Memorandum submitted by the Society of
Motor Manufacturers and Traders Ltd
1. The Society of Motor Manufacturers and
Traders Ltd (SMMT) welcome the House of Commons Science and Technology
Committee's inquiry into the UK research, development and demonstration
in non-carbon energy technologies. The SMMT is the leading trade
association for the UK motor industry. It represents some 600
member companies ranging from vehicle manufacturers, component
and material suppliers to power train providers and design engineers.
The motor industry is an important sector of the UK economy. It
generates a manufacturing turnover approaching £45 billion
and supports around 800,000 jobs.
2. The automotive sector recognises the
importance and is committed to reducing CO2 emissions.
It has acknowledged the importance of a shift to a low carbon
economy and is actively engaged in improving the performance of
its products and manufacturing processes. The drive towards a
low carbon transport system requires significant investment in
research and development not only to secure environmental improvements,
but also to ensure the long-term competitiveness of automotive
sector in the UK.
3. The motor industry has made positive
steps in reducing CO2 emissions and is committed to
significant reductions in the future . In a groundbreaking voluntary
agreement European vehicle manufacturers agreed to reduce average
new car CO2 emissions across Europe by 25% from 1995
level to 140 g/km in 2008. The SMMT estimates that this measure
will result in a saving of 14 million tonnes of CO2
in the UK, or 3.8 million tonnes of carbon. This would represent
over 15% of the UK Government's Kyoto commitment.
4. The latest available data indicates that
average CO2 emissions from new passenger cars are on
track to meet the European agreement. In the UK emissions have
fallen by 6.4% between 1997 and 2001. This is as a result of improvements
in fuel efficiency, growth in sales of smaller vehicles and an
increasing market share for diesel products.
5. The motor industry recognises its environmental
responsibilities and is making substantial investments in developing
cleaner vehicle technologies. Manufacturers are already making
available a variety of cleaner technologies including electric
hybrids, LPG and CNG powered vehicles. There remains significant
development potential for conventional technologies, particularly
diesel. The combination of fuel efficiency and advanced exhaust
treatments will give diesel technology an important role in powering
vehicles, particularly trucks, well into the future.
6. The industry is also making efforts to
reduce CO2 emissions from its production facilities;
Government figures indicate that between 1990 and 2000 the sector
reduced carbon emissions by 27%, despite significant increases
7. The SMMT successfully negotiated with
Government, a Climate Change Levy agreement on behalf of 11 vehicle
manufacturers in the UK. Participants are eligible for an 80%
discount on the levy in return for meeting challenging energy
reduction targets in production processes. The majority of companies
in the automotive sector, however, have been hit by the Climate
Change levy because of narrow eligibility criteria prevent them
from entering into a negotiated agreement with Government.
THE SMMT FUTURE
8. In 2001, SMMT member companies established
a strategy group to consider the future of automotive fuels and
recommend measures to encourage the development and take-up of
cleaner conventional and alternative fuels over the next 20 years.
The SMMT Future Fuels Strategy Group (FFSG) has developed a pan-industry
vision of the long-term future of automotive fuels. It has considered
the options for a fuels strategy within a 20-year timeframe in
the light of the simultaneous need for CO2 reductions,
emission control and security of energy supply.
9. The Group expects that in the short to
medium term the vehicle parc will be dominated by vehicles using
developments of existing fuels and technologies. These developments
will include a mixture of improved conventional fuels and technologies,
alternative fuels and hybrid technologies. In the long term, it
is the view of the SMMT that hydrogen produced from renewable
energy sources is currently the only carbon free fuel available
to us that can offer the prospect of a sustainable, low carbon
10. The move to hydrogen will not be a single
step but a long-term and evolutionary process. Whilst hydrogen
technologies are being developed and commercialised, other technologies
will continue to be developed or improved to supplement and extend
conventional fuels and improve emission levels.
11. The UK automotive manufacturing base
has historically been strong and durable with a tradition of quality
and excellence. The development of the low carbon economy will
have a major influence on the future of the sector as a whole
and automotive manufacturing in particular.
