Transport Committee - Plug-in vehicles, plugged in policy? - Minutes of EvidenceHC 239

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House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Transport Committee

Low Carbon Vehicles

Tuesday 12 June 2012

dr Keith Bevis, Professor Richard Folkson and Dr Nigel Berkeley

Paul Everitt, Ian Allen and R Graham Smith OBE

Norman Baker MP

Evidence heard in Public Questions 1 - 118

Oral Evidence

Taken before the Transport Committee

on Tuesday 12 June 2012

Members present:

Mrs Louise Ellman (Chair)

Steve Baker

Jim Dobbin

Kwasi Kwarteng

Mr John Leech

Paul Maynard

Iain Stewart

Julian Sturdy

________________

Examination of Witnesses

Witnesses: Dr Keith Bevis, Managing Director, EValu8 Transport Innovations Ltd, Professor Richard Folkson, Fellow, Institution of Mechanical Engineers, and Dr Nigel Berkeley, Director, Applied Research Centre in Sustainable Regeneration, Coventry University, gave evidence.

Q1 Chair: Good morning, gentlemen. Welcome to the Transport Select Committee. I would like to start by asking if you could each give your name and the organisation you are representing. This is to help our records.

Dr Berkeley: My name is Dr Nigel Berkeley. I am from Coventry university.

Professor Folkson: I am Professor Richard Folkson and I represent the Institution of Mechanical Engineers.

Dr Bevis: I am Dr Keith Bevis. I run EValu8 Transport Innovations Ltd, running Plugged-In Places in the east of England.

Q2 Chair: Could you tell us what role you think plug-in vehicles should play in reducing carbon emissions from road transport? What could they achieve? Who would like to start on that one?

Professor Folkson: I will lead off. Electric vehicles definitely play a role because we need to move to a fossil fuel-free form of transport in the future. My perspective is that they are an important enabling technology but we should not assume that they are the only technology. We should not back a single winner. There are lots of other technologies that can also play a role in decarbonising transport. The way I always express it is that, rather than having electric cars, we will have an increasing electrification of cars, and all cars will have some degree of electrification, be it from a stop-start micro hybrid all the way through to a fully electric vehicle. There will be lots of shades of these and different vehicles will suit different consumers in different ways depending on their usage. The affordability of those technologies is critical.

Q3 Chair: Does anybody else want to add to that or have a view on it?

Dr Bevis: One of the areas where they can help, particularly at the moment, is in reducing the amount of pollution in city centres. For a lot of the regular stop-start traffic that we have in cities such as white vans, taxis and that sort of traffic, which is continually producing pollution, changing some of that to EV reduces that.

Q4 Chair: The Government say that they expect to see tens of thousands of plug-in vehicles on the roads by 2015. Do you think that is realistic?

Dr Berkeley: Personally, no. I think that is very optimistic given the current level of demand. There is a huge problem. Although the willingness is there from the industry, the technology is there and electric vehicles have become more and more available, although product choice is still limited, consumer demand is still lagging way behind.

Q5 Chair: What role do you think the plug-in vehicles could play?

Dr Berkeley: I have been part of the CABLED consortium of demonstrator electric vehicles in the west midlands region. The evidence we have there from the completed trial, from the drivers, is that these electric vehicles are very much a viable alternative to urban commuting and a very good solution. The evidence is that driving patterns are no different from what people’s normal daily commutes are with standard internal combustion engine vehicles.

Q6 Chair: Do you think the Government should do more to support this? Is there more that could be done?

Professor Folkson: Government play an important role in enabling it. Affordability is such a key issue that we won’t get to a future state without some level of intervention and support. The problem in terms of affordability is that the batteries are so expensive-and they are going to stay expensive for some time in the future until volumes become very significant-that it is not a good rational economic case for consumers to switch to an electric vehicle at the moment, particularly if the vehicle is not used a lot. We were having this discussion outside. If you use an electric vehicle a lot in a fleet to do a high mileage, then you will save, relatively, a large amount of money in fuel, diesel or petrol. But if you are a typical user, only doing 12,000 miles a year, you only spend about £1,500 a year on petrol or diesel. That is, relatively, a small amount of money, particularly spread over the life of the car compared with the very much greater cost of an electric car’s purchase price.

Dr Berkeley: I would argue that, yes, the Government could do more to stimulate demand, particularly in terms of public awareness and public education around what EVs can do for drivers. There is too much emphasis on electric vehicles as a kind of solution to the planet’s ills and fuel security, whereas the evidence suggests they are decent cars as well. We should be promoting that more and educating drivers using the disseminated results we are getting from the demonstrator trials that the Government have funded. I was going to say something else, but it has slipped my mind.

Dr Bevis: The other obvious thing that the Government could do is use them. Nothing works better than a good example. We can see examples across Europe. Estonia gave an electric vehicle to all its social workers, which put them into the public arena1. I am not arguing that particular case, but certainly there are areas where we use vehicles for public activity with a high mileage in a fleet application. If Government were to push local authorities to take up electric vehicles and support that, it would definitely show the way for the public to follow.

Q7 Chair: You are talking about a mixture of promotion and financial support.

Dr Berkeley: The plug-in grant is currently set up in such a way that the subsidy is really ineffective because the price is still too high. All you are doing is benefiting those people who could afford the vehicles anyway. I would argue that the people who are currently buying electric vehicles do not need the subsidy because they can afford it without the subsidy. Maybe we have to look at different patterns and encourage people. Using subsidies against leasing might be an alternative rather than purchase. Is purchase the only option?

Q8 Paul Maynard: So far we have 1,400 vehicles registered that have been obtained through this grant. We have spent tens of millions of pounds on a national network of recharging facilities, which are not interoperable and which face private competition, which are arguably more attractive to some people. How can we say that this is a sensible and good use of public money when customers do not seem to want to purchase the goods? Are the customers wrong?

Dr Bevis: There is a chicken and egg situation with electric vehicles. You either have to provide an infrastructure for people to buy cars and use them or allow people to buy cars worrying that there is no infrastructure. It will be wrong whichever way you do it. The solution that we have chosen is to build an infrastructure ready for the cars. You make a very valid point about interoperability. The fact that we can even say the word shows that we use it a lot.

Q9 Paul Maynard: That is something, yes.

Dr Bevis: However, if you dig underneath, you will realise that as of last week, with ourselves and east of England and the midlands, we are now allowing roaming, which is a more friendly word. We are talking with London, and by the end of September we will be roaming there as well. The various groupings are coming together to make it easier for the drivers. What is also happening is that the commercial sector is talking to the Plugged-In Places groupings to allow roaming across those areas. We are doing the activity of beginning to break that failure in the market by putting some infrastructure in place and encouraging the commercial sector to come in and build.

Q10 Paul Maynard: Given that the private sector is now making investment, particularly in London, I gather, with NCP car parks, where you tend to find plug-in places, was there a need for the Government to invest this £30 million in these eight pilot areas? Until recently none of them seemed to be talking to each other. Greater Manchester has no plug-in points so far, according to the DfT’s evidence.

It does seem to have been, as an example of Government spending-what is the polite term for it?-an absolute fiasco, particularly given that, parallel to that, the private sector has shown an ability to provide the plug-in points where people want to use them and need them. Is there any evidence as to which has been the most effective of the eight different regions in terms of people actually using them as opposed to spending Government money?

Dr Bevis: I think we are only just beginning to get the evidence on people using them-I will admit that-because we are gradually bringing that data together. The part of the evidence that we do have is that putting an electric charging point in a street or a car park is a lot more difficult than it would appear to be. The one thing that we have done is tackle all the problems involved in doing that so that, as the commercial sector comes in, we are talking about an industry that understands how to do it. Previously, if we had electric vehicles, we would be struggling with those issues. We have brought those issues to the fore in order to tackle them and share with Government how to do it and how to help local authorities as well.

Q11 Paul Maynard: We have evidence from a company called Thriev, which I think is pronounced "Thrive" but it is spelt wrongly, who say that in London there is a target in 2013 to have 1,300 public infrastructure charging points to refuel the London target of 100,000 plug-in vehicles. Most of these public points are slow charge. They say it would take 20 days of back-to-back charging to refuel this target fleet. How have Government allowed such an incomprehensible, over-optimistic and wacky system to emerge that simply cannot do what it was supposed to do? What has OLEV actually done? What value has it added, if any, to this process?

Dr Bevis: If we talk about electric vehicles in particular, one of the problems we have at the moment is that their range is not fantastic. A 100-mile range is typical. People are worried, if they travel somewhere that is 45 miles, whether they have enough energy to get home. Part of the Plugged-In Places has also introduced home charging. From the CABLED project, we already know that people will be more inclined to charge electric vehicles at home if they have those facilities. Therefore, the charging on the street or in a car park is more about topping up the extra 10 miles rather than charging a battery from zero.

Q12 Paul Maynard: Was that your understanding at the start of the project or have you learned that?

Dr Bevis: We have learned that home charging is more important than we thought, but we had included it at the start of the project.

Dr Berkeley: I will add to that because what Keith has just said is important. During the CABLED trial we found in the west midlands region that the drivers very much welcomed the public charging infrastructure as a kind of comfort blanket. It was not necessarily something they would use to recharge the car completely. You would use your home charger or your workplace charger, but you know then you have the added comfort and security that the public charging is there if you were short of juice on the way home and needed it and could charge your car up. I do not think it was ever anticipated that you would use that for full charging.

Professor Folkson: I think that answers Paul’s question, but the other important point to make is that it is very much chicken and egg, as Keith said. I do not think you would get people to buy the cars unless they had the confidence that there is somewhere to charge them if they are worried they are running out of charge. Therefore, we have to start somewhere and that is the role that OLEV has provided.

Paul Maynard: Some chicken and some egg.

Q13 Chair: It is about the infrastructure being there.

Professor Folkson: It is.

Q14 Mr Leech: How important is the issue of confidence, both with the consumer and the industry itself? There is the whole issue about people not feeling that they will be able to find somewhere to recharge their vehicle and they cannot go the distances that they need to on a single charge. How much is the problem to do with people thinking, "We are not quite there with electric vehicles and, rather than my next car being an electric vehicle, the one after that will be an electric vehicle, because the industry will have got us to that stage"?

