Written evidence submitted by Axeon|
vehicles have clearly been identified as the most effective way
to de-carbonise transport in the short to medium term and are
therefore essential to the Government's ambitious climate change
indicates that consumers are far more likely to consider purchase
cost rather than long-term savings when buying a vehicle.
the electric vehicle market is to flourish, it is vital that the
Government acts to incentivise both businesses and consumers to
ensure that the cost at the point of purchase is reduced as far
as possible while the market is still in its infancy.
measures announced in the Budget to limit the financial burden
on drivers of conventional cars were an understandable response
to current economic circumstances, additional tax measures could
be taken to induce consumers to purchase electric vehicles.
1. ABOUT AXEON
1.1 Axeon is a leading UK technology business
which designs and manufactures advanced lithium-ion battery systems
for electric and hybrid electric vehicles (EVs and HEVs). Headquartered
in Dundee, Scotland, Axeon is the only UK-based high tech battery
1.2 Axeon has a proven track record; vehicles
powered by Axeon lithium-ion battery systems have driven well
over a million miles on the roads of Europe and the US.
1.3 We continue to invest in our UK-based R&D
centre to be at the cutting edge of battery technology, cost competitiveness
and product performance. We are currently working on several technology
development programmes, four of which are part funded by the UK
Government's Technology Strategy Board. As a result of this support
and collaboration with several other UK based automotive businesses
we are now winning significant orders for mainstream automotive
projects, which will give the UK a significant presence in this
rapidly growing new sector, and support the UK Government's objective
of developing green, high tech manufacturing businesses vital
to the UK economy.
1.4 As a spin-off to the original automotive
technology, Axeon is also looking at energy storage in the renewable
energy sectoranother important new industrial sector if
the UK is to meet its climate change targets.
2.1 We very much welcome the Environmental Audit
Committee's new inquiry into the Budget 2011 and green taxes.
We believe there is a long way to go before the transport sector
will be in a position to make its full contribution to the UK's
demanding climate change targets.
2.2 It is worth noting that at present low-carbon
vehicles do not pay Vehicle Excise Duty (VED) and if purely electric
do not pay Fuel Duty either. Hence, in the longer run, the loss
of the tax revenue presently raised by these two duties will require
the Government to give considerable thought to a different structure
of taxation in the transport sector.
2.3 However, in the shorter term, the issue of
achieving our climate change goals is essential to encourage a
critical mass of consumersboth in the public and private
sectorto switch to electric or hybrid vehicles for their
transportation. EVs have clearly been identified as the most effective
way to de-carbonise transport in the short to medium term and
are therefore essential to the Government's ambitious climate
2.4 Research indicates that a key inhibitor of
the growth of the EV market is cost. In general, the evidence
suggests that private consumers are less likely to take into account
the overall cost of an EV, which involves a higher purchase price
but lower running costs, when making decisions about purchasing
cars. Hence we believe there is much to gain by introducing measures
which reduce costs at the point of purchase.
2.5 Whilst we welcome commitments made in the
Budget 2011 to incentivise low-carbon company cars, we believe
that more needs to be done to stimulate the EV market. An attitudinal
survey conducted by the Department for Transport in 2011 found
that 55% of respondents supported higher taxes to try and stop
people buying cars with high CO2 emissions.
2.6 We have commissioned work, in collaboration
with others, in this area with a view to helping the Scottish
Government formulate its policies, and whilst we are not in a
position to send that document to you, we thought that it may
be of use to summarise its main conclusions. In the interests
of brevity, we have given only a brief summary of the measures
we believe would be helpful. If you would like more details, please
do not hesitate to be in touch.
3.1 While measures announced in the Budget to
limit fuel increases were an understandable response to current
economic circumstances, rising fuel prices will in fact do more
to encourage the uptake of electric vehicles. The Department of
Transport's January 2011 survey, Public Attitudes to Climate
Change and the Impact of Transport, noted that after purchase
cost, fuel costs are the most important cost when buying a car.
An increase in fuel duty could therefore encourage consumers to
switch to EVs. A report commissioned by the RAC Foundation in
January 2011 also cites evidence from both the UK and US that
increases in fuel prices result in a preference for fuel-efficient
vehicles and changes in driving habits. In response to the fuel
price peaks in 2008, followed by the global economic downturn,
the UK market has seen a marked shift to smaller, more fuel-efficient
cars, a trend which could continue to benefit the EV market if
fuel prices were to increase.
Company Car Tax
3.2 Measures to freeze Company Car Tax for low-carbon
vehicles and increase levies for more polluting vehicles from
April 2013 are welcome. Historically data shows that, until the
fuel price peaks in 2008, the Company Car Tax system was the main
incentive driving the reduction of new conventional car CO2
3.3 Extending the limit on the capital allowances
short life assets election is another welcome move for the manufacturing
industry. However, in addition, we would encourage the Government
to consider providing additional enhanced capital allowance
tax exemptions for business. This would extend the existing scheme
for low carbon cars until 2020, and widen eligibility to a larger
range of vehicles and recharging infrastructure.
