FORD may have to resort to restricting the supply of ICE vehicles if the Government doesn’t deliver market boosting EV incentives in the Budget later this month.
In a rare interview, Ford Chair and Managing Director, Lisa Brankin, said that while the current plan was to keep supplying ICE vehicles, a reduction in supply “is one of the plans that might have to happen”.
While Brankin was keen to point out that it did not want to reduce supply and Ford isn’t planning to do so at the moment, the option was not off the table as a way of meeting the Vehicle Emissions Trading Scheme (VETS) which is linked to the ZEV Mandate.
Speaking to Broker News at the launch of the new all-electric Explorer SUV, Brankin said: “VETS is a mix, so one strategy could be to say we’re not going to supply any more ICE. That’s not our plan. That’s not where we want to end up. We know there are customers that want those vehicles. We’ve got a dealer network that wants to sell them and we don’t want to restrict supply because at the end of each of those vehicles is a customer, and that’s kind of what people forget in all of this. So that’s not what we want to do, but that is one of the plans that might have to happen.”
The decision to supply will hinge on the Chancellor’s Budget on 30 October.
Brankin urged the Government to use the upcoming Budget to put incentives in place to stimulate the EV market:
“There's an opportunity that I would encourage the Government to grasp to help us build momentum and get to where they need to get to so we don't get to 2030 and look back and think what went wrong.”
She added: “The number one thing that I’m thinking about at the minute is VETS compliance. It’s probably one of the biggest challenges that we are grappling with as an industry and as a manufacturer. I think the UK Government has set really, really ambitious CO2 targets. And because transport is one of the biggest contributors to CO2 we need to play our part in delivering that objective – hence the VETS trajectory. And if we want to get that target of CO2, then we’ve got to deliver the VETS.
“Unfortunately, at the minute we’re not, as an industry, on track to do that and that’s driven really by lack of customer demand for electric vehicles.”
Brankin added that Ford understood the Government’s fiscal challenges but if the automotive sector is going to help hit the CO2 targets there needs to be greater incentives to buy an EV both in the retail car market and in the commercial vehicle market.
“The incentives we’ve got already need to stay and we’d add in a retail incentive to drive retail demand and help customers make the switch.
“We’ve thrown our weight behind the SMMT which is calling for a cut to VAT. They’re suggesting a time-limited cut for three years from 20% to 10% on new EV sales. But at the same time, Ford Pro is so important to us. What we really want to see is an extension of the plug-in van grant as at present that’s set to run out at the end of March next year. That doesn’t give any forward looking ability for our fleet customers, so we want to see that extended.”
Ford’s current EV mix is running at around 10% year-to-date for passenger cars and approximately 4% for LCVs. While Ford is unlikely to meet the 22% car and 10% van BEV targets this year the real deadline comes at the end of 2026 when the fines, and any forward borrowing, become due.
According to Brankin, industry-wide retail demand for EVs is below 10%, while for fleet it’s above 35%.
Beyond incentives or reducing the supply of ICE vehicles, Brankin did not offer any other options that would be open to Ford. The manufacturer has been pressuring fleets to take a minimum mix of BEVs throughout this year and at the start of the year was only offering terms to those commercial vehicle orders which took 10% EV.
However, this position has been relaxed according to one prominent leading broker who said: “They don’t explicitly mandate that 10% of LCV bulk deals need to be EVs, but they certainly ask the question and actively pursue it."
“From what we can see this is the case with their approach more generally. For some customers who want to order in volume, the EV option may be feasible e.g. local authority, but for others such as construction business, it’s not worth pursuing and they wouldn’t jeopardise the larger volume for the sake of the EV content.”
Ford Explorer – stimulate sales
Brankin said Ford was working on a way to hit the targets through all channels including brokers. “It’s really challenging because when you don’t have customers who want to buy electric vehicles, it’s really hard. But without incentivisation I think it’s going to be really hard for the industry overall to get to the targets and within that for us to get to targets as well.
“We feel really strongly that we are asking for customer incentivisation to drive demand to help us move customers into electric vehicles.
“Without that demand, the scheme does not work. We will have nine electric vehicles in the market by the end of 2025 and we still won’t be able to hit that ZEV target. That demonstrates something’s not right with the scheme. And the challenge is even more acute on the LCV side because of course some of the flexibilities available to help companies meet the scheme, meet the targets, they’re not going to be possible to use in commercial vehicles. We are the market leader, we have the electrified product in the market, there’s no one to buy credits from on the commercial vehicle side. So it demonstrates that reform of the scheme is absolutely necessary.”
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Tristan Young is an award winning journalist with more than 25 years’ experience reporting on the automotive industry focussing predominantly on fleet and retail. As a self-confessed petrol-head, Tristan has a weakness for car classifieds. When he’s not writing about the automotive industry, he can usually be found outdoors with a small pack of border collies.
