Select Committee on Science and Technology Appendices to the Minutes of Evidence


APPENDIX 22

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.

INDUSTRY ACTION

  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 in output.

  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 FUELS STRATEGY GROUP

  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 transport system.

  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.

COMPETITIVENESS IN THE UK

  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 manufacturing.

  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 and development.

RESEARCH AND DEVELOPMENT

  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.

AUTOMOTIVE INNOVATION AND GROWTH TEAM

  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.

INFRASTRUCTURE DEVELOPMENT

  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.

GOVERNMENT SUPPORT PROGRAMMES

  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.

THE LOW CARBON VEHICLE PARTNERSHIP

  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 vehicle parc.

    —  Promote opportunities for UK competitive advantage.

    —  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.

GREEN PUBLIC PROCUREMENT

  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 carbon vehicles.

  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.

CONCLUSIONS

  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.

September 2002



 
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