Laggard manufacturers must not be allowed to dictate the pace of the UK’s electric transition

The UK’s transition to zero emission vehicles (ZEVs) will continue to require adaptability and innovation from incumbent automotive manufacturers. For those who embrace the transition, the economic opportunities are endless and some manufacturers are already reaping the rewards of the burgeoning market for battery electric vehicles (BEVs). However, not every incumbent manufacturer seems to have embraced the UK’s electric future. 

Toyota is perhaps the most notable incumbent manufacturer to resist the pivot towards BEVs, instead continuing to champion its range of plug-in hybrid vehicles (PHEVs) and traditional hybrids. This has come at a cost; Toyota has thus far completely failed to establish itself within the UK’s BEV market. In July, Toyota sold just two fully electric vehicles, the lowest out of all manufacturers who offer electric models. The company currently only offers one BEV model in the UK - the Toyota bZ4X SUV, which was recently subject to an embarrassing recall.

Graph 1: Toyota is well behind competitors in establishing itself in the EV market segment.

Toyota’s approach to BEVs is bizarre, especially in light of its historic green credentials. The release of the Toyota Prius in the early 2000’s was nothing short of revolutionary. The Prius was, by the standards of the time, ultra low emission and incredibly fuel efficient. In the UK, the Prius was the green car of choice for much of the 2000’s and 2010’s, and paved the way for Toyota to release hybrid versions of several of its most popular models, including the Yaris and Rav4. On the back of these releases, a 2018 poll found Toyota was the incumbent manufacturer British consumers most associated with electric vehicles. As late 2019, Toyota was still well positioned to capitalise on growing consumer demand for BEVs. Yet they did not launch any new electric models, and lost out on a share of the only growing segment of the new car market in the UK.

In the UK, demand for hybrid vehicles is beginning to stagnate. Cumulative hybrid sales as of July 2022 sit only slightly above where they did in July 2021. Hybrid’s share of new car registrations has hovered at around 25% for most of 2022. However, as the market has contracted over the course of 2022 the actual volume of hybrids sold has dropped. As EVs become more mainstream, consumers are increasingly equipped with a stronger understanding of the benefits of BEVs compared to hybrid models.

Graph 2: Cumulative hybrid car registrations have stagnated over thus far in 2022, with the volume of new hybrid registrations currently sitting at around the same level as they were in July 2021.

This downturn will soon be compounded by policy changes in both Europe and Britain. On the continent, the European Commission (EC) is planning to implement new utility factors for PHEVs, beginning in 2027. These factors will ensure data on real world driving behaviour is used to assign emissions values. A recent study by The International Council on Clean Transportation found that “real-world fuel consumption of PHEVs in Europe is on average three to five times higher than WLTP type-approval values”. Given this, the utility factors system is likely to mean manufacturers will no longer be able to use hybrid sales to meet emissions regulations, and are likely to move away from the technology. In the UK, the writing is already on the wall for hybrids. By 2030, only hybrids that are able to travel a “significant distance on zero emissions” will be allowed to be sold, and by 2035 the sale of new hybrid vehicles will be banned completely. The forthcoming ZEV mandate should contain measures to further disincentivize manufacturers from pedalling hybrids to consumers. 

In contrast, consumer appetite for BEVs continues to grow. This year BEVs share of new car registrations in the UK has grown each month compared to the corresponding month in 2021. Furthermore, since March the volume of BEVs sold each month in the UK has also increased. 2022 has already seen more new EVs registered than in the whole of 2020.

Graph 3: Cumulative new EV registrations have increased exponentially year on year since 2019.

Despite these market trends, Toyota has shown little sign of changing course - much to the consternation of its shareholders. In mid-June, shareholders raised the issue at the company's AGM, hoping to press the company into working to reclaim its position as a leading “green” manufacturer. In response, Toyota reasserted the company’s commitment to developing a range of “environmentally friendly” vehicles, including PHEVs and hybrids. In late July, Toyota appeared to double down on this message. According to reports in the British media, Toyota wrote to the Government threatening to stop its UK manufacturing operations if the Government remains committed to its plan to ban the sale of hybrid cars in 2035. Toyota responded publicly, categorically denying sending the letter, and reiterated its commitment to zero emissions targets. However, in the same statement the company also reasserted its commitment to hybrid technology, saying; 

“We continue to see a role for many different technologies in the transition to zero emission based on the principle of ‘mobility for all’ and ‘carbon as the enemy’ – including for low emission full hybrids and plug-in hybrid technology.”

Cynics might suggest that Toyota could be gambling that the centre of gravity of British politics is about to shift further to the right. Rishi Sunak and Elizabeth Truss, the candidates vying to lead Britain's conservative Government, both recently reiterated their commitment to net zero. However, it increasingly appears that net zero is unlikely to be a serious priority for the next Government. Some car manufacturers may be holding out in the hope that this translates into the loosening of the net zero agenda and the relaxation of ZEV take-up targets. The British Government simply cannot relax its drive toward electrification and net zero. To do so would be rewarding laggards at the expense of companies who have, in good faith, taken risks, innovated, and invested to develop a range of high-quality BEV models. BEVs are increasingly becoming the go-to choice for British consumers. Laggard manufacturers simply cannot be allowed to dictate the pace of change of an economic and efficient energy transition.