This is the second in a series of blogs which summarises New AutoMotive’s response to Government’s consultation on phasing out sales of new petrol and diesel cars from 2030 and supporting the ZEV transition. You can find a summary of our consultation response elsewhere on the New AutoMotive website.

In our first blog, we explained why the DfT’s analysis of the savings from only permitting plug-in hybrids with significant zero emission capability was opaqued and downbeat, how the savings could be much greater and what much tougher (well, practically impossible) decisions the Government would have to take to stay on course with its carbon budgets if it decided to permit the continued sales of hybrids after 2029.

In this, we consider the horrifying possibility that Government might not agree with us and decides to permit sales of hybrids without a plug alongside plug-ins between 2030 and 2034. What this will mean for makers, and how might the policy end up (not) working?

Options

The consultation is not short of options. But in broad terms there are three options where HEVs are permitted alongside PHEVs:

Option A - everyone gets to sell whatever they want as long as there’s a 1 kWh battery in there providing a small percentage of the propulsion.
Option B - people can sell whatever they want as long as the emissions of each individual vehicle are below a certain amount per kilometre. This vehicle level cap can be tight (105 or 115g/km) or loose (180g/km).
Option C - people can sell whatever they want as long as the average emissions of the cars they sell are below a certain firm-specific level. Firms already have these targets under the Non-Zero-Emission Car CO₂ Trading Scheme (CCTS). These targets are not in the public domain (they should be) but our estimates are below. These could be tightened further, by 10% or 20%.

New AutoMotive's current estimates for emissions targets of each car manufacturer. — Current CO₂ targets by manufacturer

The Options Government Probably Aren’t Serious About

The first two options feel like they’re on offer for completeness, and to show the DfT have considered every possibility.

Option A: Why, having set a company-level emissions target for the past 2 decades, would Government contemplate canning all emissions requirements in the final mile and throwing a 5 year long party for hummers, cybertrucks, and amphibious people carriers? It’s a hard ask. Popular with Aston Martin and Lamborghini perhaps, but due to an undesirable quirk in the regulations (perhaps a future blog) the standards don’t even apply to them.

Option B: In contrast, a one-size fits all tight vehicle level cap applicable to HEVs and PHEVs is superficially appealing, in that it would only allow people to buy smaller, lower-powered cars which were not as polluting. However, these are exactly the vehicles where ICE technology is most efficiently replaced by batteries. It would also prevent people buying bigger vehicles for purposes where there are currently fewest options to electrify - think towing, regular off-road use. A perverse outcome.

Meanwhile a very loose vehicle level cap feels slightly like a return to option A. Why undo 20 years of gradual tightening of vehicle emissions standards, by allowing manufacturers who have massively outperformed emissions standards to suddenly exclusively sell high margin 180g/km hybrids?

The Options Government Probably is Serious About

So Option C, and a fleet-wide standard, it (probably) is. Firm level average emissions have been the approach until now, and we see no reason to anticipate that changing. At what level should it set the standard?

A key consideration is the fact that the reported emissions of the fleet are changing beneath our feet - even without any alteration in the spread of vehicles which manufacturers sell. This is because of the changes to Utility Factors (UFs) for plug-in hybrids, to account for the fact that some users - predominantly company owners - are not charging their vehicles as often as hoped.

A 20% cut is way too tight

When this change is taken into account, our analysis suggests that a 20% fleet-wide emissions target would be far out of reach for many firms even if all of their current sales were to switch from petrol and diesel to hybrid.

Firms which have lagged on cleaning their ICE sales, such as BMW and Mercedes, would need to reduce the emissions of their ICE vehicles by more than 30%. Firms which have performed moderately well in reducing fleet CO₂ emissions such as VW and Ford would need to find reductions of 20-25%. Even Toyota would have a shortage of allowances and little scope to reduce emissions further - 75% of its vehicles are already hybrids.

Therefore our initial conclusion is that implementing a 20% target reduction would give the appearance of permission to sell hybrid vehicles whilst throttling it to vanishingly low levels in practice. Whilst this may have its attractions, it feels politically unachievable in reality. Firms would be incentivised to invest in the hybridisation of their sales whilst being in practice unable to realise any significant level of return on that investment - exactly the situation Government is keen to avoid in the case of vans.

Meanwhile consumers who understand that they can buy a hybrid vehicle would traipse from dealer to dealer to buy vehicles which no-one can afford to sell them. All this is likely to lead to policy instability and last minute dilution of requirements in practice.

But 10% is also too tight

Even under a 10% reduction, only Toyota would have any CO₂ credits when the emissions of plugins are recalibrated and almost every firm except Honda, Hyundai, and JLR would need to cut their emissions by a further 10%. This again offers false promise to manufacturers that they could continue to sell hybrid vehicles if only they can invest enough to make them clean enough - whilst in practice forcing them to delete many of their models from stock, and to perform two juggling acts: not only selling enough BEVs but also making sure that their remaining hybrid sales are sufficiently clean by keeping vehicles in stock but turning all but the most committed purchasers, with the greatest willingness to pay, away.

Our conclusion is that this proposal is not going to survive contact with the reality of the motor manufacturing lobby.

No tightening. Just stretching - and breaking - manifesto commitments

So what we’d be left with is no tightening at all. We wouldn’t see any headline improvement in vehicle efficiency. Government would have read its manifesto promise of “restoring the phase-out date of 2030 for new cars with internal combustion engines” to mean phasing out ICE vehicles unless they had a 1 kWh battery alongside the 3 litre engine.

This is an interpretation stretched up to and well past breaking point. It isn’t going to work. We urge Government to permit only PHEVs and range extended vehicles to be sold in the 2030-2034 transition period.

Do Any of the Ideas for Continuing the Sale of Hybrids After 2029 Actually Work?