Regulation Is Killing The Car Industry

A foreboding new survey by the Institute of Directors (IoD), a leading organisation that represents many leading entrepreneurs and senior business leaders in the UK, showed the bleak confidence of business owners. They say the recent tax hikes by Chancellor Rachel Reeves outline the disregard of the private-sector which they say will undermine economic growth. 

The decreased faith in business viability has been further emphasised and evidenced by the recent closing of Vauxhall’s branch in Luton, putting 1,100 jobs at risk. The closure at Luton represents the issues that car manufacturers face nationwide; current regulations that car manufacturers face are extortionate. These regulations predominantly include those of the ‘zero-emission vehicles mandate’ in which car manufacturers must meet certain sales quotas in order to drive Britain towards a completely ‘net-zero’ economy. Current rules state that EVs (Electric Vehicles) must make up 22% of a carmaker's car sales, and 10% of van sales in 2024. Firms must pay a fine of £15,000 for every sale that pushes it outside the mandate. Unfortunately for both the manufacturers and the government, electric vehicles aren’t nearly as popular as originally predicted. There are growing concerns over the sales quotas; customers aren’t meeting the demand quotas for electric vehicles.

Vauxhall isn’t the only company to come forward with announcements of job cuts, Ford also recently announced their employee cuts nationwide. Over the next three years, Ford intends to cut 800 jobs in the UK alone, with over 4,900 total job cuts across Europe, roughly 14% of its regional workforce. In a statement, Ford said, “the industry faces unprecedented competitive, regulatory and economic headwinds”. 

Nissan, which builds EVs at its plant in Sunderland said the regulations “undermine the business case for manufacturing cars in the UK, and the viability of thousands of jobs and billions of pounds in investment”. This mantra has been repeated across the board by executives within the motor industry. 

Recently, EV sales have been increasing in the UK, with one out of every five cars being electric. This has mainly been due to the discounting in price due to the weak demand for EVs. Ford themselves have had to cut prices because of the shortening demand. These regulations are driving up prices of production whilst also reducing competition within the market.

Net-zero mandates aren’t the only regulations that are marginalising car manufacturers, the increases of National Insurance and minimum wage will cause further lasting impacts. These hikes will not only increase production costs and make it harder to hire new people but also further restrict the barrier of entry for new competitors to enter the market. Prices will continue to remain high with fewer competitors within the industry, making it harder to attract new customers. Car brands are urging the government to relax its regulation and its rules around meeting sales quotas amid uncertain economic conditions. 

It isn't any wonder that customers aren’t attracted to buying EVs. They are on average, as highlighted, much more expensive than diesel and petrol cars. Rapid charging stations, while they have improved in numbers, are still hard to come by in the UK. Furthermore, the range of EVs varies with car manufacturer, battery size and in some cases, temperature. 

Until these issues are addressed, the car industry will continue to be hampered by the government’s regulations and sales quotas which aren’t being met. If these quotas aren’t removed, along with the regulations hampering the industry, the car industry will implode in on itself. It is quite evident that the UK government can’t enforce sales upon people, so why enforce the mandate in the first place?