Dr Bevis: That is a really good question.

Q15 Mr Leech: The flipside of that in terms of the industry is how much is the problem with confidence within the industry and that by the time we are at a stage where vehicles are affordable and people want to buy them, and people are buying them, there might be another technology on the way which will be much better than electric vehicles?

Chair: Professor Folkson, you look as if you want to answer. How do we get the confidence that is required for people?

Professor Folkson: People are worried about buying electric vehicles for a number of reasons. They are worried about the residual value at the end of their life-how much they will get when they sell the car. That is a very big unknown with electric cars, particularly when the battery may need to be replaced at some point during the life of the vehicle, which could cost more than the car is then worth. There are big confidence issues about the value of the product.

Q16 Mr Leech: What is the rough cost of a battery as a proportion of the vehicle?

Professor Folkson: It is about half. If the car is about £30,000, which is fairly typical for a vehicle with a subsidy, the battery will be £15,000 to £20,000. It is very significant. If it only lasts 10 years, you could end up having to buy a new battery at the end of 10 years. In 10 years the batteries could be cheaper. They will be somewhat cheaper but that is the unknown. That is where the confidence issue comes in. People do not know how much it will cost for a new battery once it is out of warranty, which is probably at 10 years.

Q17 Mr Leech: What about the industry itself worrying about putting vast resources into the technology and then someone coming along with something that is better?

Professor Folkson: The industry is committed to putting a lot of resources into that. There are plenty of examples of just about every company around the world working on EVs and other technologies. The problem I see is that the other technologies are getting better just as quickly as the EVs are getting better. Internal combustion engine technology is improving. The carbon emissions from petrol and diesel engines will continue to get better and better year over year. The cost gap in terms of operating a petrol or diesel engine compared with an EV will continue to stay the same as it is. That is one of my worries.

Q18 Mr Leech: I do not mean this as it might sound, but is there a danger that we are wasting our time with electric vehicles at this point and we should be looking at something further in the future?

Professor Folkson: No, I do not think we are wasting our time.

Q19 Chair: Dr Berkeley, you are shaking your head.

Dr Berkeley: I would not agree with that. In terms of confidence, going back to my earlier point, maybe something we could do in the interim is to encourage different modes by which people can access electric vehicles rather than just straightforward purchase. If cost and uncertainty is the issue, why not offer different alternatives such as leasing so that people can lease cars and use the subsidy to offset lease costs? Going back to Richard’s point about using them for fleets as well, you would get them out there into the market at a time when you cannot stimulate purchase.

Q20 Steve Baker: There are so many things to ask that it is hard to know where to begin. Professor Folkson, earlier on you mentioned the £1,500 per year average cost of petrol. That is the pump price you will have used, is it not?

Professor Folkson: Yes.

Q21 Steve Baker: I know you are a humble engineer like me, but, when you do economic analysis and you compare these technologies, do you use the underlying economic cost or, if you like, the end cost, including all Government subsidies and taxes?

Professor Folkson: We do it both ways. I do it as a simple engineer very simplistically to try and look for a high side for EVs. When I did the analysis, I took the pump price, including the taxation element, looked at the average usage and compared that with the price of buying an electric car if the electricity is free over its entire usage, so you do not pay anything for the fuel in your EV and you pay the pump price for the petrol or diesel. With the £5,000 grant, it takes five to six years to break even if you do not pay anything for your electricity. Without the grant, it is more like 10 years to get to a break-even point with an EV. That is part of the problem.

Q22 Steve Baker: But that was the pump price of fuel. If we took off the tax, it would be about a third, so that would triple all those numbers.

Professor Folkson: Yes. I assumed £1.50 a litre.

Q23 Steve Baker: The whole thing is economically and utterly irrational without the subsidy.

Professor Folkson: That is partly because I have assumed 12,000 miles a year. If we looked at fleets, who are doing more like 30,000 to 40,000 miles a year, that whole equation would change very significantly. The problem is that targeting private individuals doing relatively low mileage is not such a good economic case for subsidy as larger fleets doing much higher mileages.

Q24 Steve Baker: Have you done any analysis on the comparative cost per mile of the infrastructure? I will try and explain what I mean. We have talked about putting in home charging points or parking charging points to get 10 miles of range. How much does it cost per mile of range gained to put in the electric infrastructure compared to having a petrol station, say?

Professor Folkson: That is a good question. We have not done that analysis on infrastructure costs because the petrol pumps are already there. We have a 100-year-old infrastructure now, effectively. You could argue that we have an electrical distribution infrastructure that is already there, but with the Plugged-In Places pieces-the new bit that we are trying to add on to it-I have not done that analysis.

Q25 Steve Baker: I would be really interested if you did. Dr Bevis, just picking up on some of the things you were saying earlier about the chicken and egg problem, how did the petrol station network emerge?

Dr Bevis: I am probably the oldest member here, but not that old.

Q26 Steve Baker: Did it not just emerge spontaneously in society because people wanted them to go with their very convenient and attractive petrol engine vehicles?

Dr Bevis: Yes, but the cars were also coming out as a small introduction to society, whereas at the moment we are dealing with a mass car market and trying to introduce a number of electric vehicles into it.

Q27 Steve Baker: But isn’t the key difference that people wanted the petrol engine cars at the time, whereas now I think Dr Berkeley said that consumer demand was lagging, which I automatically just translated to mean that people do not want these? What we are saying is that we are trying to get everybody in society to make a transition that they do not want to make that is extremely expensive and they are just not doing it. Is that what we are saying?

Professor Folkson: That is an interesting question: where did petrol stations come from? If you look at the very early origins of cars, they ran on wood alcohol, which was effectively biofuel, purchased from the chemist in a bottle. It was only as the car expanded to become a means of transport, rather than a rich person’s toy, that the industry decided it needed to find a new and more plentiful supply of the energy it was putting into these vehicles. The petroleum industry emerged as another source of fossil fuels to wood alcohol. Then it started distributing it through a pumping process and petrol stations took off. Originally it was literally a bottle of fuel that was purchased from a chemist’s shop.

Q28 Steve Baker: To wrap all of this up, because I realise the Chair will want to move on, earlier on when the term "market failure" was used and bearing in mind some of these factors we have talked about, rather than market failure, is it not a public failure just to obey the Government and do the things that Government want?

Dr Bevis: Your choice, yes.

Q29 Chair: Mr Baker’s question to you was: is it the case that it is thought that people ought to do this but actually they don’t want to or they are not doing it? Is that a correct analysis of where we are?

Dr Bevis: I think that is a correct analysis, because until people understand the need for it-at the moment, so long as we have plenty of petrol, there is no particular need for it, and, so long as we are not concerned about pollution and tailpipe emissions, there is no particular need for it-as companies have responsibilities for the environment and begin to look at their fleets and how they can reduce their carbon footprint, then they will begin to understand that this is part of the solution. We are probably providing a solution before the public in general understands the need for it.

Q30 Steve Baker: I want to make one more point. I have tried to make this case with a degree of humour to try and soften it a bit. When I am listening to this, what I hear is that any of this only matters if the carbon dioxide issue is an existential threat to society and to humanity. Perhaps it is not a question for you, but why can’t we just be honest then and say we should just use naked power to make people get off petrol and carbon? Is it going to work trying to do it gently, to incentivise and pretend that there is freedom, or should we just abolish freedom and force people?

Chair: Please don’t answer that. It is the general thrust of the question.

Dr Berkeley: That assumes that people are wedded to petrol as a means of driving their vehicle. Surely if the choice, the range of cars and the performance was there, it would not matter to people what was powering their cars. As long as it offered them the same choice, the same comfort, the same experience and the same security, it would not matter. The problem is trying to raise the confidence of consumers that these things are as good as the petrol alternatives, which at the moment they are not, but it is getting there. It is about education, as I said before, and using the evidence we have from trials that have happened all over Europe and the world to demonstrate what electric vehicles can do. They are not milk floats like they were 60 years ago. There are some very good electric vehicles out there.

Professor Folkson: But people are wedded to personal transportation. That is Henry Ford’s quote. They are wedded to personal transportation and any Government that tried to mandate that you had to go for a much more expensive form of personal transportation than your alternative choices would have difficulties at the ballot. That is the difficulty.

Chair: That is the answer to your particular question.

Q31 Iain Stewart: I would like to go back to one of Professor Folkson’s earliest comments that wholly electric cars are only going to be one part of an electrification of vehicles. Given all the concerns and worries that have been expressed about ranges and the cost of it, should we not be focusing more on the hybrid vehicles? Those will attain quite a sharp reduction in emissions but without betting the farm on one model.

Professor Folkson: It depends on the usage by the consumer-how far they travel and what their pattern of usage is. I personally believe that the Vauxhall Ampera, which is a series hybrid, is going down the right route. We will end up with vehicles that have a combination of highly efficient small internal combustion engines when you need them but an electric vehicle operating mode if you do not need to go too far, which can be carbon-free for a lot of the car’s operation. The balance for the vehicle manufacturers is how much of it is internal combustion power and how much is battery power, given that the batteries are still very expensive in the Ampera. How do you manage that mix? Different consumers will have different requirements for that mix of fossil fuel versus electric energy. I hope I have explained that clearly.

Q32 Iain Stewart: What I am trying to get at is that, instead of spending all the money on putting in the charging network and the subsidies for buying wholly electric cars, would it not be a better use of the money to use that in helping the manufacturers to invest in the hybrid technology? You would have a range of vehicles to meet the different consumer needs.

Dr Berkeley: In the short term, that might be a good solution. If you look at the US model, where obviously the driving patterns are a lot different, hybrids are certainly the way forward. Maybe as a short-term solution that would be a sensible option.

Q33 Iain Stewart: Why aren’t we doing it then?

Chair: Dr Bevis, do you want to tell us why?

Dr Bevis: Looking at research money that has been put into transport, it is going into a number of developments. It is up to us as researchers to come up with those proposals, working with the vehicle manufacturers. Looking particularly at the Ampera, because we have had lots of studies on it, the new technology underneath the bonnet is frighteningly advanced. There are good things happening, but there is still a place for the basic electric vehicle for levels of transport that are fairly low mileage. From the CABLED project, if we look at people’s use of vehicles, more than 80% of all our car driving is less than 30 miles a day. A pure battery vehicle does actually deliver the goods.

