The past couple of weeks in the automotive world have seen a typical number of new car announcements – most of them were electric vehicles (EVs) of course, but not all, the menu also including plug-in hybrids and even a performance petrol-powered car in the latest BMW M2. 

Just four years ago it was all very different – many new models being revealed then were described as the last of their kind, with manufacturers queueing up to announce just how quickly they would go all-electric in the race to Net Zero. Had those aims been met some of those brands would already be electric-only, but they are not, because the world, or at least the political landscape, has changed. 

The US is now headed by someone who is a lot more of a climate-sceptic, and in Europe arguments against the rush to electric automobiles are gaining traction. Even in the UK the current Government has heard the mood music and watered down some aspects of the Zero-Emissions Vehicle Mandate that was the big stick forcing the automotive world down the Net Zero path. 

In the UK national newspapers are expending unprecedented amounts of copy speculating on the prospect of Reform UK’s leader Nigel Farage being the country’s next Prime Minister, despite a General Election being more than three years away. Among the manifesto points Farage has started espousing in speeches, is the scrapping of Net Zero, and so we assume the ZEV mandate would be no more if he came to power? Not exactly helpful for the future planning departments of automotive manufacturers trying to crystal-ball gaze years ahead…

So the future remains very uncertain – everyone sort of knows we are going all-electric, just how and how quickly is not quite as set in stone as it was just a few years ago. There are growing thoughts that some radical rethinking might be necessary and it was perhaps that vein that produced the remarkable instance of two direct rival car bosses speaking with the same voice last month.

At a Future of the Car summit organised by Britain’s Financial Times newspaper, Luca De Meo, CEO of Renault Group, and John Elkann who heads up Stellantis Group and so has badges such as Peugeot, Citroën, Vauxhall, Fiat and Alfa Romeo under his remit, teamed up to call for more flexibility in future EV sales targets, especially where small cars are concerned.

Priced to sell

Small cars pose a big challenge for any car manufacturer. The customer base is to a major extent comprised of those who have recently passed their test and are looking for a first car, and at the other end of the scale retirees who just want a runabout to go down the shops twice a week. The common factor is that they don’t have much money to spend.

The small cars in a manufacturer’s model range sell in big numbers, but they bring in not a lot of revenue, as their margins have to be as tight as possible to make them affordable to those customers. Several small cars make do with four-star and sometimes even three-star safety ratings because the extras needed to hit the top five-star mark – the norm in the larger segments – would simply push their price beyond what their target market can cope with.

All of which makes the challenge far more prescient when talking about EVs. If you ignore oddities such as the Dacia Spring, its bargain basement price the result of a mediocre range, equally mediocre safety rating and no extras whatsoever, small EVs are expensive.

Renault’s revival of the 5 as an EV already looks to be a hit and at prices starting from £23,000 it is considered seriously competitive. But at the same time a petrol-powered Renault Clio can be had for around £17,000 – £6,000 is a lot not to spend on a car for someone at the start of their career and yet to earn the big bucks, especially if you consider that the £23k 5 will do more than a hundred miles less than the Clio before needing recharging. To get another 60 miles will cost another £3,000 for the bigger battery version. 

If you are short of cash, you will choose a petrol or even hybrid Corsa over the electric one every time…

Such figures are replicated across the market. The Vauxhall Corsa for many years vied with the Ford Fiesta for the title of favourite first car. Today a new Corsa costs from just under £19,000, an electric one £9,000 more. Hyundai’s smallest car is the i10, priced from £16,100, its smallest EV the Inster, from £23,500.

So the manufacturers have the problem that the buyers responsible for one of the biggest slices of their sales figures will be some of the hardest to turn into EV buyers, leading some to speculate that slavishly pursuing zero emissions targets could result in neglecting the small car market, which won’t exactly help the emissions targets. 

De Meo and Elkann argue that instead of the current hard and fast 2035 deadline for all new car sales to be electric in both the European Union and the UK, there should be more flexibility. They advocate, over the next few years at least, a much greater role being played by the sale of small cars with plug-in hybrid or range-extender powertrains (which have a small low-emission engine present just to generate electricity for the battery). These would be much cheaper than going full electric, but significantly cutting the overall CO₂ emissions figures – not zero emission, but lower emission.

Hybrid option

It is becoming increasingly clear across the automotive sector that the hybrids and range-extenders have a greater role to play on the road to Net Zero than was thought to be the case just a few years ago, and recent changes to such as the ZEV mandate legislation have demonstrated that. 

Just a week ago Honda announced plans to cut back on its electric investment by 30% in favour of hybrids – the Japanese manufacturer now sees EVs accounting for 20% of its global sales by 2030, not the 30% it previously forecast, and plans to launch 13 ‘next-generation’ hybrid models in the four years from 2027.

The small car exception idea appears to have merit, because the figures suggest it will play a viable role in achieving the ultimate goal which is cutting CO₂ emissions – but it is also clear that the whole picture remains as confused as ever. Everyone needs to get round a table and thrash out a plan, fast…