Back in 2009 the then UK Government put into place an ambitious and well funded initiative to accelerate the adoption of plug-in vehicles. Over £400million was earmarked to advance the market from both the supply and demand side. Of this mammoth figure, £230 million alone was allocated for a consumer incentive grant that would knock off between 2 and 5 thousand pounds of the sticker price of a new plug-in vehicle. The current incumbent Government decided to support this initiative and the consumer incentive was introduced to the market at the start of this year. The timing was chosen to coincide with the introduction of EVs into the mass market so that all potential early adopters would benefit.
6 months on and we can look back and review the “success” of the grant measured by its level of uptake. As of last week the incentive grant has been allocated a total of 680 times meaning (assuming the full £5000 was allocated on each occasion) £3.4million has thus far been distributed. To me this doesn’t seem like a huge figure and (again if we assume that the sales have been evenly distributed) it only equates to an average of 113 plug-in vehicles being sold per month. Clearly this is better than nothing, but when you compare the first 6 months figures with the total budget allocated for this initiative you begin to think the UK Government was rather ambitious in their expectations for market uptake.
What might be the snag in the system holding back higher levels of adoption? Well it’s important to remember it’s still early days and that uptake of the incentive may accelerate rapidly in the future. As plug-in vehicles are only just being released into the mainstream market, manufacturers are limiting their initial volumes of these vehicles to match it with demand. As the demand in the market begins to pick up so too will supply as manufacturers ramp up their production. Indeed, the earthquake in Japan has also played a role with the first batch of Nissan Leafs made available in the UK coming from Japanese factories. As Nissan plants in Sunderland and Spain begin the manufacturer Leafs we can expect an increase in the supply in the market. The market choice is still somewhat limited with only a few different models made available that may not suit everyone’s tastes. As the variety of plug-in vehicles increases over the coming 18 months we can expect more consumer interest, market demand and therefore incentive uptake.
These factors may all account for a proportion of the slow initial uptake of the incentive grant but there is still a large elephant in the room. It’s taking the UK economy longer than expected to shrug off the effects of the global recessions. Indeed, the Bank of England recently downgraded its growth forecasts for the UK economy in 2012. The economy grew by such as low percentage in the first 6 months of this year it effectively stayed where it is. Buyers in what is still viewed as a bear market will be much less willing to take onboard the additional financial risks that plug-in vehicles represent. Until the overall economic environment starts to look more rosy I’m sorry to say my personally prediction of the uptake of plug-in vehicles will remain muted. I’d like to be proved wrong and that the incentive grant will act as a big enough pull to encourage consumers to make the switch to electric automation, especially when supply and choice increases, but I cannot see it happening anytime soon. A case can be made that, with such a large sum allocated to fund this initiative, perhaps increasing the magnitude of each individual grant to say £7,500 or even £10,000 could make a real difference. Automotive manufacturers wouldn’t like this however, such as large grant would create a large amount of distortion on the market and would provide too much of a competitive advantage to manufactures producing the first generation of mass market EVs. For the time being we’re going to have to wait it out and see if the situation begins the change but I wouldn’t bet your mortgage on it.
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