It wasn’t too long ago that Gordon Brown, the then Chancellor of the Exchequer, claimed to have banished boom and bust economic business cycles leading to an environment of stable financial prosperity. What a difference a few years can make, now instead of enjoying unrivalled stability we are have to cope with a much more uncertain world where, if short term prospects seem shaky, medium and long term predictions are almost worthless. This world of uncertainty goes all the way up from the micro household level, where individuals are worried about their jobs and mortgage payments, to the macro government and international levels where fiscal restructuring and sovereign debt are major topics of debate.
Uncertainty and instability are not always bad things. Many financiers have made large profits from being able to accurately plot the fall of companies, betting on stock price decreases. It also generates a need for more advanced prediction and estimation techniques stimulating academic and professional innovation. Some companies specialize in “bad times” services such as insolvency firms, debt restructuring agencies and bankruptcy accountants. Unfortunately, for the vehicle market and most notably LEVs, uncertainty is not desired and can lead to a great deal of distress.
A modern car usually goes through many years of research, development and demonstration before it is eventually deployed into the automotive market. With this in mind, manufacturers like having stability in their product design, knowing what the consumer wants, what the current and likely future vehicle legislation is and also the likely prices of the raw materials needed to build the car. The UK Government has been less than solid concerning both the consumer incentive grant for BEVs/PHEVs that it is going to be introduced in 2011, only allocating funding for a one year period. Concerning funding for research alongside grants and loans to manufacturers to assist them in diversifying their production systems, the UK Government has been slightly more concrete but still nowhere near the level of certainty the manufacturers would desire. From a consumer preference perspective, because LEVs will have distinctly different characteristics requiring users to change their driving habitats, it will be difficult to accurately estimate their likely responses due to their unstable preference sets. All of these factors harbour a market environment that is difficult to predict and volatile.
Consumers likewise demand certainty when buying a new vehicle. A new vehicle purchase represents a significant financial decision for any household so ensuring this decision is optimum is of high importance. The average vehicle’s lifespan is increasing as vehicle technologies and designs become more robust. Consumers will desire a vehicle that fits their needs and wants as well in 5 or 10 years time as it does now. These factors do not suit LEVs with their new technologies leading to a level of uncertainty regarding their future applicability.
Both the industry and market need an injection of stability if LEVs are to progress from being a niche market application into mainstream adoption. I doubt very many people will disagree with this primary objective but how we get there is an entirely different question. The UK Government will have a key role to play in any scenario for increasing market stability and I don’t think they could do much worse than developing a more long term and robust policy mechanism for encouraging manufacturers to develop and consumers to buy LEVs. This policy mechanism must have its funding guaranteed into the medium term and also be dynamic insomuch that it can respond quickly to changing market conditions. This quest for stability will be no easy task and no one market actor, even the UK Government, will be able to do everything that is needed. Someone does need to make the first move however, and the UK Government must be seen to be proactive in this sense and lead the market to where it needs to be.
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