Is the Electric Car Market Becoming Nothing More than a Political Football?

With news that Tata Motors has yet to receive confirmation that its application for a £10 million loan from the British government has been successful, the company has threatened to withdraw from the UK car market and scrap plans for its Vista electric cars to be manufactured in the UK. As a consequence many people believe that the electric car market could become the next political football with dire consequences!

Government funding for the electric car market

Tata Motors is furious with the UK authorities, having applied for a £10 million loan from the government's heavily publicised £2.3 billion funding package which was announced as a backup for companies looking to invest in more fuel-efficient technologies. This comes at a time when Nissan has announced a £200 million investment in its Wearside plant amid rumours that the UK government will offer further support in the form of loans and loan guarantees.

It has to be said that Tata Motors is not the first company to look towards the UK government for assistance and find that progress is much slower than promised. When you consider the company applied for the loan in April, when the UK government announced its backing of more fuel-efficient technologies, the news that confirmation will not be forthcoming before September at the earliest does not bode well for the future.

Why is the government dragging its heels?

While there is a suspicion that the UK government likes to grab headlines in a blaze of glory and then ultimately cut back on promises, there is also a need to ensure that UK taxpayers do actually receive value for money. There is no point in investing tens of millions of pounds, or hundreds of millions, into a venture or a company which is potentially unstable in the current economic climate and could struggle to make the impact promised.

However, the electric car market is still fairly immature in the UK and around the world and there are obvious risks with regards to investment in this sector in the short to medium term, until it has a firmer footing. Whether the government is looking to avoid any potential criticism or controversy prior to the next general election is another point which has been mooted that ultimately the silence from Peter Mandelson's Department has been deafening.

Assistance from overseas governments

The UK authorities need to be very careful about dragging their heels with regards to further investment into the electric car market when you consider that for example Tata Motors has already secured a multi-million pound loan from the Norwegian government and Tesla Motors was the grateful recipient of a multimillion dollar low-interest loan from the US government. Even though it appears that companies such as Tata Motors and Nissan are looking to the UK for the future of their electric car operations there is a need for the authorities to "grab the moment".

The UK car market

It is no secret that the UK car market has literally died a death over the last 20 years and despite the UK government's promise of a multibillion pound loan guarantee and bailout program, very little finance has actually been received on the shop floor. There is a real danger of the electric car market becoming the new political football the future which could be kicked around from pillar to post and may see the UK miss out on this potentially lucrative area of industry. Even though the headlines suggest otherwise, the UK government certainly needs to speed up the processing time it is taking to consider financial assistance for companies willing to invest into the UK.

Is the UK government short on financial backing?

Even though each and every country around the world is in a very similar situation, with budgets stretched to the limit and national debts moving higher and higher, a number of reports regarding the UK economy suggest that government finances have literally been stretched beyond their limit. Whether this has had any impact upon the UK government's apparent delaying tactics with regards to the £2.3 billion fuel efficiency drive is open to debate but there is no doubt that money is in short supply and even a delay of a few months would help the UK authorities replenish their funds.

However, when you consider the billions upon billions of pounds which have been ploughed into the UK financial sector, with limited return as yet, maybe the authorities have made a massive error in going for the headline grabbing investment in the financial sector when ultimately some money should have been put aside for growth areas such as electric vehicles. Whether the authorities will live to pay the price remains to be seen!

Why should taxpayers invest in the electric car market?

When you consider the millions upon millions of pounds which the likes of Nissan have injected into the UK economy and the millions upon millions of pounds in corporate taxation which they have paid to the government, long-term relationships with these types of companies can be very lucrative on many levels. When you also throw in the thousands of jobs which can often be created, reinvigorating local economies and creating a supply chain which can also employ tens of thousands, then we start to see the full picture.

However, it is worth remembering that financial assistance from the government should be seen as a long-term commitment as those looking to play the system in the short-term can benefit to the detriment of the UK taxpayer and the UK employment market.

Conclusion

Even though the UK authorities have made significant progress in funding some areas of the electric car market and persuading the likes of Nissan to open a new battery plant in the Northeast, there is a real danger that the electric car market could become a political football. Vague promises of massive funding often grab the headlines although it is imperative that the finance which has been promised is ultimately available at a reasonable speed.

News that Tata Motors is potentially looking elsewhere for the manufacture of its own electric vehicles because of government delays in confirming a £10 million loan application starts to give the impression that the UK authorities have their favourites, such as Nissan, and other companies may ultimately be ignored. This is a very dangerous game to play because by putting "all of your eggs in one basket", i.e. backing a small number of car manufacturers, the UK authorities are handing over more influence and more power to the likes of Nissan.

Finding a balance between lucrative concentrated investment and the creation of a large long-term market is not easy and is proving testing for the UK authorities.