Q34 Chair: Is the public money going into the right areas?

Professor Folkson: To answer Iain’s question about whether that money should go to the vehicle manufacturers, having come from a vehicle manufacturing background, the amounts of money spent on product development by all the companies are mind-boggling. The amount of Government money that is going into this project, although it may sound a lot in UK terms, is relatively small compared with the total spent globally on vehicle development by all the manufacturers. I am not sure it would make enough of a difference globally to influence the products.

It is more important for Government money to go into incentivising the right consumer behaviours. Rather than saying, "Buy an electric car", you want money that incentivises people to buy a car with the minimum carbon footprint and measure it in a different way as opposed to saying you get a grant if it is an electric vehicle that meets these criteria. I am not sure that is the best way to spend the money. Incentivising consumers to spend their own money in the right places is probably the best use of the Government incentives.

Q35 Iain Stewart: I have a final technical question. At the moment the maximum range for an electric vehicle is about 100 miles.

Professor Folkson: Yes.

Q36 Iain Stewart: Are we likely in the next few years to see a step change in that? Is there a battery in the market that is going to double or triple that?

Professor Folkson: No. It is really about the balance between the size of the battery and the cost of the battery. If you want more range you add weight, which means that you need an even bigger battery to go further and you are on an exponential curve that makes it more expensive. It is going to be very difficult to get longer-range batteries. If anything, we might learn from experiences like CABLED to say that we don’t need 100 miles really; 70 is adequate and we can produce lower cost electric cars with smaller batteries that are perfectly adequate once we have educated the consumers to use them in the right way and have the confidence in them.

Q37 Jim Dobbin: Professor Folkson was talking about incentivising the public to go down this route possibly. How does that fit into different Governments’ view that we should be trying to take motor vehicles off the road and use rail or other forms of public transport?

Professor Folkson: It gets back to my point that people view personal transportation as a right these days. It would be very difficult to convince them otherwise. The rail network is already fairly well utilised near to capacity. I do not think you are going to make a quantum shift to get people off the roads in a way that is going to make a really significant difference.

Q38 Jim Dobbin: In which parts of the country is there more electric vehicle use? Have you any idea about that or is it evenly spread?

Professor Folkson: London is certainly the biggest.

Dr Bevis: London is the biggest. In terms of registrations of plugged-in car grant cars, 50% of those cars are in London, the east of England or the midlands almost exactly.

Professor Folkson: That is where the Plugged-In Places activity and trials have been focused.

Q39 Chair: Does the usage reflect where the plug-in facilities are?

Dr Berkeley: Yes, and where the TSB-funded trials have been taking place as well.

Q40 Jim Dobbin: Does that have something to do with the wealth of the different parts of the country?

Professor Folkson: It is more to do with trials and incentives. You do not pay the congestion charge in London; that is what has driven the usage there. One of the points I wanted to make is that the numbers are still tiny compared with any other vehicle use. If you are going to reduce carbon, you have to get to very large numbers of cars. The world produces about 50 million cars a year, which is a mind-bogglingly big number. If we made a 1% improvement to that 50 million cars, it would have vastly more impact than a 50% improvement in the performance of electric vehicles. It is about numbers. We need to get to big numbers of cars and at the moment the numbers are really trivial.

Dr Berkeley: The market share is 1.1% at the moment.

Q41 Julian Sturdy: Where do you see electric cars in 10 years? We are not talking about hybrids. We have already had questions on hybrids from Mr Stewart and that was a valid point. Where do you see electric cars in 10 years or the role of electric cars in 10 years?

Professor Folkson: I think they will be more mainstream. They will not be quirky but accepted as a perfectly viable alternative to an internal combustion engine for some consumers. My worry, and I think it gets back to Dr Berkeley’s point, is that they are likely to be bought by affluent consumers who want them because they want them anyway irrespective of the economic considerations-

Julian Sturdy: As a second vehicle.

Professor Folkson: -as a second car, and they are going to become second cars. They will make excellent second cars where you can choose to use them on the short journeys where range is not an issue, and you will have your more expensive luxury internal combustion engine car to go on longer distances and take the family on holiday or whatever. I think they will tend to migrate to second cars in affluent families. That is how I see the market growing.

Q42 Julian Sturdy: I do not disgree with you on that point. Listening to the debate so far, we have talked about the capital cost. We have talked about very high depreciation values and a 10-year life cycle with the battery. That means basically that straight electric cars pretty much have no second-hand value. Am I correct in that?

Professor Folkson: Yes.

Q43 Julian Sturdy: That is going to limit them to certain consumers. We have also talked about electric cars not being the panacea or silver bullet to solving emissions problems. Everyone so far has agreed on that. My point is whether we should be investing solely in electric cars if you say they are going to be a second car to affluent consumers who can afford a hybrid car, but they will also have a luxury second car, just to do the short journeys, when new technology such as hydrogen technology could be potentially coming down the line in 10 years. Are we basically wasting our time and money on electric cars in the short term when there are going to be other technologies moving forward? I take Mr Stewart’s point about hybrid cars because that is a different point. I am talking about purely electric.

Professor Folkson: You make a very good point about hydrogen because actually hydrogen cars are electric cars. Hydrogen is likely to be used in fuel cells and you need all of the electric car technology for the control systems, the motors and the propulsion unit. They will be the same in a hydrogen-powered car and it has a battery. The hydrogen fuel cell charges up the battery, albeit a much smaller one. Electric cars are a necessary stepping-stone technology towards the hydrogen economy as well. That is probably the strongest argument for saying that we are not wasting our time on electric vehicles. If we want to get a long way in the future, maybe 50 years hence-and where the hydrogen comes from is another big question-electric vehicle technology is a necessary stepping stone to help develop those follow-on technologies.

Q44 Chair: Would anyone else like to comment on that?

Dr Berkeley: I agree with that point. The hydrogen technology is still a long way off in terms of mass deployment. Convincing consumers over hydrogen is going to be a pretty tough job as well in terms of their fears over security with hydrogen. That is quite a difficult task in itself. In the short term, I do not see that the investment being made into alternative technologies is sensible.

Dr Bevis: I agree with the points already made.

Q45 Julian Sturdy: If I could come back on that point, I do not disagree with what you say, but should we not be using the hybrid cars as that stepping stone, rather than pure electric?

Professor Folkson: This is where it blurs and why I prefer the term "electrification" of cars rather than electric cars. Hybrids are another form of electric car, but they happen to have an internal combustion engine as well.

Q46 Julian Sturdy: We are not talking about a Government subsidy on the hybrid cars, are we?

Professor Folkson: You have it on the Vauxhall Ampera, which is a series hybrid. It is a very blurred division between hybrids and electric. That is correct; that is how it is going to develop over the coming years.

Q47 Mr Leech: I want to pick up on a couple of things that Professor Folkson said and hopefully suggest that the Government’s money has not been wasted perhaps as much as has been said already. You said that you think in 10 years electric vehicles will be more mainstream. Would electric vehicles be more mainstream without this Government initiative?

Professor Folkson: I believe it will go slower because of the affordability issue, and, as fewer people can afford them, fewer will buy them.

Q48 Mr Leech: Regardless of how much money has been spent, it is a step in the right direction, albeit perhaps an expensive step in the right direction.

Professor Folkson: Yes.

Dr Berkeley: Yes.

Dr Bevis: I think most steps are expensive, but in making the step now we are coming across some of the technical issues around using electric vehicles and using infrastructure that we can solve while there are fewer vehicles around. If we had to solve those issues in 10 years when the car was coming into the mass market, there would be far more disruption.

Q49 Mr Leech: On that basis, would you all agree that this is a good use of Government money?

Dr Berkeley: I would.

Dr Bevis: Yes2.

Professor Folkson: I would; I think it is the right thing to do.

Chair: You are all saying yes.

Q50 Mr Leech: Slightly more positively. That was the first issue. The other one was that you said everyone was wedded to personal transportation. Of course, there are some people who are not wedded to personal transportation and who are very committed to using public transport and not driving.

Is it not part of the conundrum for the industry that the people you are most likely to persuade of the merits of electric vehicles are those who are less wedded to personal transportation? As an add-on from that, is part of the problem that at the moment some of those people who might be committed to buying an electric vehicle are still concerned about the carbon footprint created by the current electric vehicles-particularly given the carbon generation that creates the electricity in the first place?

Professor Folkson: Those are two very good points. I will take the second one first. The whole industry is worried about the life-cycle analysis of the total emissions in producing the car and the fuel over its entire life and disposing of it at the end of its life. There is a lot of work going into comparing existing technologies with the new technologies to make sure that we have that part of the equation correct.

You are right that we tend to be a bit London-centric sitting here. If you live in London and work in London or its surrounding areas, it is quite easy to use public transport. In some ways you would be crazy to use your own car. I live in a rural area and there is no public transport. We have to be careful that a lot of the people wedded to personal transportation are wedded because that is where they live and their whole lives depend on being able to move around an area where there is either inadequate or no public transport. We cannot just assume that people are wedded to it because they love cars. It is because their whole lives are structured around that situation.

Dr Berkeley: The evidence we have had from the drivers from the CABLED trial as well is that a good proportion of those that came to our feedback meeting were what you would call "petrol heads", who wanted to take part in the trial to see what an electric vehicle driving experience was like. The overwhelming feedback we had from the drivers was very positive. The number of people that said they would be tempted to buy an electric car was quite staggering, particularly given the affordability of an electric vehicle. To take your earlier point, it is not just those people who are more wedded to public transport who would be tempted. I think those people who are currently driving traditional internal combustion engine vehicles who have had the opportunity to drive an electric vehicle see the advantages.

Dr Bevis: I have just one point. We talk to lots of people across our region about transport planning. They are beginning to think about how you get cycling, walking, bus riding and train riding into the package. By putting electric vehicles in as part of that discussion it means that they are taking a much wider view. That story is developing across the regions.

