA, AFVs are expected to account for 20% of all cars in use by the end of the decade.
Future trends
In 2020, one in 10 UK-registered vehicles were imported and export demand increased as European governments accelerated incentives for electric vehicle uptake in order to boost economic activity. However, car manufacturers face the challenge of engaging customers affected by the economic shock caused by the coronavirus pandemic.
Investment in new models and marketing campaigns aided by government policies to boost the uptake of AFVs will provide opportunities for UK manufacturers ahead of the ban on sale of new petrol and diesel vehicles in 2030. The UK government is expected to introduce policies and incentives similar to the Plug-in Car Grant, which has boosted sales over the past five years, to accelerate AFV uptake in the UK market. In addition, the government has pledged to invest £500 million over the next four years for the development and mass production of electric vehicles, batteries and associated supply chains.
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