The Electric Vehicle Industry in the UK

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Executive summary

The UK is among the countries that have experienced climate change effects such as heatwaves. To effectively tackle this issue and lower the number of emissions, one sector to focus on is the electric vehicle industry. In the UK, the government supports the growth of the electric vehicle industry to replace internal combustion vehicles and reduce its carbon footprint. The findings from the macro-environment evaluation are inadequate funding, intense competition from vehicles that use fossil fuel, and resistance to change. As a result, the growth of the electric vehicle industry will play an integral role in attaining the UK’s goal of net zero by 2050 due to its ability to lower greenhouse gas emissions to the environment.

Introduction

Today, the world is facing the impacts of climate change due to the overuse of fossil fuel, cutting down trees, and rearing livestock. Climate change is happening, and people are experiencing a dangerous shift in temperature and weather. The UK is one of the countries that have experienced the impact of climate change through episodes of extreme heat (Sharma et al., 2019). This has led to the emergence and growth of the electric vehicle industry in the UK. The sales of electric vehicles are increasing steadily in this country because they help achieve its 2050 net-zero emission goal (Logan et al., 2020). It is anticipated that electric vehicles will completely replace internal combustion vehicles. Therefore, this report will discuss the UK’s net-zero, an overview of the electric vehicle industry, macro-environment analysis, key issues, and a 20-year forecast.

An Overview of 2050 Net-Zero Goal

The net-zero target is important because it is one of the most effective ways to tackle climate change by reducing global warming. A climate change act as amended in 2019 commits the UK to be net-zero by 2050. The legislation increased the country’s commitment to a 100% reduction in emissions by 2050 (Logan et al., 2020). The UK intends to decarbonize its power sector by 2035 completely. It wants to focus on renewables by generating power through offshore winds and nuclear energy plants (Farand, 2021). In addition, the UK wants to speed up industrial carbon capture and hydrogen. As a result, the electric vehicle industry is likely to benefit more from this goal because it helps in reducing the emission of greenhouse gases.

Macro-Environment Analysis

Table 1: PESTEL Analysis

PESTEL factors Explanation
Political Political factors include political stability, trade restrictions, policy formation, environmental regulation, and many more. The country has a stable government owing to its parliamentary democracy. It is subject to the rule of law, low corruption, and effectiveness of government policies (Hamilton and Webster, 2018).
Economic Economic factors include economic growth of the country, employment, and many more. In 2021, the GDP of the UK was $2.7 trillion. Currently, the corporate tax rate for companies is 19%. However, it is anticipated that the UK government would reduce the tax rate to attract more corporate.
Social Social factors consist of cultural norms, health consciousness, population growth, and others. Based on their health consciousness, UK’s citizens value their health and well-being. The country’s population was about 67 million people (Shahbaz et al., (2020).
Technological The UK houses one of the world’s leading research and development centers, which are constantly working to break down barriers in almost every segment. As a result, the economy is mature with entrepreneurial opportunities.
Environmental Environmental factors include environmental policies, weather, climate change, and many more. The government of the UK has focused their attention on reducing the effects of climate change. For example, the recent goal is to achieve a net-zero by 2050.
Legal The UK has several laws and regulations for companies to conduct their operations in the country. Some of the laws include employment laws, environmental protection laws and many more.

SWOT Analysis (Opportunities and Threats)

There are opportunities and challenges due to climate change and net-zero 2050. The first opportunity is the increasing need to decarbonize the transport system. The UK government wants to reduce the impact of climate change by lowering emissions caused by vehicles using fossil fuel. The second opportunity is the government’s interest in reducing climate change and achieving net-zero in 2050. However, some possible threats or challenges are cost, tough competition from fossil fuels, and resistance to change. To actualize the dream of net zero by 2050, massive investment is required in infrastructural change and other operations. There is also a possibility of resistance because change is not an easy process. Therefore, reducing climate change faces a number of opportunities and challenges in the UK.

Electric Vehicle Industry Analysis

The electric vehicle industry has several strengths and opportunities. The electric vehicle industry in the UK has received a major boost due to the government’s growing interest in reducing the impact of climate change. In 2021, the government announced that it would move its ban on fossil-fueled vehicles from 2040 to 2030 (Jolly, 2021). As a result, the electric vehicle sector is considered a major player in reducing the impact of climate change. In addition, the industry is growing due to government support. The number of charging points for electric vehicles is increasing across the country to help realize the dream.

Table 2: Porter’s Five Forces

The five forces Explanation
Bargaining power of suppliers The bargaining power of suppliers is low because of the existence of many suppliers in the market.
Bargaining power of buyers The bargaining power of buyers in the electric vehicle sector is low because of a high number of customers (Johnson et al., 2020). The demand for electric vehicles increases as people become conscious of the environment.
The threat of new entrants The threat to new entrants is low because of the large capital required to start and manage.
Threat of substitute The threat of substitutes is high due to the availability of fossil fuel vehicles. Customers can easily make a decision to purchase internal combustion vehicles because they are cheap and easy to manage (Johnson et al., 2020).
Rivalry among competitors The threat of rivalry in the market is high. However, internal combustion vehicles in the market are the main threat to the electric vehicle industry.