Q51 Paul Maynard: Very quickly and on the issue of whether it is money well spent, you have identified three regions that had the largest number of electric vehicles. We also know that the second highest number of charge points as of March 2012 is in the north-east, with 399. That is not an area that you highlighted. When I looked on a website at their map of charge points, it was almost like a touristic tour of rural Northumberland. It looked delightfully visually, I am sure, but I wonder how many cars are actually using them. This might be a nice way to spend public money. All spending of public money is nice, I am sure, for those who are benefiting from it. However, has this money been well spent in terms of ministerial oversight? That is my real concern. Money has been lobbed out there with no oversight of what has been achieved. We cannot even achieve a standardised plug, for God’s sake, to operate in all these places. What in heaven’s name are the Ministers doing overseeing this?

Chair: That is a comment on whether you think the Government have acted in an efficient manner in relation to this and what changes you might like them to make.

Dr Bevis: I think you have to look at it in terms of the time scale. The north-east of England was part of the very beginning of the Plugged-In Places programme so it has had an extra year to run. It has learned lots of lessons, and those of us who have come into it later have stood on their shoulders in terms of how we have operated in the rest of the country. Part of that reason is just history; it started first and therefore has had more time to get going.

To take your very last point about connectors, precisely because we have the Plugged-In Places programme-and we have managed to lobby the manufacturers-we have some agreement on a connector. It has been pushing agreements on connectors and agreements on safety standards. Because we are working in the industry, we have pushed and we have those standards.

Q52 Paul Maynard: Am I wrong to say that the connector agreed upon is the Dutch model that was already in existence before the Plugged-In Places scheme began, or am I misinterpreting that?

Dr Bevis: It probably was already in place, yes.

Paul Maynard: Therefore, if we had been doing our jobs properly, you would have had that to start with rather than spending two years squabbling, but that is another matter.

Q53 Kwasi Kwarteng: I wanted to follow up a point that my colleague made with regard to ministerial oversight. It seems that there are considerable sums of money being spent, but there seems to be some confusion perhaps as to how best the money could be applied. I was wondering what your views were about whether there was enough Government oversight or scrutiny, if you like, on this spending.

Dr Bevis: As I am running a Plugged-In Places programme, I feel very scrutinised. I am reporting to Government Ministers on a monthly and three-monthly cycle. They know exactly how many charging points I have put in the public domain and how many are with companies. They know precisely how much money I am spending and the rate at which I am spending it. If I want to invest in an expensive rapid charger to give somebody much faster charging, I have to argue that out very strongly.

Dr Berkeley: It is exactly the same with the CABLED projects funded through TSB. We have been under very regular scrutiny and audit procedures, which I think was quite welcome as well.

Professor Folkson: As we have said several times, we have to get the infrastructure there to encourage the consumers to buy. It is hard to make the consumers buy when these are expensive products. What we have been saying is that with the subsidy, which is probably the greater proportion of Government money rather than the Plugged-In Places money, there is more money being spent on subsidising vehicle purchases from my understanding than the infrastructure. That is not encouraging sufficient consumers to buy the cars yet.

Dr Berkeley: Compared to other countries, what we are actually spending in the UK is comparatively small.

Q54 Steve Baker: Are there any lessons that the UK could learn from other countries where the uptake for plug-in electric vehicles has been higher?

Dr Berkeley: There are a couple of examples that I would highlight. The French use what is called a "feebate" scheme, where they offer purchase incentives to low carbon vehicles. If you are buying one that has lower emissions, you get what they call a bonus, so you get money or a grant of up to €5,000. Once you register a higher polluting vehicle, you are penalised and you have to pay more on registration. That is a kind of carrot and stick approach, which they found was quite successful in France.

Interestingly, in Norway, where the take-up of EVs, particularly in Oslo, has been tremendous-they have sold something like 1,000 Nissan Leafs in Oslo-they do not offer the incentives but do it in a different way by offering free parking, free electricity and a lot of tax incentives as a package rather than looking for incentives at purchase. There are different ways of doing it.

The US example with tax rebates is against the weight of the battery rather than the emissions of the vehicle.

Q55 Steve Baker: Are there any developing countries who can offer us lessons in relation to decarbonisation of transport?

Professor Folkson: I can think of a couple of examples. These are very long-term issues that need continuous Government collaboration with manufacturers. If you look at Brazil and Sweden, they have had very long-term biofuel policies. Something like 80% of vehicles in Brazil are now powered by bioethanol made from sugar cane. That is partly because of their industry but you could argue that is a developing nation, now emerged, I would say. That was a very long-term policy that stimulated a whole industry as a collaboration between the Government incentivising the biofuel and the vehicle manufacturers making biofuel cars.

Q56 Chair: Is there any one change you would like the Government to make in its current strategy?

Professor Folkson: Don’t keep changing direction, I would say.

Dr Berkeley: Focus more on stimulating demand through better public awareness. To come back to the point that has been made in the last few minutes, they should build on the money that has been spent to highlight what has been achieved, big up the possibilities of electric vehicles and educate the public.

Dr Bevis: Again, I would say working on the incentives and paying to develop public awareness. One of your points is that perhaps we have spent more money on infrastructure than we needed to, but in fact the Government grant is structured in such a way that the money we have to spend is on infrastructure. We are not paid to do the other nice things such as engaging with the public. We are paid to build the infrastructure. Providing freedom in that spend to do these other things would help, yes.

Chair: Thank you very much for coming and answering our questions this morning.

Examination of Witnesses

Witnesses: Paul Everitt, Chief Executive, The Society of Motor Manufacturers and Traders Limited, Ian Allen, Manager of Environmental Strategy, General Motors, and R Graham Smith OBE, Managing Director, Toyota Motor Europe, gave evidence.

Q57 Chair: Good morning and welcome to the Transport Select Committee. I would ask each of you to give your name and organisation. This is to help our records.

Ian Allen: I am Ian Allen and I work for Vauxhall.

Paul Everitt: I am Paul Everitt. I am the Chief Executive of the Society of Motor Manufacturers and Traders.

Graham Smith: I am Graham Smith, representing Toyota.

Q58 Chair: Thank you very much. Do you believe that we will see tens of thousands of plug-in vehicles on the roads by 2015? That is the Government’s expectation. Do you think it is going to happen?

Paul Everitt: We are always wary of making forecasts in an area that is so new and developing. We will see progressively more vehicles on the roads. I do not know if it would be helpful, but I feel, having listened a little to your earlier session, that a bit of context might help the discussion along.

We need to remember that there is a regulatory framework within which the auto industry is working, particularly in Europe but also in major markets around the world-in the Americas, Japan, China and elsewhere. All those regulatory regimes have a downward pressure on CO2 emissions. There is a great deal of convergence of those regulatory regimes, all of which means that low and ultra-low-carbon vehicles are going to be required in increasing numbers over the course of the next two to three decades. It is important that we understand that regulatory requirement. This is not solely a question of commercial choices or even consumer pressure. This is regulatory requirements effectively being set at a global level that are guiding the products that we, as an industry, need to put on to the market.

Similarly, and this is one of the big differences between your role in terms of parliamentary oversight and ours as industry, we are taking a very long-term view here. We look at the regulatory trends. We have to make a decision or are being required to make decisions about what sorts of products and what kind of technology will be commercially viable over the course of the next 10, 20 or 30 years. It is that background that leads us to believe that the course the Government have embraced is an appropriate one.

I would also like to say that for us, yes, this is a very strong regulatory requirement. People take a different view or a variety of views, but it is also a highly important environmental requirement and aspiration. For us in the UK, it is an absolutely essential industrial opportunity. We need to reflect on all three elements in deciding whether the Government have got it right or not.

Q59 Chair: What are the barriers to making more progress?

Graham Smith: Let me lead off from our side. I would emphasise the point made in the previous session that there are a range of technologies that incorporate electric propulsion. They include hybrid vehicles, plug-in hybrid vehicles, range extender hybrid vehicles and fuel cell hybrid vehicles, all mentioned in the previous session. The two auto companies represented here are active across those ranges of technology. We expect to bring all of them to market in the near to medium term. We can talk in more detail about that. There is a direction that is incorporating electric propulsion.

In terms of the market size, just to give an indication on a global basis, we have now sold more than 4 million hybrid vehicles. That gives you some sense of the size and scale. Although it is not something that we particularly emphasise, for the sake of giving context, the Toyota Prius, a hybrid vehicle, was the world’s best selling car in the first three months of this year. That will give you a sense of the rate of adoption and the developing nature of a market for vehicles with electric propulsion. That market is developing further.

We have already seen the launch of the Vauxhall Ampera; I am sure that will be touched on. Our plug-in Prius, which is today’s Prius that can be externally charged and used as an electric vehicle, will occur here in the UK anyway in the next few weeks. The market is developing and growing, but it is very important that we recognise the range of electric technologies that are already deployed and will increasingly be deployed.

Ian Allen: I agree with those points. As was previously mentioned-this is a bit of a "poor me" speech-we invest billions of dollars and billions of yen in the development of all of these vehicles. One of the biggest barriers to entry is the cost of the cars because of the very technical nature of the vehicles themselves. As Graham said, it is the whole range of differing technologies. The Toyota might pave the way for us all in terms of making electric vehicles or alternative propulsion generally accepted. With electric vehicles, we are in our early days of that. Going back to your first question as to whether there will be tens of thousands of vehicles on the road, we have had decades of experience of forecasting what is going to happen on a monthly, weekly or almost daily basis with combustion engines. From our point of view, we have been on the market for six weeks, so we are still learning.

Q60 Kwasi Kwarteng: I want to ask a question with regard to the expanding market. You said that you had sold 4 million as of now, going back. I want to know where in particular your growing markets are. Can you shed any light on where demand for this product is growing strongest and also what are the reasons in those places where it is growing very strongly?

Graham Smith: As a percentage of our total sales, one of the strongest markets is actually here in the UK. We have a major market in hybrid vehicles in north America, China, Japan and the majority of Asian markets. You don’t achieve the number one world’s best selling car without selling very much on a global basis. I would not particularly want to differentiate between the markets. We sell in 170 markets worldwide and there are not so many where the Prius is not available, as an example. It is only one of our hybrid technologies. Almost our entire Lexus range, with the exception of one model range, incorporates hybrid technology as well.

Q61 Kwasi Kwarteng: On that point, do you see any regional variation in terms of Government support, subsidies and policy driving this demand or is it just the same wherever you go and Governments are treating it in the same way?

