Brexit: Is the British EV market really in danger?

FT UK Brexit EV Article - September 14 2018.jpg

In an article published yesterday, the Financial Times explored the potential impact of a no-deal Brexit on the electric vehicles market in the United Kingdom. The verdict: the electric car market is in danger. But is the British EV market really in any danger?

Will major automakers face availability issues?

The argument presented in the Financial Times’ article hinges on a potentially limited availability of electric vehicles - there will not be enough EV to cover the demand in both the United Kingdom and the European Union. Given that most major automakers are already producing / have announced production of their EVs (with some, like Volvo, promising 100% EV sales by 2025), it seems unlikely that supply will fail to match demand due to the manufacturers’ inadequate planning.

What is true, though, is that the electric vehicle market may be plagued by a limited availability of batteries, which can have a concomitant effect on the production of EV. According to Moody’s, metal supply shortfall could slow down the production of BEV. With that said, low emissions vehicles include PHEV, like the Mitsubishi Outlander PHEV and the Prius Prime / Prius PHV. Even if not exclusively electric, Plug-in-Hybrid Electric Vehicles fare much better than the threshold the European Union has set: namely, an average of CO2 emissions lower than 95grams / kilometre across a carmaker’s fleet from 2021. The Prius PHV manages CO2 emissions of just 28g/km, while a large SUV like the Mitsubishi Outlander PHEV emits approximately 41g of CO2/km. As PHEV require much smaller batteries than pure, battery-only EV, it would not be surprising to see manufacturers ramping up PHEV production to meet their EU goals, if the projected shortage of metal supply materialises.

Additionally, although the shortage of batteries is a realistic scenario given the previously unexpected growth the EV market is experiencing, most articles seem to ignore a potential breakthrough in the solid-state batteries field. As CleanTechnica revealed yesterday, investment in researching solid state battery technology has doubled since 2017 - the booming of this market has encouraged all stakeholders to increase their spending in the hope of finding an alternative to Li-Ion battery. Volkswagen, for example, has just invested $100m in a Stanford spinoff that develops solid-state batteries. Dyson, the British vacuum company which is now developing its own BEV, is also betting heavily on solid state batteries. Its first BEV, rumoured to become available in 2020, is supposed to feature a solid-state battery - although a report from the FT cast doubts on this.

Will automakers give up on one of the fastest growing EV markets?

According to the website EV-Volumes, the United Kingdom is experiencing the third strongest growth of the EV market in Europe after Germany and Norway - it only comes second to Germany in the European Union. The Plug-in-Car-Grant is one of the most generous incentives in the European Union, offering up to £4,500 towards the purchase of a BEV (and up to £8,000 towards the purchase of an electric van). Additionally Theresa May has recently announced a further £106m towards EV infrastructure development. Not to be forgotten, the capital’s Mayor, Sadiq Khan, is a fierce supporter of the zero-emissions movement: London is soon trialling a ban on fuel burning vehicles in some areas, which will reportedly include a street in London’s financial district (the City). These initiatives and regulations will only serve to boost confidence in the government’s dedication to zero-emission and will make owning an EV easier, potentially spurring even further growth of the British EV market.

Competition can fix this

The United Kingdom is the third largest population in the European Union and its second largest economy after Germany. Even assuming that some major automakers decide against selling their electric vehicles in Britain due to the underwhelming EV supply and the potential EU fines, Britain’s huge demand for electric vehicles will not just die off. According to CleanTechnica, sales of EV in the European Union and Norway (BEV + PHEV) reached 184,910 cars in the first half of the year. Out of this figure, approximately 30,000 vehicles were sold in the United Kingdom.

Tesla’s continuing popularity, even amid the multiple BEV options currently on the market, suggests brand loyalty in the EV market is relatively low. In the interests of simplicity, I will assume that 80-90% of EV buyers are brand-agnostic, and will thus buy an EV that matches their budget, even if it is not produced by their favourite brand.

In the unlikely scenario of major automakers halting EV sales in the United Kingdom, the approximately 60,000 British EV buyers / year * will be left with few or no options. If, in line with my previous assumption, the majority of the British EV buyers would “settle” for any EV regardless of brand,** the status-quo monopoly/oligopoly would create very strong incentives for EV manufacturers to start selling in Britain. An EV carmaker with a fleet that covers the entire budget spectrum (such as Tesla, with Model 3, Model S, and Model X) could potentially choose to stop selling in the competitive European Union EV market and instead, sell all of their limited production*** in the United Kingdom, where competition is little or non-existent.

Admittedly, focusing on a single market in Europe, such as the United Kingdom, is not a wise choice for any carmaker and I doubt the projected scenario would ever materialise. It serves to show how strong the incentives against stopping EV sales in Britain.

Concluding, a no-deal Brexit is bad, but it does not pose a significant threat to the electric car market. Even if the fundamental argument on which most articles base their concerns, namely, the undersupply of batteries, materialises, it is unlikely that the vast resources dedicated to the development of solid-state batteries will fail to yield a result in due time. Finally, even if the worse comes to worst and the demand for EV exceeds supply, it is doubtful that major automakers would abandon one of the fastest growing markets in the world.

* Notice how I am also ignoring the meteoric year-on-year growth of the EV market.

** Amid the projected lack of any options.

*** Undersupply is an assumption underpinning the Financial Times’ article.

Photo Credit: Jim Mattis / Wikipedia