Carmakers are rationing supplies of petrol, diesel and hybrid vehicles to the UK market to avoid fines for not selling enough all-electric vehicles, a major retailer says.
The government’s zero emissions vehicle (ZEV) policy requires at least 22% of new-car sales this year to be of battery electric vehicles (BEVs), which rely exclusively on plug-in charging. But with demand growth for BEVs apparently cooling off, motor companies have been accused of delaying deliveries of other cars until next year to meet their 2024 target.
The UK experience is part of a broader BEV market challenge for companies, some of which are slowing electric transition in the face of consumer resistance.
Last week, Chinese-owned Volvo pulled back on its intention to sell only BEVs by 2030. Instead, it hopes BEVs and plug-in hybrids combined will contribute 90% of sales by then. The difference will be made up by mild hybrids, which rely mainly on petrol and diesel internal combustion engines (ICEs).
It is unclear what impact this will have on the SA motor industry, from which Mercedes-Benz SA now exports plug-in hybrid cars and BMW SA will shortly follow suit. Many of their exports go to Europe.
The government expects local manufacture of BEVs to start only in 2026.
Recently, Ford in the US announced that its share of annual capital expenditure dedicated to BEVs would be cut from 40% to 30%. It, too, is looking at more hybrid options. The company said its electric vehicle business had lost nearly $2.5bn in 2024.
SA’s 150% BEV investment rebate will kick in from 2026. The timing is based on the commitment of one company, as yet unnamed, to start BEV production then. Finance minister Enoch Godongwana says the rebate is expected to cost R500m in the first year. Other companies are known to be considering following suit.
Whether the slowdown in demand growth will affect timetables is unclear. According to a motor company director: “It’s too soon to know what the effect for SA will be. The general view is that BEVs will eventually dominate internationally. The only question is, when? The same applies to investments.”
Toyota, a voluble proponent of multi-path automotive technology, encompassing BEV, hybrid, hydrogen and even artificial ICE options, has cut BEV production plans by one-third. It says it plans to build 1-million BEVs annually by 2026, rather than the 1.5-million announced previously.
Many other companies, including General Motors, Volkswagen, Porsche and Stellantis, are also gearing down immediate BEV plans. One problem is that BEV vehicles are still more expensive than ICE alternatives. Now that many governments have reduced or cancelled the generous buyer incentives that helped get the BEV market going, consumers are looking elsewhere.
Range anxiety (the fear of being stranded because of most BEVs’ limited single-charge journey limit), doubts about the availability of charging points, and often-weak trade-in values of used vehicles have all contributed to waning consumer confidence.
The trouble is that many governments have committed themselves — or rather their citizens — to a BEV future. In the UK, this year’s 22% minimum car market share will rise incrementally to 80% in 2030 (70% for vans), when, say policy experts, motor companies will have to pay a £15,000 (about R360,000) penalty for every ICE car sold beyond the remaining 20%. The only way to avoid this would be through carbon credits.
The UK is due to go 100% BEV from 2035 — the same year as the EU. To move towards these targets, and in the absence or reduction of government incentives to make it affordable, motor companies say they are being forced to subsidise prices themselves, and are losing money in the process.
BMW, VW and Renault are among companies lobbying the EU to slow the BEV process and include hybrids in the mix. If not, they warn that Chinese companies, which manufacture all electric vehicle versions in vast numbers and at much lower cost, will flood the European market with cheap vehicles.
In the US, where legislated BEV introduction is much slower, Ford said in April that it lost more than $100,000 each on many of the BEVs sold in the first quarter of the year.
Carlos Tavares, the CEO of Stellantis, whose brands include Fiat, Alfa Romeo, Jeep, Peugeot, Citroën and Opel, has questioned whether it is worth continuing vehicle manufacture in the UK when government BEV policy forces it to sell at a loss.
Robert Forrester, CEO of the Vertu Group, one of the UK’s biggest auto retailers, said last week that some dealerships were told by manufacturers that some ICE vehicles ordered now would be delivered only in 2025 because not enough BEVs were being sold.
“In some franchises, there’s a restriction on supply of petrol cars and hybrid cars, which is actually where the demand is. It’s almost as if we can’t supply the cars that people want, but we’ve got plenty of the cars that maybe they don’t.
“They [manufacturers] are trying to avoid fines so they’re constraining the ability for us to supply petrol cars to try to keep to government targets,” he told the Daily Telegraph.
“The new-car market is no longer a market. It’s a state-imposed supply chain.”
In SA, government policy is geared towards the manufacture of BEVs but not their local sale.
Motor industry production is heavily export-focused. A white paper published in December 2023 seeks to continue that with incentives, available from 2026, restricted to manufacturing.
Motor companies plan to lobby new trade, industry & competition minister Parks Tau to include consumer incentives, so the cars are affordable for SA motorists. Without a local market for SA-made products, it will be difficult to persuade multinational motor companies to continue investing, they say.
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