Graham Smith: Paul has provided the context in terms of regulation. It is increasingly difficult to achieve the projected emissions limit values without incorporating electric drive, hybrid technology and so on. The direction is the same in all markets. Again, Paul has made the point that the regulations are to some extent coming together.

Q62 Kwasi Kwarteng: Forgive me, but you are speaking in very general terms about the regulatory environment. Surely there is a difference between the sorts of policies they have in Singapore, for instance, and the kinds of incentives we are giving in Europe. I want to get some more colour on that. We can talk here for the rest of the day about generalities and the environment, but I would like some more specific detail.

Graham Smith: There are a range of incentives around Europe in France, Germany, the Netherlands, Portugal and so on. It is typically between €5,000 and €7,000 in terms of purchase incentive. Tax structures tend to emphasise things. We have heard comment in the previous session about the "feebate" system in France. There are various fiscal structures that tend to favour low-carbon technologies. They do vary, both in terms of the structure and the amounts of money. There are public procurement programmes in the majority of the locations that you have mentioned, both in the west and in Asia. Governments are leading with their own procurement. This tends to be typical as well.

Q63 Kwasi Kwarteng: In terms of what we are doing in the UK, how does that compare with some of these other jurisdictions-these other countries? Is there more that we could be doing?

Graham Smith: I would say it is towards the leading edge in terms of the range of purchase incentives and fiscal arrangements. Exemption from the London congestion charge is an example. There are other incentives in place. It would be difficult to characterise the UK as anything other than in the leading group, although not necessarily in pole position.

Q64 Paul Maynard: Mr Everitt, you pointed out the global regulatory framework under which you are working, which is undoubtedly true. Would you agree, though, that the point you are making is that a lot of what you are trying to achieve is not within your gift to deliver? You can’t be held responsible for the life-cycle carbon footprint of the cars you produce. You can’t guarantee that the electricity powering the batteries in the cars is coming from a renewable source, for example. You are at the mercy of national Government energy policies.

If we in this country are not promoting renewables fast enough, are not embracing nuclear or suddenly decide to use more coal, then that in effect has more impact on you meeting regulatory requirements for reducing the overall carbon footprint than any number of million pounds here or there that you use to bung at a Plugged-In charging infrastructure.

Paul Everitt: There are two aspects to what you have asked. In the medium term, between now and 2020, the regulatory regime in Europe is solely levelled effectively on the vehicle manufacturer. It is our ability to deliver the technology to the market and get the market to take it up; the onus is on us. That is something which we cannot do very much about. That is our entire responsibility, rather, so we have to do something about that.

Beyond 2020, where the targets we expect to see both in Europe and elsewhere are beyond the limit that the technology alone can deliver, we are into a position where, unless we have a decarbonised grid and an infrastructure, whether for electric charging or hydrogen, that is available and available for the mass, we are unlikely to be able to deliver all of the expectations. Clearly, post-2020, it becomes a much more complex world where we need to see greater interaction between the vehicle industry, Government, energy generators and also infrastructure providers. I can characterise it by saying there is a shorter-term window and a longer-term challenge.

Q65 Paul Maynard: Indeed; it makes sense. There has also been great discussion among all three of you, citing international examples, of ownership figures in different countries. Looking at all of your evidence taken together and all of the different statistics quoted, I fail to see any correlation between the amount of public money spent on encouraging ownership and/or investing in charging infrastructure and the overall rate of ownership other than in Norway. That seems to be the one isolated example where there has been a difference. Is it not the case that, if the Government had spent no money at all on Plugged-In Places, there would still have been enough private sector investment to generate a charging infrastructure where the electric cars required that charging infrastructure?

Paul Everitt: No. The Government’s role has been absolutely essential in catalysing market development in the UK. In my view, it is a classic example of the role Governments can and should play in the early stages of market development. As you heard a bit earlier, they have helped to de-risk the infrastructure and the development of the infrastructure because a lot of the lessons have been learned. Government were prepared through the Plugged-In Places process to go through the sometimes difficult mechanisms of getting infrastructure put in on the ground and understanding through the demonstration projects how consumers have responded to that infrastructure. If we had gone back three or four years, the argument would have been that we need to see a mass of public infrastructure to try and support the roll-out of electric vehicles.

The process of developing the Plugged-In Places and the demonstration projects that went alongside that has demonstrated that the balance is different and that the majority of people are going to be looking for home charging or at-work charging. The level of public infrastructure needs to be high enough to give reassurance but does not need to be ubiquitous. That is part of the learning process. Had we not done that-and for me this is an industrial as well as an environmental issue-without Government’s clear involvement and the signal that they sent, many of the investments that have come to the UK over the course of the last two or three years would have been less likely to have come here.

Q66 Paul Maynard: I want to try to counter that. Looking specifically at charging infrastructure, we have the eight regions. If we take London as an example where the bulk of electric vehicles have been registered, we have Source London providing a network of publicly available charging points. Yet we also have a large number of boroughs providing a parallel service and a large number of private operators providing a parallel service in car parks-NCP in particular. I struggle to comprehend what you are trying to say, which is that, without Source London providing a publicly accessible infrastructure network that people don’t want because they want home charging, the private sector would not have stepped in to provide the home charging infrastructure that people do want.

Paul Everitt: My argument is that, without the catalysing impact of Government involvement in promoting and providing the seed corn for infrastructure development, the private sector companies, who are now looking to enter the marketplace, would not have done so because they would not have had the confidence to do so. Without the public involvement, we would not see a market beginning to develop. We would see no market and therefore the case for making private sector investments into some of the infrastructure provision would not have been made.

Q67 Paul Maynard: Just for clarity, do you regard the entire £30 million as seed corn funding or would part of that be seed corn and the rest not? Does the seed corn funding have to be the entire £30 million?

Paul Everitt: I do not know exactly how much of that has been spent yet. It is over a period of time. I think it is quite difficult. My view is that certainly a significant proportion of that was absolutely necessary expenditure. What we are seeing through the process over the course of the last 18 months or two years is a development and a refinement of the Government’s infrastructure strategy, which is putting much more emphasis on the private sector and allowing the private sector to enter the marketplace. It is easy to be wise after the event. If Government had not made the move and had not had the catalysing impact, then we would not be sitting here with a nascent market and with investment flowing to the UK because the UK is seen to be a leading market for low and ultra-low-carbon vehicles.

Ian Allen: In terms of the infrastructure of the network itself, we do a lot of events and go out and talk to the public. One of the first questions that they ask us when they come on to our stand to talk about our car is, "Where am I going to charge it? There is nowhere to charge it." Those are mostly people in outlying areas rather than necessarily those people in the Plugged-In Places areas, who would probably potentially focus on the fact that it is a bit too expensive for them. Until we can talk to them about where they charge it and how they charge it-and, as Paul said, home charging is the basis for that-it is very difficult. The flow of information is very important, but it is also seeing posts out there, and cars being charged at posts out there, that provides that reassurance for people to make a leap of faith into an electric vehicle.

Q68 Paul Maynard: Why can’t you just supply charging points at all your Vauxhall dealerships?

Ian Allen: We do.

Paul Maynard: So the private sector does it.

Q69 Chair: Mr Everitt, you said that investment had come here partly because of the Government’s investment in this area. What would the alternative places be?

Paul Everitt: Across Europe? It depends where you are looking, but there is a range. We are in permanent competition with other places around Europe for automotive investment.

Graham Smith: I will give a small example. We have nine plants in Europe. We chose the UK to introduce our hybrid technology partly because of the positive overall total environment towards low-carbon and low-emission vehicles here in the UK. We could have made other choices.

Q70 Chair: Where else might you have gone?

Graham Smith: We have vehicle assembly plants in France and Turkey, as an example, but the UK was chosen. Our hybrid model here in Europe is the Auris vehicle, which is also built in Turkey.

Paul Everitt: There are two examples with which I am sure you will be familiar. Nissan have made a significant commitment to the UK in terms of a battery plant and the production of the Leaf. They have other direct plants in Spain, but through the Renault Alliance they have many around France and other places. You will not be aware of this, but this morning BMW have announced that they will be building their conventional engine at their Hams Hall plant for their hybrid i8 product. One of the reasons why they are committing that engine development to the UK is that we are seen to be a market for new and evolving technologies.

Q71 Mr Leech: What do you estimate as the benefit to the British economy from the positive mood and steps taken by the Government in terms of investment in the British car industry here?

Paul Everitt: The total investment over the course of the last 18 months is around £5.6 billion. Over the course of the next two to three years there will be 15,000 new jobs, tens of thousands of existing jobs safeguarded and a huge opportunity down and through the supply chain in the UK to create a genuine centre of excellence around Europe for low and emerging ultra-low-carbon technologies. That will give us the opportunity not only to rebalance our economy but develop a product that we can sell around the world. The market for low-carbon vehicles is expanding at a huge rate. From a UK perspective, we absolutely need to be winning our share of that market.

Q72 Mr Leech: Without the commitment from the Government, what proportion of that investment do you think would have gone elsewhere?

Paul Everitt: It is very difficult to say it is a black and white decision. Clearly some of it would have come to the UK irrespective because that is the home for a number of products, but I think there would not have been the same enthusiasm. A significant proportion of the investment that we have seen has come from the very strong relationship that exists between Government and industry and the willingness of Government-both previous and current-to listen to the priorities that industry has and to respond positively to them.

Q73 Steve Baker: Mr Everitt, you have been pretty clear that Governments-plural-have managed to direct the car industry into making long-term decisions to produce a particular kind of vehicle.

Paul Everitt: I would not see it that way. I would say that we have had a positive conversation with Government where they have responded to the challenges and trends that we face and have tried to provide an environment in the UK best suited to our needs.

Q74 Steve Baker: You have confused me slightly now because I thought you had explained how the Government regulatory environment had caused you to produce a kind of vehicle that, in the previous session, we had heard tell that the public did not want.

Paul Everitt: No. Where I started from was that the regulatory requirements are not produced by the UK Government. They are produced at a European level in which we operate, but they are also reflected in, and there is convergence with, similar regulation emerging in the Americas, Asia and particularly in China. There is a convergence of the regulatory requirements. What the UK Government have done is responded to industry’s presentation of where the opportunities lie to create an environment in the UK that is best suited to us and allows us to invest with confidence.

Q75 Steve Baker: Given the overall trend of direction of the world in relation to this.

