Allianz Q&A on upcoming ban on new petrol and diesel cars

Authored by Allianz

Prime Minister Boris Johnson has announced that new cars and vans powered wholly by petrol and diesel will be banned in the UK from 2030.

Originally the ban was to be introduced in 2040 to reduce greenhouse emissions; however this date was then brought forward to 2035 earlier this year before the Prime Minister announced an even nearer date of 2030 as part of the 10 point green plan. Moving this date forward another five years will help jumpstart the market for electric cars and push Britain towards its climate goal.

What about existing Interal Combustion Engine (ICE) and hybrid cars?

The PM has confirmed that some hybrids would still be allowed. This means that hybrid cars could still be on sale until 2035. Similarly, owners of existing full internal combustion engine (ICE) cars will not be forced off the road when 2030 comes around; rather the ban is only on the sale of new ICE vehicles.

Any potential repercussions?

Since taxing on motoring currently generates about £40bn per year, the ban on petrol and diesel cars is likely to result in a financial shortfall for the government. One way to address this could be the introduction of a national system of road pricing, meaning that motorists would need to pay to use the roads.

However companies could see a financial benefit in electrifying their fleets. A common drawback with company vehicles tends to be the associated personal tax liability, where employees are required to pay ‘Benefit in Kind’ (BiK) to reflect the taxable benefit. This can result in individuals opting for keeping their own vehicles and claiming the mileage, which in turn can mean companies miss out on certain benefits, such as deductible repair and maintenance expenses. The Government has confirmed that drivers of pure electric vehicles will pay no BiK tax in 2020/21, so motorists may be more persuaded towards an electric vehicle.

What’s the potential insurance impact?

Insurers anticipate an increased demand for so-called ‘Green Parts’ post 2030, for remaining roadworthy petrol and diesel cars; ‘Green Parts’ are undamaged, reusable vehicle components which have been reclaimed from end-of-life accident damaged vehicles.

Electric vehicles tend to accelerate more quickly than an equivalent petrol or diesel car so it is likely to take drivers some time to become used to their new vehicles, this may result in more claims. It’s therefore important that any employer moving to an electric fleet considers what additional guidance or training may be required.

What is the 10 point plan?

The 10-point plan, termed the ‘green industrial revolution’, looks at energy efficiency in homes, zero-emission public transport, clean nuclear energy and more.