Will clean air zones impact car sales?

The importance of addressing global warming has gained increasing traction over recent weeks. With Scotland hosting the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow in November, the momentum in the UK is sure to increase. Changes in how we travel are squarely at the centre of calls for change, albeit it is not alone. So, is this a change that will help car sales?

Candidly, it is hard to be sure, the global pandemic has affected consumer confidence financially, and we continue to see moves away from public to private transport. There is plenty of evidence that many new car buyers are interested in buying an electric vehicle (EV). However, there are continuing concerns about the UK’s charging infrastructure, even if the range potential from the current crop of new EVs is increasingly impressive. And then there is the price; EVs are costly due to the essential but expensive batteries.

Pain v Gain

I believe that inherently many people looking at a new car want to switch to an EV; indeed, by 2030, they will have to because fossil fuel cars will no longer be sold in the UK after that date. The critical area to see mass adoption will be the age-old pain v gain assessment.

EVs offer very low Benefit in Kind taxes for business users, no road fund licence, less servicing and much smaller fuel bills typically. These pluses are offset by the high cost and the fear of ‘range anxiety.’

To date, this equation has seen adoption at a modest level, not helped by a shortage of supply due to a worldwide dearth of essential microchips. Now enter the potential influence of Clean Air Zones across urban areas across the UK. Birmingham, which launched its CAZ in June, sees drivers in its CAZ area being charged £8 per day if their vehicle does not meet the minimum emissions standards of Euro 6 for diesel and Euro 4 for petrol. For Birmingham commuters the cost adds a sizeable weight to their assessment scales. Nor is Birmingham alone. However, there is no consistent standard for CAZs and charging or not.

The CAZ road map

There are four classes of Clean Air Zone, and Local authorities can decide what level of restriction to apply.

1. Class A - Buses, coaches, taxis and private hire vehicles
2. Class B - Buses, coaches, taxis, PHVs and heavy goods vehicles (HGVs)
3. Class C - Buses, coaches, taxis, PHVs, HGVs and light goods vehicles (LGVs)
4. Class D - Buses, coaches, taxis, PHVs, HGVs LGVs and cars

Buses, coaches and HGVs that meet Euro VI emissions standards must be exempt from charges or restrictions. Cars, vans and taxis that meet Euro 6 (diesel) or Euro 4 (petrol) emissions standards must be exempt from charges or restrictions. Ultra-low emission vehicles with a significant zero-emission range must be exempt from any charges or restrictions.

By March 2018, the UK Government mandated that each local authority create an Air Quality Improvement Plan to combat air pollution in regions that breached legal limits. Today and impacted by the pandemic, the roll out and potential charging varies.

Areas set to introduce a CAZ

Please note these are subject to change and have varying charge/no charge plans and naturally different geographic reaches:

• Bath and Birmingham are live; the former is not levying charges as yet.
• Leicester - CAZ expected in Summer 2021.
• Bradford - CAZ expected in October 2021.
• London - ULEZ expansion from October 25, 2021.
• Bristol - CAZ expected from October 29, 2021.
• Portsmouth - CAZ expected in November 2021.
• Newcastle - CAZ expected in 2021.
• Manchester - CAZ expected May 30, 2022.

Scotland has a schedule for low emission zones in its major cities, while Wales is finalising their plans.

It is important to note that a number of urban areas have opposed the introduction of CAZs in their jurisdictions.

The problem for consumers is the breadth of variation. A monthly bill of £160 in Birmingham for a city centre commuter could well be a compelling factor in opting for an EV. However, from an affordability perspective, access to an EV could still be a step too far for some and right now, the availability of used EVs is limited.

In the short term, the big winners could very well be newer used cars, notably Euro 6 for diesel and Euro 4 for petrol vehicles which would not be impacted by CAZ fees typically. The problem is that, like many used vehicles, availability is limited, and prices are rising. So here again, for some people, affordability could be an issue.

Jon Slater, Chief Marketing and Strategy Officer