Electric And Hybrid Vehicles Industry In United Kingdom

The UK automotive market has seen a drastic surge in the demand for electric and hybrid vehicles (EHV) over the past three years, indicating an increase in new registrations of EHVs from 3,500 in 2013 to nearly 40,000 by the end of June 2015

Definition / Scope

Unlike the conventional vehicles where the ignition of the engine is entirely powered by gasoline or diesel, hybrid vehicles use an addition electric motor/battery to power the internal combustion engine.
A mix of conventional engine and electric motor provides better fuel efficiency and improved environmental performance. The EHV roughly gives an energy efficiency of 46% as opposed to 18% operational efficiency by conventional vehicles

Market Overview

The boom in the Electric and Hybrid vehicle market is the result of growing environmental concerns like increased global warming, depletion of fuel reserves and excessive CO₂ emissions by conventional vehicles.
The sale of electric and hybrid car has risen dramatically over the past 12 months. As per the figures published by Society of Motor Manufacturers and Traders (SMMT), the start of the year 2014 showed around 500 electric cars registrations/month, which has now risen to around 2,400 registrations/month in 2015
There has been a huge increase in the number of electric and plug-in hybrid models offered by manufacturers in the UK, giving buyers a wide range to choose from.
UK network of charging points across the country has considerably increased from a few hundreds in 2011 to over 8400 by mid of 2015.
The UK government has taken various initiatives for the expansion of the electric and hybrid vehicle market. Various incentive packages have been announced to support the research and development of lightweight batteries for EHVs.
Government policies like exemption from road tax, congestion charge waiver and free parking at various locations has encouraged buyers to opt for electric and hybrid vehicles.
However, long charging time, limited range, high battery cost and electrical safety remains a huge challenge for the manufactures.

Market Risks

Although EHVs market has grown over the past few years, there are a number of barriers to market expansion. Some are technological and others relating to consumer perception.

Limited Range: The distance covered by a fully charged electric vehicle is not quite high. The majority of buyers cannot afford high performance models, and most electric vehicles still have limited range. However, hybrid cars addresses range issues, one can switch to the conventional engine as soon as the battery runs out of power.

Long Charging Times: The long recharge time of the EV continues to make it less attractive compared to the fossil fuel-powered vehicle which takes only a few minutes to refuel. On average the charging time is 6 to 8 hours of full charge.

High cost of the batteries: One of the major impediments to reducing the cost of EVs remains the cost of their batteries, which can make up about 50% of vehicle production costs.

Electrical safety: There are also electrical safety concerns, as Lithium-ion batteries could be dangerous if short-circuited or overheated.

Top Market Opportunities

UK is the second largest vehicle market in the EU after Germany. The figures from the Department for Transport suggests that British households owning a car has risen from nearly 23 million to 27 million between the years 2001-2011
Since the launch of the government’s plug-in car grant scheme in 2011, there has been a surge in demand of EHVs. The sale for the EHVs quadrupled during the year 2014, depicted by sales figures of 3,586 in 2013 and 14,498 in 2014 . The subsidy scheme for EHVs has been further extended until 2016
With 14,000 EHVs already sold in the first half of the year, 2015 looks set to become the year of the boom for EHVs in UK
The number of charging points across the country has increased from a few hundred in 2011 to over 8400 in 2015.
To promote the manufacture of EHVs, the UK government has announced a 5 year investment programme in low emission vehicles industry worth £500 million, which includes £100 million towards research and development of best green cars.
The electric car by Nissan – the Nissan Laef broke the sale record in 2014 selling 4,051 units in the UK which was more than double the 1, 812 sold in 2013.
Other popular EHV models in the UK market include Mitsubishi Outlander PHEV, BMW i3, Renault ZOE, Toyota Prius PHEV, Vauxhall Ampera.
Although these type of vehicles are above the average purchase price, the fact that the driver saves fuel (and fuel prices are constantly increasing) in the long run it compensates.
Economies of Scale are bringing down the production cost for this type of vehicles
The environmental issue of global warming, high carbon emission and conserving fuel reserves has led vehicle manufacturers to invest even more on the development to EHVs.

Technology Trends

UK government has started ‘Electric Vehicle Homecharge Scheme’ wherein government contributes up to 75% of the total charge towards the installation of charging points per household/ eligible vehicle
Transport of London (TfL) has installed nearly 1,300 charging points across the city in past two year
Technological developments in the past decade contributed to more efficient engines and smaller charging times.

Regulatory Trends

The United Kingdom government has created measures/policies which promote this type of transport.

EHVs are exempted from paying Vehicle Tax/Road Tax.
In order to reduce the initial cost, government offers grants to customers who opt to buy EHVs (grant of 25% towards the cost of a car and 20% off the cost of a van).
EHVs are eligible for 100% discount on congestion charge (up to £11.50/day saving)
Around certain areas free parking is allowed for EHVs to promote the uptake of such vehicles.

Other Key Market Trends

Customer Segment

According to survey conducted by the Transport for London, within the next 4 years, 73% of Londoners would consider buying an EHV⁽³⁾.The consumer market is widespread with people holding different beliefs about the car. Consumers likely to purchase electric cars include:

Affluent customers who prefer to use EHV in addition to owning another car.
Consumers who require cars mostly for short distance commuting.
Environment conscious consumer who believe EHVs are environment friendly.
Middle income group consumers, as they can save on parking charges and taxes.
Consumers who have passion for cars and new technology in cars.
Young generation, as it is cheaper and looks incredible.
Commercial transport, as it gives corporate benefits of being seen as ‘Green’.

Market Outlook

With industries facing the challenge of lowering carbon footprints and conserving fuel reserves, the market for EHVs is likely to rise at a significant rate.

Eliminating uncertainty barrier among buyers, involving all stakeholders in deployment of new vehicle, technological development on battery life and charging time, are necessary tools to promote the market for EHVs.

Competitive Landscape

The competitive landscape is dominated by car makers like Nissan, Toyota, Ford, BMW, Mitsubishi, Renault , Vauxhall . The graph below shows the statistics of new car registration by models in the year 2013-2014.
In the automobile sector almost every car manufacture is producing at least one model of electric or hybrid cars.

Competitive Factors

Limited range is the biggest barrier in buyers opting for these vehicles. Few manufactures are coming up with aluminium air battery technology promising a potential range of 1000 miles as opposed to lithium ion batteries with a range varying from 100-3200 miles.
Mass consumer population is uncertain regarding the capabilities of EHVs. Better outreach programmes are required that would educate vehicle buyers about the full potential of these vehicles and enable them to appreciate the benefits of fuel economy.
Involvement of all stakeholders is critical for the successful deployment of new vehicle technology. The collaboration of government, manufacturers, buyers, research institutes can make this ‘clean mobility initiative a success.