Saker: Lessons from China on hitting a target

AM's regular columnist Professor Jim Saker, director of the Centre for Automotive Management at Loughborough University's business school and president of the Institute of the Motor Industry, shares his thoughts about the risk of distress sales caused by governments that set short-sighted and disruptive targets to shift consumer habits.

There are definitely times when Governments should step in and influence what is going on in the economy. This should be done to address macro-economic issues such as inflation or unemployment.

They should also step in to try and balance inequalities and issues around poverty.

What doesn’t work is when politicians make arbitrary decisions that impact on business without any real thought as to the implications.

The obvious issue being debated is of the banning of sales of new ICE vehicles in 2030. Since its announcement I have been arguing that it makes no sense. Why 2030? Why not 2028 or 2035 or 2040?

I fully understand the issues of climate change and the need for C02 emissions to come down rapidly but for this to be achieved it has to be done by setting objectives and timelines that have a structured and resourced strategy to achieve them. This is self evidently not the case for the UK Government.

They have appeared to set a target which based on current performance they will not be in power to be held accountable when it is not achieved..

A number of industry leaders have started to question the viability of this as a target with Robert Forrester being quoted as saying ‘The ban on ICE vehicles in the UK in 2030 will have to move back 5 to 10 years.’ The interesting case is that if that happens by then EV’s may not be the best solution to address climate change.

Having lived through the Blair Government’s advocacy of diesel, only to have that reversed a decade later, is a lesson that should be learnt.

Perhaps one area that is worth looking at is the situation currently evolving in China. The Government have imposed a July 1st as the date for imposing stricter auto emissions standards.

This has put pressure on automakers and dealers to clear inventories of vehicles that do not meet the standard. SAIC Volkswagen Automotive Co. is offering cash subsidies for car purchases of $537 million which is one of over 40 car brands dramatically cutting prices.

To a large extent this is hitting the legacy brands and allowing the newer EV based brands to gain a dominant position.  

As China is the largest automotive market in the world both in terms of demand and supply with registrations climbing to 23.24 million units in 2022 a dramatic move like this has a domino effect on the rest of the global market.

China controls 95% of the battery production in the world including the supply of the raw materials. Its market growth last year was greater than the UK total car market. This drive to EV will suck in the raw materials into Chinese manufacturing leaving the rest of the world scrabbling for the resources. China might hit 2030 but I am not sure the UK has a chance.