12. A stable economy, low levels of corporate
taxation, a flexible and skilled labour market and a competitive
exchange rate will continue to be the main factors determining
profitability and decisions on future investment. In the medium
and longer term the UK's future share in the development and production
of clean and alternative fuel technologies will depend critically
upon the capabilities of the automotive supply chain.
13. The transition to a low carbon vehicle
parc will require heavy investment in new technology and engineering
capabilities. To be among the leaders in developing new technologies
the UK needs to host engineering and scientific centres to both
develop these technologies and ensure their evolution into volume
14. A highly trained workforce at all levels
of the automotive industry has to be equipped with the key skills
needed for the low carbon transport future. A recent study commissioned
by the Department for Education and Skills (DfES) has reported
on the British and German automotive components industries. This
highlighted the higher educational standards of employees within
German component suppliers and the greater focus on product design
15. To ensure that the UK supply chain is
best placed to meet the demands of the low carbon economy it is
important that the Government helps create an environment that
attracts research and development expenditure into the UK. Research
in the automotive sector has seen strong growth since 1995, spending
£1.06 billion in 1999 and employing over 12,000 people specifically
on automotive research. 87.5% of these were involved in developmental
research with 12% on applied research. This demonstrates that
the industry has recognised R&D as crucial in enhancing a
viable vehicle and components manufacturing base.
16. The SMMT has supported the measures
introduced by Government to promote R&D, particularly the
R&D tax credits announced in the April 2002 Budget. Further
measures are required and the SMMT would encourage the Government
to consider the removal of duty on automotive fuel that is used
solely for research and development as well as for testing. This
would signal the Government's support and provide an incentive
for manufacturers to develop and utilise research, development
and testing facilities in the UK.
17. The importance of the low carbon economy
and ensuring that the UK automotive sector was equipped to retain
its competitiveness was a key feature of the Automotive Innovation
and Growth Team (AIGT) report published in May 2002. The AIGT
was established by the Secretary of State for Trade and Industry
and lead by Sir Ian Gibson CBE. It drew together industry leaders,
civil servants, academics and representatives of environmental
and consumer organisations. Its aim was to identify key trends
for the sector and actions to ensure that the UK remained an attractive
location for the global automotive industry.
18. The AIGT made seven main recommendations
these included calls for the establishment of an automotive academy
to support the development and promotion of process improvement
and new product introduction techniques. In addition it called
for the refocusing of the Foresight Vehicle programme to encourage
greater commercial exploitation and establish competitive advantage
for the automotive sector in the UK.
19. It recommended that two centres of automotive
excellence and development were established to build a base of
knowledge and expertise in low carbon and fuel cell technologies
and Transport Telematics and technologies for sustainable mobility.
There was also support for the establishment of a Low Carbon Vehicle
Partnership, as proposed in the Government's Powering Future Vehicles
strategy, and a pilot mobility project to accelerate the uptake
of low emission vehicles and explore alternative approaches to
providing urban mobility.
20. The AIGT report was endorsed by the
Prime Minister and the Secretary of State for Trade and Industry.
The DTI Automotive Unit has been given the task of implementing
all the recommendations made by the AIGT. The Unit has made progress
producing an outline implementation plan with the expectation
that significant progress should have been made by early in 2003.
21. The uptake of low carbon vehicles by
consumers is intrinsically linked to the availability of alternative
fuels through an appropriate refuelling infrastructure. The LPG
experience has shown that introducing a new fuel requires all
stakeholders to make their contribution to guide the consumers'
choice. The investment and commitment by vehicle manufacturers
to develop clean and low carbon vehicle technology must be matched
by that of the energy sector to provide low cost and accessible
fuel. Planning authorities have a key role in facilitating the
development of an accessible refuelling network. What is needed
is a consistent interpretation of planning guidance by local authorities,
while Government together with the sectors involved should develop
common EU standards for the new refuelling systems.