Paul Everitt: Exactly.

Q76 Steve Baker: We were talking earlier in terms of the size of the markets. Mr Smith, you said you had sold 4 million Priuses. How does that compare to the total market for Toyota cars? How many Toyotas did you sell in the same period?

Graham Smith: The 4 million is for total hybrids, so that is across all our hybrid model ranges and we have an increasing range. It includes Toyota and Lexus, and it is cumulative. That just gives you a sense of the scale of the developing market.

Q77 Steve Baker: But what were the total sales in the same period?

Graham Smith: That I do not have, but in a given year let me give it to you in percentages. By 2013, if you take the UK first of all, we would expect between 20% and 30% of all of our sales to be hybrid and plug-in hybrid vehicles right across our model range. In Europe, in total, it is more likely to be towards 20% than 30%. The UK is one of the larger and more progressive leading markets in Europe.

Q78 Steve Baker: But yours, of course, is one of the world’s great companies. It is very well known for the development of lean methodologies and all those things. You are obviously looking to the whole world. How do you think the British market compares in terms of its potential to you as Toyota globally-not Toyota UK? How does the UK compare to, say, Africa, India and China?

Graham Smith: Obviously the UK is a much larger market even than, let us say, South Africa, which is the single most developed market in Africa. I am not an expert on Africa, but the sizes of the market, whilst they are growing rapidly for new vehicles, are still relatively small. Within Europe, the UK is one of the big five markets. Germany, France, Italy, Spain and the UK are the five largest markets in Europe, not just for us but across all vehicle manufacturers. Therefore the UK is very important indeed.

Of our nine plants, we happen to have two of them here in the UK and so it makes it doubly important. We are trying to lead from a manufacturing point of view in low emission manufacturing, not least because we have our hybrid vehicle being built there.

Q79 Steve Baker: What I am driving at is that the UK is a country of about 60 million people, but across the world billions of people are emerging from poverty and will probably want to buy cars. It seems to me that many of those billions of people are living in countries that do not have this kind of environmental regulation. Is that a fair statement about Africa, India and China?

Graham Smith: Increasingly, all markets, not least because of Kyoto, Copenhagen and climate change targets-broadly, in all countries, even developing emerging markets-are putting in place emissions regulations. It is not just about CO2. In many markets, air quality emissions-particulates, NOx and so on-are more important than, or just as important as, CO2.

Q80 Chair: In the last Budget, there were some changes in relation to incentives. Have they affected the purchases of any of your vehicles?

Ian Allen: Certainly from our perspective. In fact, Budget day was the first day of our media launch. We could not have had more perfect timing because a lot of the questions that we faced from the journalists at the end of their drive were about the announcements in the Budget with regard to a reduction in 2015 of the benefit-in-kind taxation allowances for business car drivers and also with the taking away of first year capital allowances for leased vehicles.

The business side of the industry is seen as a big area for us in terms of sales of electric vehicles because it gives real world credence to vehicles because people see them on the road. Companies are also inclined to lower the carbon footprint of their fleet. It is a good way for companies to lower their carbon footprint and be seen to be lowering their carbon footprint. That should not really be underestimated. For us, changes in terms of incentives do create instability in an already fragile, fledgling market.

Graham Smith: I can just add to that. So far, it has already been referenced that the number of vehicles purchased with the benefit of the plug-in car grant since it was first introduced is about 1,700. It is, let us all emphasise, a very small and clearly developing market. The consumer journey is a challenging one. It is a new technology and it requires external charging of vehicles. With our plug-in Prius hybrid and the Vauxhall Ampera, electric vehicles are already in the marketplace. We need to take the consumer to the point of externally charging the vehicle and then there are the other aspects of new technology.

There is the need for reliability to be demonstrated and proven. There are plenty of reasons why consumers might be cautious about a new technology. Therefore, anything that changes and destabilises the regime within which that purchase takes place-either the plugged-in car grant or the fiscal arrangements-even going forward, because they project their own situation forward, will affect particularly professional buyers making their judgments about what the situation will be in 2015, 2016 and 2017 when they will be incurring the costs of the vehicles that they purchase today. The changes and the reduction in the fiscal benefit-the attractiveness of that regime-were particularly negative from our point of view.

Q81 Julian Sturdy: It has been mentioned a number of times now that sales in the hybrid market are expanding at a huge rate. Do you envisage that over the next few years as a result of that expansion and also the potential competition that is going to come from car manufacturers we will see the cost of hybrid cars coming down?

Ian Allen: Taking the Prius and the Auris as two good examples, they are almost mature products in the marketplace today. They do not necessarily face the barriers that the EVs and we as an extended range electric vehicle or even the plug-in Prius will face in terms of additional cost because it is a mature vehicle on the market. It is only through economies of scale that we will manage to get a true reduction in costs.

Q82 Julian Sturdy: But you do not think the expanding market you have talked about will bring those economies of scale.

Ian Allen: At the current rate, we could argue not.

Q83 Julian Sturdy: So it is not expanding as quickly as you thought, then.

Ian Allen: To be honest, in terms of a consistent approach to the market, as we have spoken about, that is the only way to get constant take-up in terms of electric vehicles.

Graham Smith: I want to make this point. Prius is our first hybrid vehicle. It was introduced in 1997. The consumer journey and the rate of adoption was almost flat. The numbers that were bought in those early days were very modest indeed. I have made the point about the success that has been generated over an extended period of three generations of the vehicle and of course our expanding hybrid range. We have to be realistic about our expectations for the market for electrically charged vehicles.

The other point to make is that we also happen to be the world’s biggest manufacturer of batteries, electric motors and electric machines. That is partly because of the fact that every one of our hybrids-every one of those 4 million-has at least one battery, at least one electric motor, an inverter, control software and various other aspects of electric vehicle technology, all of which are required in one way or another in other forms of electric vehicles. Pure electric vehicles, plug-in hybrids and range extender hybrids incorporate many of the same technologies. Fuel cell vehicles, in turn, will also incorporate those technologies.

The journey that we are all taking forward and the development of the marketplace- the volumes rising-are bringing forward the lower prices, the lower costs and the commercial accessibility of electric vehicles, range extender vehicles and plug-in hybrids. It is not one technology or another. It is a range of technologies. They are related and we are moving all of them forward at the same time. The context within which that is happening on a global basis is really important. The arrangements that Governments put in place are fundamental to that journey continuing.

Q84 Paul Maynard: Just to be clear, you are talking about hybrid vehicles at the moment, which are very different to the 1,400 vehicles for which the Government are providing a subsidy. I entirely take Mr Everitt’s point that the Government are creating a climate in which it is appealing to motor manufacturers to develop new technologies. What I am trying to draw down to is what it is the Government are doing that is making a difference and, indeed, what elements of the Government’s policies are not having an impact on those investment decisions. Can you confirm for me that, if the Government had not provided a subsidy that led to the purchase of 1,400 vehicles, or indeed the provision so far of the £30 million for the Plugged-In Places scheme, investment decisions might have been taken differently? How essential were they to the creation of this beneficial climate you have been describing?

Graham Smith: I want to make one point about what qualifies and what does not. The plugged-in car grant is available to a range of electric vehicles, to the Vauxhall Ampera range extender hybrid vehicle and to the plug-in Prius. In future months I am sure other vehicles will qualify as well. There is a range of vehicle technologies, including the externally charged vehicles, that qualify for the plugged-in car grant. It is not just electric vehicles; it is the range of technologies that we are talking about.

Q85 Paul Maynard: Of which we have 1,400 so far.

Graham Smith: I could also add two vehicles. Ours is launched in a few weeks. The Vauxhall Ampera has been on the market. They are not yet included. It is too early to make any judgment.

Q86 Paul Maynard: Indeed; but it is not 4 million.

Graham Smith: No.

Paul Everitt: The key point is that, first, Government listened and have produced as a consumer incentive something based not on a specific technology but on performance criteria. If you can meet the performance criteria, then you are open to the grant. Just to re-emphasise, it is not just EV or not EV; it is a range of technologies. They are all electrified to some degree and will increasingly be so. That is very much in tune with what industry was looking for because it allows a range of technologies to compete in the marketplace, the winner being that which the consumer likes the most.

I will confirm that the Government’s approach around ultra-low-carbon vehicles is about investment and collaborative R and D with industry. It is about demonstration projects, not just cars but vans, trucks and buses. It is consumer incentives not just open to private buyers but cars, vans and trucks. It is open to the marketplace. It is part of the package that makes the UK an attractive venue and an attractive location for major global vehicle manufacturers.

Q87 Julian Sturdy: I want to come back to the question of the market for hybrids. Is there a concern over the resale value and the lifespan of hybrids? I know that is potentially changing as technology moves on. Is that something of a concern with the customer?

Paul Everitt: I want to clarify something. Are we talking about hybrids or the range of technologies that are out there?

Q88 Julian Sturdy: I want to talk about the current hybrids, from the Prius moving up, if I can.

Graham Smith: Let me comment. There is no issue with the residual value of the current Prius. We have gone through three generations. It goes back to 1997. It is well established in the marketplace. It has won the JD Power customer satisfaction award on a number of occasions. The reliability has been demonstrated, and both professional and retail buyers buy them just like any other model in our range. The residual is comparable to the residuals on similar models that are not hybrid-of a normal car. There is no issue and there has not been for some time.

The other thing you should remember is that in today’s hybrid the battery lasts the lifetime of the vehicle. With an electric vehicle, there are some question marks about the length of time the battery will last because it is being used in a completely different way. That is where a view will need to be taken about residual value.

Q89 Julian Sturdy: The point I am trying to get at is that there is quite a difference in the residual value of hybrids from the pure electric.

Graham Smith: It is early days.

Paul Everitt: The normal sales process is that a new vehicle comes on the market and will probably change ownership after three years, particularly if it comes from the business sector into the private sector. It may change hands again at six or seven years. That is part of developing a residual value. Most of the technologies we are currently putting on the market have not yet been on the market for three years. They have not gone through that cycle. At the same time, many of the people who comment on or set values for these products have no experience. We are at the very earliest stage of developing a market for this product.