Vehicle Excise Duty
3.4 The freeze in Vehicle Excise Duty rates for
cars emitting less than 95g per kilometre is a welcome measure.
However, anything that can be done to increase the price differentials
between adjacent bands for vehicle excise duty, which in turn
increases the financial benefit of EV ownership, would be a boost
for the EV market. Evidence suggests that VED is not (at current
levels) a sufficiently strong price signal to incentivise the
purchase of lower CO2 cars. If the band was larger
however, VED could be expected to have an impact.
3.5 A key recommendation would be the introduction
of a Feebate scheme, a revenue-neutral incentive programme involving
increasing the tax levied on the purchase of relatively high CO2-emitting
vehicles and providing rebates for lower CO2-emitting
3.6 In general, evidence suggests that private
consumers are less likely to take future reduced running costs
into account when purchasing an EV, instead prioritising the purchase
cost. Hence we believe there is much to gain by measures which
reduce costs at the point of purchase. Since the EV market is
still at an early phase, there is currently no second-hand market.
This means that when purchases are made, they are for brand new
vehicles. Consequently, a move to levy a registration tax for
new vehicles scaled on the basis of CO2 emissions could
also have a beneficial effect on the uptake of EVs. This measure
would involve increasing the "first year rates" for
high CO2-emitting vehicles to give EV buyers a financial
benefit of between £2,000 and £5,000.
4. WIDER RECOMMENDATIONS
THE EV MARKET
4.1 The Government to produce an Electrical
Vehicle Infrastructure Strategy setting out a clear vision
for the future and a strategy for the provision and roll out of
appropriate recharging infrastructure.
4.2 The Government to set technical standards,
specifications and regulations for implementing a recharging
4.3 A review of the possible market models
for recharging infrastructure and work with relevant stakeholders
to agree a market model identifying key roles and responsibilities
for energy providers, electricity retailers, EV manufacturers,
private infrastructure providers and the public sector; and pricing
and payment approaches; and customer interface requirements (single
or multiple points of contact).
4.4 The Government and local authorities to provide
funding for publicly accessible recharging points.
4.5 The Government and local authorities to incentivise
businesses to install recharging points. This would involve
engaging directly with the largest businesses with employee car-parks
to highlight the benefits of encouraging use of EVs rather than
conventional vehicles; by providing free advice; and by providing
match funding to "innovator" and "early adopter"
businesses wishing to install recharging points in existing parking
4.6 The Government to prepare advice for residents
on home recharging and guidance for electricians on the type
of facilities needed (including issues to be considered in communal
parking areas). Local authorities to disseminate information.
4.7 The Government to provide national planning
guidance on the provision of recharging bays and infrastructure
in local authority areas as part of a parking strategy which supports
wider sustainable transport objectives.
4.8 The Government to update building regulations
to set out minimum requirements regarding the provision of electrical
infrastructure and recharging points in new buildings.
4.9 The formulation of a Working Group to
address electricity generation and distribution requirements
4.10 Local authorities to work with existing
car club operators to introduce EVs into fleets and introduce
EV-based car clubs in other cities. This would involve local authorities:
engaging directly with existing car clubs to raise awareness of
EVs and their benefits; using car clubs instead of purchasing
their own fleet cars; procuring vehicles directly for car clubs
using their considerable purchasing power to lever favourable
purchase prices or lease contracts; investigating the feasibility
of working with manufacturers to set up a publicly funded electric
car share scheme.
4.11 Encourage manufacturers to offer alternative
ownership models to consumers in the UK by promoting the UK
as an attractive market for manufacturers, and engaging with manufacturers
to understand and influence their decisions about where to focus
their sales strategy.
4.12 The Government to provide subsidies up
until 2020 of at least £5,000 in the initial years with
the level of subsidy reducing as EV uptake increases.
4.13 The Government to introduce a targeted
scrappage scheme to encourage consumers to purchase electric
vehicles, with subsidies reducing as EV uptake increases.
4.14 The Government to provide grants for
purchasing second hand EVs from specified dealers, with subsidies
reducing as EV uptake increases.
4.15 The Government, local authorities and other
public sector organisations to support an earlier than average
switch to low carbon emissions vehicles for public sector fleet
vehicles (cars and vans) through procurement policies.
4.16 The Government to support and fund research
needed to enable rapid EV uptake.
4.17 The Government to lobby the EU to increase
the EU target for the emissions-intensity of new cars and vans
produced by manufacturers.
20 April 2011