22. The UK Government supports research,
development and demonstration of cleaner vehicle technologies
through a number of programmes. These include the Foresight Vehicle
Programme, Powershift Programme and the New Vehicle Technology
Fund. These programmes are important in supporting the development
of markets for cleaner vehicle technologies and creating synergy
between academia and industry.
23. These programmes were not specifically
designed to accelerate the transition to a low carbon transport
system. The publication of the Government's Powering Future Vehicles
strategy highlights the need to ensure that these programmes are
co-ordinated to ensure maximum value and that there is a coherent
link for technologies from pre-competitive development, through
in-vehicle demonstration onto positive consumer incentives.
24. The SMMT considers that the DfT and
DTI should work closely to review the priorities and links between
these programmes and to ensure that they are fully geared towards
supporting the Government's strategy of promoting a low carbon
transport system and UK competitive advantage.
25. The SMMT fully supports the creation
of a Low Carbon Vehicle Partnership to promote the transition
to the low carbon transport system. The SMMT believes the Partnership
should involve a broad base of stakeholders with representation
from Government, the automotive and energy sectors, local authorities,
as well as consumer and environmental organisations.
26. The Low Carbon Vehicle Partnership will
need to be a long-term project with formal links to the four departments
involved in the strategy, and should oversee the draft strategy's
implementation. The Partnership should have close links with the
ministers responsible within the four departments and should have
a dedicated secretariat and sufficient budget to deliver its objectives.
27. The Partnership should elaborate on
the work of the Automotive Innovation and Growth Team (AIGT) to
compose dynamic and forward thinking approaches to the development
and uptake of low carbon vehicles. The remit of the Low Carbon
Vehicle Partnership could include the following:
Monitor progress of the low carbon
Promote opportunities for UK competitive
Identify R&D priorities.
Co-ordinate and advice on
priorities for Government initiatives and programmes.
Assess barriers to the take-up of
low carbon vehicles.
Provide information and advice on
market incentives for low carbon technologies.
Provide information and advice to
consumers on new low carbon technologies.
28. The automotive sector has brought to
market innovative low emission technologies, but continues to
find it difficult to build sustainable markets for these products.
The Government, its agencies and local authorities represent significant
markets for new vehicles. The purchasing policies of public sector
bodies should be used to encourage the take up of clean and low
29. Experience suggests that the opportunities
that these markets represent have yet to be fully exploited. Currently,
financial incentives to shift fleets to cleaner technology are
not available to government departments and their agencies and
efforts by local authorities are limited by the additional costs
associated with cleaner vehicle technologies.
30. The SMMT would like to see public procurement
being used to ensure that the UK is at the forefront of the move
towards low carbon vehicles. Using green fleet management and
demonstration projects would help lay the groundwork for a wider
market for this technology and enhance the competitiveness of
the UK industry.
31. The automotive industry is aware of
the need to move towards a low carbon economy. It continues to
make progress in reducing emissions from its own processes and
products and is actively engaged in developing future technologies
to seek to meet society's aspirations.
32. The importance of investment in research,
development and demonstration of low carbon vehicle technologies
is well understood by the global automotive industry. The work
by the AIGT has highlighted the importance of ensuring that a
greater proportion of this work is undertaken in the UK to ensure
the long-term competitiveness of companies based here.
33. The Government has signalled its support
for research, development and demonstration expenditure by providing
for the favourable treatment of such expenditure for tax purposes.
It is important that further efforts are made to make the UK an
attractive base for R&D expenduture.
34. The future challenges of delivering
and commercially exploiting moves towards a low carbon economy
require a highly skilled work force. There are indications that
the UK compares less favourably than some other countries in respect
of the proportion of employees with recognised qualifications.
35. There are Government support programmes
for research, development and demonstration of advanced vehicle
technologies. These need to be more clearly focused on projects
that will deliver competitive advantage for the UK in progressing
the low carbon agenda.
36. The Government has recently published
its Powering Future Vehicles strategy and indicated that it will
implement the recommendations of the AIGT report. These developments
indicate that Government and industry are broadly aligned in terms
of the objectives of moving to a low carbon economy. It will be
important to ensure that the various commitments that have been
made are delivered in a timely fashion.