There are lots of concerns about the battery. After 10 years the battery will be good. It might not be optimum for automotive use, but, effectively, 80% of the performance of the battery will still be there after a decade. We are confident and we believe there will be a second life for much of those batteries in stationary uses, but clearly again we have not gone through a 10-year cycle for those batteries to be used in those environments. That is why we believe that this is a long journey we are embarked upon. It is right that we should start at this point, but the big commercial take-up is still some significant time away.

Q90 Chair: We are about to see the Minister. Is there any one issue you think the Minister should think about or any one change that should be made in existing policy?

Graham Smith: We would certainly encourage him to talk to the Chancellor about the announcement made in the Budget in relation to benefit in kind as it applies to zero and ultra-low-emission vehicles. There is an opportunity to reverse what is a fairly negative signal towards the auto sector in the UK were those changes to be reconsidered. There have been one or two Budget announcements that have been reconsidered. We would very much wish to see this added to the list.

Chair: You would like it to be added to the list.

Ian Allen: I would certainly agree with Graham on that particular point. Any positive or negative decisions and announcements have a positive or negative effect on the industry. The negative effect that the announcement in the Budget had could be reversed by a positive announcement that they are being reintroduced or that other incentives are coming in to take their place.

Graham Smith: It is such a fledgling market. It is such early days in the marketplace. The volumes and the exposure to the Treasury are tiny at present. It just seems perverse that the opportunity was taken to make a change in the outlook for benefit in kind and indeed capital write-down allowance on cars at such an inauspicious moment in the development of the marketplace.

Ian Allen: I agree on that point again. It is a lot about the consumer, whether that is a private consumer, a business or a fleet consumer, in terms of confidence. It is confidence in the industry and confidence that the vehicle that they are going to buy is still going to work in three, five, eight or 10 years. We put an eight-year warranty on our battery for that very reason. People are concerned, "What’s going to happen if my battery packs up? Am I going to have to spend £10,000 on a new battery?" It is all about the confidence of the people. As I said before, we are expecting them to make this leap of faith into an electric vehicle and make a change.

Paul Everitt: I agree with both my colleagues on the shorter-term issues. The one issue that I think Government need to address is the longer-term one. In our industry we do have a technology roadmap. We know exactly the kinds of products we are going to be putting on to the market. Government should be taking a stronger role with the infrastructure and power generators to ensure that they, too, have a coherent roadmap to deliver the resilient and decarbonised grid we need post-2025.

Graham Smith: Which we also agree with.

Chair: Thank you very much for coming and answering our questions.

Examination of Witness

Witness: Norman Baker MP, Parliamentary Under-Secretary of State, Department for Transport, gave evidence.

Q91 Chair: Good morning, Minister. Welcome to the Transport Committee. Could you tell us by how much carbon emissions from road transport have been reduced since you took office?

Norman Baker: It is difficult to put a specific figure on the element in relation to low carbon vehicles because there is a whole range of levers that Government will pull at any one time to try to reduce carbon. We do have to reduce carbon because 21% of our carbon emissions are, of course, from transport and 92% of those from road transport. You have to take into account, for example, the investment in rail, the money from the Local Sustainable Transport Fund and the money that is being spent in this area. It is difficult to disaggregate it and put a specific figure on each one of those. We can measure across the economy as a whole.

Q92 Chair: But by how much have the emissions been reduced in relation to road transport?

Norman Baker: I cannot give you that specific figure in terms of your base year. I will happily come back to that if you want to.3

Q93 Chair: Perhaps you could give us a figure on that. Do you feel confident that the UK is on course to see tens of thousands of plug-in vehicles on the roads by 2015?

Norman Baker: Yes, I think so. What we are seeing, first of all, is a strong commitment from Government. Secondly, there is an increasing understanding from local councils that this is the way forward and that they have their role to play. Thirdly, it is very encouraging that the private sector is now investing in the vehicles themselves and, also, increasingly, it understands the opportunities to invest in the charging arrangements out there on the street, in private car parks and so on. So I think we will see that. There is a necessity, as I have explained, to reduce our carbon emissions significantly. That is an agenda shared by all three parties, and that is going to give a consistency to Government policy in the next couple of decades.

Q94 Chair: Are there any plans to look again at Government strategy on how to achieve all of this?

Norman Baker: We launched the strategy "Making the Connection" in June 2011. It is only a year old. That is not to say that we are complacent about that because this is an ever-changing picture and we will be reviewing how far we have got later on this year to see whether or not we should make any changes.

Q95 Chair: Are electric motorbikes going to be included?

Norman Baker: We are open to any suggestion as to how we might secure reductions in carbon from motor vehicles. We have obviously looked at cars. We have brought in the plug-in van grant to pick up on those. Mike Penning has been taking forward this trial on HGVs. We have increased the money for the Green Bus Fund. We are very happy to look at any aspect of road transport where carbon emissions are involved to see whether we might be able to help or not.

Q96 Paul Maynard: I would like to look at the Plugged-In Places scheme that you have been operating and overseeing, which I gather has had £30 million invested in it. We have been listening to our witnesses, who have had mixed reports on what has been occurring. There are 1,400 electric vehicles and £30 million spent on a national infrastructure. Some have suggested it was a case of chicken and egg, which may be true, but others have described it as something of a learning curve. Do you see it as a learning curve? If so, is it a worthwhile learning curve?

Norman Baker: I would not use the words "learning curve". First of all, £30 million is a budget that has not yet been spent. That has not been fully committed yet. Of course this is a brand new area, and the arrangements that were set up with the Plugged-In Places quite deliberately gave some local flexibility in order to test out what might work and what does not work. We are all learning now with a brand new technology.

What has been very encouraging for me about the lead given by Government is that it has, at an earlier stage than we might have anticipated, attracted support from the private sector. We are now seeing a big commitment to charge points across the country from the private sector at an earlier stage than we would have thought. In a sense that has obviated a need for us to continue to push forward as far as might have been thought with the public Plugged-In Places. We are still committed, of course, to the eight Plugged-In Places areas. They are still progressing, and some are progressing faster than others because of the local flexibility that I have mentioned to you. We now have 6,000 charge points in the UK. Most of them are provided by the private sector. That is a very good achievement.

Q97 Paul Maynard: Are you monitoring the usage of the drive points?

Norman Baker: Yes. The Plugged-In Places areas have to keep in close contact with OLEV-the Office for Low Emission Vehicles. There is a joint arrangement set up between ourselves, the DfT, BIS and DECC. There are regular monthly checks on what is happening in terms of the individual Plugged-In Places. Yes, we do monitor that quite closely. We are doing further monitoring on a data basis later this year to establish the uses of individual charge points and so on to see what the usage is and what lessons can be learned from this. I would not say we are on a learning curve, but we are certainly in the initial stages. We have to recognise that, as we gain data and information from the usage, that will help and form future policy direction.

Q98 Paul Maynard: As our witness from the east of England made clear, in his view it was a learning curve. They have discovered, for example, that more people want home charging than public charging locations.

Norman Baker: Yes.

Q99 Paul Maynard: Do you not think it might have been better to have tried to establish some of these fairly fundamental issues before we embarked on the project, rather than spending the money to learn what was happening?

Norman Baker: I do not think it was possible to find out exactly what was happening until we tried it. There is only so much you can do on paper on a theoretical basis. How the public will react to a particular technology is difficult to predict, as lots of manufacturers in different industries will tell you.

Q100 Paul Maynard: It does strike me, though, as common sense that most people, if it is going to take six to eight hours to charge their electric vehicle, would rather do it overnight at home than go and leave their car at a public charging point.

Norman Baker: Not necessarily. It may be that there is a public charging point quite close to where they live and it is convenient for them to charge it on the street. That is one option. It may also be the case that, if we move towards the installation in some areas of fast chargers, then we have a different scenario. With a fast charger that gives you a charge within 20 or 30 minutes, that would be eminently suitable for a supermarket car park, for example. It may be that a long charge is appropriate if you have a public charge point near a railway station. You could park your car, go off to work and charge it for six to eight hours while you are away. There are all sorts of different ways in which people want to use charge points. It is that which we are learning from the experiences of the HR’s Plugged-In Places and indeed from the private sector’s investment.

Q101 Paul Maynard: Finally, how long did it take to agree on a standard connector plug?

Norman Baker: That is a very important question, and way beyond just the UK. The issue here is to try and get some standardisation across the world. I worry about this, because if you look at mobile phones we have a situation where everybody seems to have a different phone connection to plug in, and in my view that has not been a great success in terms of standardisation. We have to try to settle on something that is efficient and safe to use and that is standard as far as possible.

We have discussions going on within the European Union on that matter through the arrangements that are put in place between business and various member states. The first stage is to get to a standardisation within Europe if we can. We think the type 2 connector is the appropriate one to go for. I am more hopeful than not that we will get there in the European Union. The trouble is, of course, that that does not in any way link up with what the Japanese are doing or anyone else in their own home territories. That is an important issue. We are on the case with that, but there is only so much the UK or even the EU can do to get international agreement on that matter.

Q102 Mr Leech: You said that there is ongoing monitoring of the Government’s scheme. Is there any individual monitoring of who is actually buying these vehicles and the impact of changing from their previous car or maybe even changing from public transport to their new electric vehicle? Will there be an assessment on the actual carbon and pollution reductions as a result of the scheme?

Norman Baker: Yes. The monitoring I was talking about a moment ago, just to be clear, was of the Plugged-In Places and the effect of the Government investment into that-that is the charge point arrangements. To be clear, you are mentioning now a second element of Government support, which is the element provided by way of subsidy for the purchase of a new car or indeed a new van. Obviously, the first thing we monitor is the sales. The sales of low carbon vehicles-cars and vans-are increasing. The penetration of sales in the UK as a percentage is roughly in line with other European countries. So we are on the same trajectory there. It is increasing, and the first couple of months of this year have in fact shown a marked increase. That is on a trajectory on the way up. We monitor that first of all and we are quite satisfied with that. If you start with a new product, then inevitably the graph starts off in a reasonably flat line and then goes up quite steeply.

If you take the Toyota hybrid-I do not know if that was mentioned by Graham Smith here today-it took nine years for the first million to sell and then the second million was sold in a further two years. That is the sort of graph you see with sales. That is the first monitoring we do.

