In order to develop the UK’s comparative advantage in the expanding international ultra-low emission vehicle (ULEV) market, the Government and industry must take unprecedented concerted action, an influential think tank reports.

The report, from the Institute for Public Policy Research (IPPR), suggests this should focus on three areas of industrial policy:

• Ensuring that domestic firms in the automotive supply chain have access to the finance that they need.
• Providing greater public investment for the application and commercialisation of innovation.
• Adopting new strategies in higher education, immigration and apprenticeship policy to ensure that the supply of engineers keeps pace with demand from the automotive industry.

However, this comparative advantage can only be maintained by the development of a vibrant domestic ULEV market.

To achieve this, the IPPR report ‘Leading the charge: Can Britain develop a global advantage in ultra-low emission vehicles?’ says action is required in several areas:

• Purchase incentives currently provided by the government should be more actively promoted, and guaranteed for longer periods to give greater certainty to buyers.
• Current usage incentives such as free parking spaces should be expanded, and other incentives such as free use of toll roads for ULEVs considered. A single ‘green badge’ scheme should be introduced to make it easier to identify qualifying vehicles.
• As a major procurer of vehicles, government should do more to drive demand for ULEVs by phasing in more stringent emission standards to the government buying standards for transport.
• Government should ensure that all ULEV buyers have access to safe charging point infrastructure for home, public, and private business use.
• New rapid charging stations should be placed at locally-identified strategic locations.
• Efforts to decarbonise the electricity system should be strengthened to ensure that drivers are not switching from dirty petrol-fuelled cars to dirty electricity-powered cars.
• The electricity network should be upgraded to meet additional demand from ULEVs.

The BVRLA has welcomed the publication of a new independent report from the IPPR think-tank on how the UK can grab the full opportunity presented by ultra-low carbon vehicles.

The association was consulted during the drafting of the report and was particularly interested in its comments on the removal of 100% First-Year Allowances for lease cars.

The report says: “Many interviewees argued that the key to promoting ULEV uptake lay in supporting leasing and rental companies, partly as a means of allowing the public to gain experience of ULEVs.

“Most cars and vans are bought through some form of leasing or rental company. In 2011 58% of new vehicle registrations were made by businesses, and of these registrations over 90% were part of a fleet of 25 vehicles or more.

“In the fourth quarter of 2011, 74% of fleets had vehicles financed on a contract hire basis, 22% had vehicles financed on an ad hoc hire basis, and 19% of fleets had vehicles financed on a finance lease basis.

“Furthermore, 66.5% of consumers used either hire purchase arrangements or personal lease arrangements.

“Therefore the changes made in the 2012 budget, which removed the availability of enhanced capital allowances for ULEVs to leasing and rental companies, have had a serious impact on the fiscal incentives available to support ULEV uptake, particularly by public sector bodies.

“IPPR has been told that the removal of the availability of 100% first year capital allowances to leasing and rental companies could add 3-5% to the cost of a car lease, or up to £15 per month on a £300 per month lease.

“For a fleet of 25 ULEVs financed over a four -year period, this adds a total of £18,000 to the cost of that fleet of ULEVs.

“We recommend that the government immediately reinstate the 100% first year capital allowance availability for leasing and rental companies.”

BVRLA chief executive John Lewis said: “We are delighted that this independent report has recognised the vital importance of the vehicle rental and leasing industry in driving the uptake of ultra-low emission vehicles, something that the government has chosen to ignore.

“We will continue to lobby for them to reinstate 100% First Year Allowances for our sector. Sales of new ultra-low carbon vehicles will not progress as everyone wants them to unless this happens.”