Key Issues

The first issue is the resistance to change from the use of unclean energy to renewable ones to reduce the impacts of climate change. Since climate change reduction is a new approach and not effectively developed, individuals and businesses lack knowledge and maintenance of operations (Buller, 2020). It is believed that the introduction of climate change mitigations to achieve net-zero by 2050 is likely to disrupt their lives. For example, there is an anticipated ban on internal combustion vehicles in the market to help achieve the net-zero emission in the UK. This means that organizations making fossil-fueled vehicles must change their infrastructure to adopt. As a result, individuals and organizations are still afraid of the impact of the change caused by the road to achieving a net-zero emission.

The second issue is inadequate funding due to the financial cost required to implement climate change mitigation strategies by reducing carbon footprint. Renewable energy initiatives demand high initial capital, which pushes investors to the back foot. The Treasury of the UK claims that taxes must be increased to support the move. The decision is stirred by an anticipated decline of £30 billion every year in tax revenues generated from fossil fuel duty (Harvey & Elgot, 2021). The plan to gradually reduce the effect of climate change to achieve the net-zero by 2050 requires expansion in the manufacturer of electric vehicles and increasing charging points. The country is expected to spend about £120 million towards the investment of new technologies to support a reduction in climate change. Therefore, achieving a net-zero goal is a costly venture and the UK government together with relevant stakeholders must be prepared to invest more money.

The third issue is the tough competition from fossil fuels. This is one of the country’s challenges in mitigating climate change. Fossil fuel remains a dominant player in energy provision (Kendall and Shang, 2020). Many sectors of the economy depend on fossil fuel because it is available and cost-friendly. Despite its contribution to climate change, fossil fuel is beneficial for household and commercial use. Non-renewable energy is still emerging as a cheaper option to renewable energy in the market. For example, it is easier to maintain an internal combustion vehicle than an electric vehicle. The benefits of using fossil fuel make the attainment of the net-zero goal a challenge for the government because it reduces the growth of sectors such as the electric vehicle industry. As a result, due to the emergency of fossil fuel as a cheaper alternative, non-renewable energy offers stiff competition to renewable energy.

A 20-year Forecast

In the next 20 years, the electric vehicle industry will replace internal combustion vehicles, and the UK government will be close to attaining its net-zero goal. In the short term, the electric vehicle industry will increase its market share in the UK due to the rising demand for its vehicles. To facilitate this growth, the UK government is set to continue offering support by increasing the number of charging points across the country. For example, the UK government stated that it will ban the use of internal combustion vehicles by 2035 (Logan et al., 2020). It is anticipated that the UK government will be near its net-zero emission goal in the long term. The country is keen on reducing its carbon footprint and enacting legislation to support the goal. Therefore, in the next two decades, the electric vehicle sector will be a major player in the UK economy and a contributor to reducing the effects of climate change.

Conclusion

The electric vehicle industry is a major player in mitigating climate change in the UK. The industry’s growth is likely to assist the country in reducing its national carbon footprint. The UK government has set out the net-zero emission goal, and to attain this, changes must be made, such as supporting the growth of the electric vehicle sector. However, the government should handle identified issues like inadequate funding, resistance to change, and intense competition because it hinders the growth of the electric vehicle industry and attainment of net zero-emission. As a result, to effectively reduce the impact of climate change, the UK government must create an enabling environment for the thrive of electric vehicles.

Reference List

Buller, A. (2020) ‘Where next for the Green New Deal?’ Renewal, 28(1), pp.26-37. Web.

Farand, C. (2021). UK sets out economy-wide strategy to meet 2050 net zero goal.

Hamilton, L. and Webster, P. (2018) The international business environment (4th ed.). London: Oxford University Press.

Harvey, F. and Elgot, J. (2021) UK’s net zero plan falls short on ambition and funding, say critics.

Johnson et al. (2020) Exploring strategy (11th ed.). Pearson, UK.

Jolly, J. (2021). Car industry lobbied UK government to delay ban on petrol and diesel cars. Web.

Kendall, K. and Shang, N.J. (2020) New dimensions in production and utilization of hydrogen. Elsevier, Netherlands.

Logan et al. (2020) ‘Electric and hydrogen rail: Potential contribution to net zero in the UK,’ Transportation Research Part D: Transport and Environment, 87.

Shahbaz et al. (2020) ‘UK’s net-zero carbon emissions target: investigating the potential role of economic growth, financial development, and R&D expenditures based on historical data (1870–2017),’ Technological Forecasting and Social Change, 161.

Sharma et al. (2019) ‘Urban heat island and future climate change—Implications for Delhi’s heat,’ Journal of Urban Health, 96(2), 235-251.

Appendices

Table 3: Team Charter and Project Plan

Team’s objectives

  • Understand the impact of climate change in the UK
Individual involved

  • Group members
Goals

  • Determine the role of the electric vehicle industry in reducing climate change
Roles and responsibilities

  • Use porter’s five forces to analyze the electric vehicle industry
  • Determine the strength and opportunities of the industry.
  • Conduct macro-environment evaluation.
  • Determine key issues.
  • Provide short and long term forecast

Analysis tools used:

  • PESTLE analysis model.
  • Porter’s five forces model.
  • SWOT analysis.

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