Of course we also make a calculation in terms of carbon. That is very important. The whole drive towards electric or low carbon vehicles is driven by the environmental necessity to deal with carbon. There is obviously a huge saving in carbon from an electric vehicle. Even with a traditional power source and even using the existing grid system, you can probably save 40% of carbon from an electric vehicle. Once you have DECC’s strategy to move towards renewable and low carbon energy sources, then you can increase that still further. We quantify the carbon that is saved from the change in the mix of the cars on the road.

Q103 Mr Leech: But are we actually monitoring people’s change in behaviour? Mrs Smith sells her BMW and replaces it with an electric vehicle, or is Mrs Smith a former non-driver, who is then buying an electric vehicle because she is quite happy to drive a non-polluting vehicle but was not happy to drive a polluting vehicle? Is that sort of monitoring being done so that we can see the actual impact of each individual vehicle upon pollution and carbon emissions?

Norman Baker: No; we have not done any monitoring of individual purchases, but we would expect the motor manufacturers to do that. It is in their interest to sell more vehicles and it is in their interest therefore to understand who is buying them, who is likely to buy them and where they should aim their market. That is a job for the motor manufacturers rather than the Government.

Q104 Mr Leech: But without that monitoring we will not be able to tell exactly the impact on carbon emissions or pollution.

Norman Baker: We can tell by the penetration of vehicles in the market and by the emissions from each vehicle as to what is likely to occur. I grant that we do not necessarily know the mileage of each vehicle, but, short of having a questionnaire for every individual purchaser of a vehicle, it is difficult to see how we could get that. Everybody’s behaviour will be different. We are assuming, or at least I am assuming, that the majority of electric vehicle journeys will be relatively short in mileage terms because they lend themselves to those sorts of short journeys better than they do the long journeys. Some 98% of journeys by car are 50 miles or less and, therefore, with the average electric vehicle being able to do 100 miles without having to be recharged, it is perfectly possible to undertake a return journey for most people with one charge.

I suspect that part of the pattern will be that initially, at least, there will be two cars in a household, one of which will be standard technology and one of which might be an electric vehicle for running around town. That is what I imagine might happen in many households.

Q105 Mr Leech: Given the relatively low take-up of vehicles at the moment, there has been some scepticism about whether or not it has been money well spent as far as the Government are concerned. Our previous witnesses suggested that, as a result of the Government’s commitment to the scheme, there has been significant additional investment within the industry in general. What has been the impact of giving investment and some incentive to industry to invest? What was the reasoning behind the Government’s scheme in the first place? Was it about giving the industry some confidence or was it about trying to persuade individuals to buy vehicles?

Norman Baker: The reason for it ultimately is about carbon. That is the problem we were trying to address. Happily, I always believe it is possible to use a particular policy to achieve more than one end. Just as the local transport fund that I am responsible for has the catchphrase "Creating Growth, Cutting Carbon", so I think it is possible to see the investment of low carbon vehicles in the same way. Investing to help the environment and investing to help the economy are not opposites; they are two sides of the same coin.

Happily, what has happened-and I think the Government’s policy has been effective in this area-has been that we have given out a clear steer of the direction of travel over a long period of time, which is what we have done. This is where we want to get to with electric vehicles, this is our aim for decarbonisation of road transport and these are the measures we are putting in place. There is the Plugged-In car grant, the Plugged-In van grant, the money for R & D and OLEV being set up specifically for that purpose. There are other steps we are taking, for example, to make sure that there is no VED paid on cars less than 100 gm. The suite of measures gives the industry confidence that we are serious about this direction of travel.

Part of the consequence of that has been to say to motor manufacturers, "This is a good place to invest in this country because we are ahead of the curve compared to many other countries." We are seeing the Nissan plant in Sunderland with jobs being created there. We are seeing the lithium battery plant up in the north-east. We are seeing investment from Toyota in Derby. This is very good for industry. We are seeing a win-win.

Q106 Mr Leech: Finally, has any assessment been made by the Department on what investment would not have taken place that has subsequently taken place since the decision was made by Government?

Norman Baker: That would be a rather odd bit of research to do. I am not sure it would be money well spent to try to analyse that.

Q107 Mr Leech: Has any estimate been made of the positive impacts of that investment decision?

Norman Baker: It is not always possible to say that action A leads to result B. What I am saying to you is that we have investment from motor manufacturers who are now coming to the UK to build the vehicles of the future. I think, because of the environment that we have created in Government to say, "This is what we believe we are doing, this is where we are going and you are welcome here", that has been successful.

Q108 Steve Baker: The point that it has been successful was very much echoed by the motor industry before you. They certainly said that. Before then, we heard that consumer demand is lagging behind the actions that have been stimulated by the regulatory environment and the vehicles that are being produced by the industry. Have you conducted any economic analysis to understand what might be the economic implications of driving scarce capital into particular uses that do not reflect the revealed preferences of consumers?

Norman Baker: You say "the revealed preferences of consumers", but we always thought that there would be a slow take-up. There is nothing surprising about that. I am entirely relaxed about the number of cars that have been sold. It is entirely in line with where we thought it was going to be. I know one or two of our newspapers like to present it as the Armageddon of the Department for Transport, or whatever they present it as, but it is entirely in line with what we thought it was going to be.

Any time you produce a new product, the price is higher to start with because that is what always happens. Then the price comes down as mass market penetration occurs. Secondly, you have people who are naturally tied to what they already have and do not see the need to change to something else. Therefore they want to see what is going to happen until it becomes mainstream. There is nothing unusual at all about the trajectory of sales.

I used to be in the music business. I remember when CDs first occurred. The sales of CDs in the first two or three years were minimal because people still wanted to buy LPs. The music business was quite clear that this was going to be a product of the future and invested accordingly. You will always see the investment running ahead of the consumer, but that is the same with any industry and any new product.

Steve Baker: I will probably leave this because I am in danger of going off into economics.

Q109 Chair: Do you think the Government could do more to make people more aware of the importance of these purchases?

Norman Baker: The Government can always do more, but there is a balance to be struck between what we should do and what the private sector should do. Honestly, Chair, I think we have the balance about right. I really do think we have got it right. We have the right incentives to encourage people to buy the vehicles. We have the right investment in the Plugged-In Places, which is now unlocking significant private sector investment to follow on behind.

The purpose of the first one of those investments is to deal with the point that I just made to Mr Baker, which is that you recognise that the costs will be higher to start with until you get the mass penetration that brings your costs down. The investment there is sensible and pitched at the right level. The investment in Plugged-In Places has been useful to give a clear steer and a commitment, which has then led to private sector penetration following on from that. The R & D gives the industry confidence, and that is at about the right level. The tax incentives that are there from the Treasury are by and large right. We are on track. I am really quite happy with where the Government are on this.

Q110 Chair: You say the tax incentives are by and large right. We have heard representations from the industry about the changes made in the Budget in relation to incentives. Are you having any rethink about those?

Norman Baker: I should say, first of all, that matters in the Budget are not a matter for me; they are a matter for the Chancellor, in that time-worn phrase.

Q111 Chair: But are you making any representations to those who are responsible?

Norman Baker: Obviously, we are in touch with our colleagues at the Treasury and in other Departments on an ongoing basis. We do not operate in silos. I regularly talk to the Chief Secretary, for example, about issues which are transport-related. I had a conversation with him last week about some issues. Those conversations take place all the time.

What I would say is that, while I understand exactly why the motor industry was slightly worried about one particular small issue in the Budget, it is important to say that the general direction of travel from the Treasury has not been changed. The incentives are still there, for example, in the VED arrangements. The congestion charge arrangements in London are still exempt for low carbon vehicles and so on. All those existing arrangements are still there.

Q112 Chair: On the Plugged-In vehicle scheme, do you think the schemes need to be harmonised so that vehicle users in one area can use charge points in another?

Norman Baker: In answer to Mr Maynard earlier, I indicated that allowing different ways of progressing was a sensible first step, but I do think there is a need to ensure that we have a harmonised system in the regions. My ideal vision is where we have pay-as-you-go charge points, where you just turn up with a credit card, a mobile phone or something else and just pay at a charge point you happen to find. That is where we want to get to in the end.

Q113 Chair: Is that something that the Government are working on now?

Norman Baker: Yes, that is something we are working on. We are discussing it with industry and the private sector. We are obviously discussing it with Plugged-In Places.

Q114 Paul Maynard: I want to stick with Plugged-In Places because I know I am obsessed. You said in your earlier answers that not all of the £30 million had currently been spent. Are you able to provide the Committee with the figures on what has been spent so far and what remains in the pot?

Norman Baker: We are on target to spend £11 million by the end of 2012-13 from a budget of £30 million. That is good news. That means we have managed to achieve the uptake and the installation of charge points with the private sector without having to commit as much money as we might otherwise have done from the public sector.

Q115 Paul Maynard: Having brought that private sector involvement in, is it your expectation that the entire £30 million will not be required to be spent?

Norman Baker: Yes. I do not think it will be required to be spent.

Paul Maynard: Thank you; that has made my day.

Q116 Chair: On the issue of financial incentives and looking at it another way, have you considered having financial disincentives for high emitting vehicles?

Norman Baker: There are disincentives already of course, which the Treasury introduced some time ago in respect of banding road tax, for example, by the emissions from a vehicle. There are a number of local councils that arrange their parking permits by banding of vehicles. Of course the biggest incentive of all is the cost of fuel. Generally speaking, the more carbon you emit, the more fuel you will use so you end up paying more for your fuel. There are already economic drivers in place as well as, if you like, moral drivers to try and encourage people to move towards cleaner vehicles.

Q117 Chair: Have you done anything on improving plug-in vehicle uptake in the public procurement of vehicles?

Norman Baker: In what sense?

Q118 Chair: To improve the purchase through public procurement in the Department or elsewhere in Government.

Norman Baker: We do take steps to encourage the public sector to invest in low carbon vehicles, if that is what you mean. In fact I wrote only this week to Royal Mail to clarify for them the flexibility they had with their vehicles. We are quite keen that Royal Mail do more than they have done so far. There was some uncertainty at Royal Mail as to what they could and could not do. I have written a letter to them this week to clarify that. We do encourage the public sector wherever we can to give a lead. We have to worry about state aid issues of course, so there are sometimes complications.

Chair: Minister, thank you very much for answering our questions.