#12 Ford UK's Lisa Brankin: Pay Per Mile Tax Could Suppress EV Uptake.

0:17Hello and welcome to Big Boss Interview. I'm Fliss Hanna and Sean Farrington is here with me to tell us about his latest interview. Sean, it was Lisa Brankin, UK boss of Ford General Motors. Yes, so a big boss, a big brand here in the UK, of course, whether it's people buying cars for decades or us making cars, making engines, making the stuff that goes into the new electric vehicles that we're seeing. It's been huge change for Ford over recent decades. So Lisa spoke a lot about that. We got into a really interesting conversation about how much we actually want electric cars at the moment. We know that lots of people, lots of businesses, lots of governments want us to be buying them.

1:01Is it what really customers are looking for at the minute? And is there enough options out there to make people convinced that it's for them? So that was pretty interesting. The growth and the introduction of Chinese cars in particular, the impact that's had on the car market here in the UK, was fascinating to hear Lisa Brankton talk about that. Very intriguing moment when I asked her if Ford might do a tie-up with a Chinese car company. I will leave you to hear what she had to say in response to that. So there was quite a lot for us to get through. It was interesting. We talked about manufacturing.

1:35We talked about sales a lot. So did she stay in her lane? Sorry. or did she talk more widely about the economy? No, there was definitely a lot of more wide chat about the economy, particularly with the budget around the corner. There are some concerns, there are a lot of big concerns about what might happen in the car industry. If you actually think about all the things that have been mooted of late, so whether it's been, are we going to be charged per mile if we're an electric car driver? Is there going to be business rates applied to those charging companies that provide the charges around the whole country?

2:06many other different aspects as well of taxes that may well change for those who drive electric cars there's plenty for us to get into there but also we just got into more widely are we are we as brand loyal as we once were the Ford Focus only in recent weeks the very last one ever made rolled off the production line it is no more for Ford so yes loads to get into with Lisa Brankin it was a really interesting chat well let's hear it here's Sean Farrington talking to Lisa Brankin UK boss of Ford.

2:39Just start off with asking you at the minute about the car market in the UK. It's a busy time for a lot of people. How would you describe the confidence in the UK car market at the moment? So I think I'd tell you that it's really tough at the minute and it's tough obviously because of the general economy. Car purchases, van purchases are big outlays for people. There's generally low levels of consumer confidence and everyone's I think waiting to find out what happens in the budget so it's been a really tough environment but on top of that we've got a very pressurized environmental targets to hit that are putting the industry as a whole under quite a lot of pressure so I'd say it's actually quite a difficult environment at the minute Sean.

3:19And in terms of how those potential customers are behaving at the moment you mentioned the budget Have you seen a change in their behaviour in recent days, weeks, months? So we operate in two bits of the market. We sell cars and we sell vans. And certainly in the van market, we're seeing particularly the sector of the market, there's more independent traders, small businesses being much more cautious and demand from that bit of the market is much lower than it had been in the first bit of this year. So that's definitely slowed down. We're seeing our bigger fleet customers being a little bit more cautious in terms of how they buy.

3:59So they're only buying when they need. And I think that feels very much there's a waiting to see what happens. But also I think the general economy is maybe not as strong. It doesn't have the momentum that it would have to see an industry that's very much more buoyant and growing. And when you say the general economy, what is really going on there for you that means things have slowed down? Well, I think if you think about it, when you buy a car, most people don't really need a brand new car. Not really. They would like one. They don't need it. And it's a really big financial outlay, probably the second biggest outlay to buying a house.

4:36So if you're not confident in your income, your savings, or want to be a little bit more cautious, you might defer that purchase. And I think that's probably what we're saying a little bit at the moment. People are a little bit uncertain. They're not sure what's going to happen. And maybe they're just waiting. What changed throughout the year? So I think in terms of cars, it's been a very tough industry. We had a very buoyant period post-COVID. And I think certainly this past couple of years, it's been tougher. On commercial vehicles, I think the rise in national insurance has hit all companies really heavily.

5:17And I think the discussion and trailing around what's happening with the budget has made companies just pause and wait to see what's happening next before they go again with purchases. Do you think that the impact of those national insurance rises, which we've talked about so much over the last year since that last budget, do you think it's been bigger than people expected it to be? I think it's had a really big impact. If I look at it in my business, but we sell through a network of franchise dealers. They're all independent businesses. And certainly in our business, in their business, it's had a really big impact on the structure of the cost of the business.

5:55And you either have to agree you're going to make less money to offset that or you're going to have to increase prices. And both of those put pressure on a business. And I think that's what we're seeing. the impact of that now rolling through into businesses and it's impacting the way they make decisions and how they think about things. How do you think the run-up to this budget has been? I think it's been really tough and obviously my focus is very much on automotive and it's very much on the automotive industry and a big part of that for us is the electric vehicle targets and there's been a lot of trailing around what might happen around that which is very concerning for us as a business.

6:35Given it's an industry and a sector that's grown so much electric vehicles and so many more people are buying them are we at a point now where it does need to be treated a little bit more like other products that are out there other markets that are out there and we're possibly going to see a bit more of a normalization of taxes this budget? So I will answer your question but can I take a step back and kind of do a bit more context so the UK government has probably got one of the biggest the most ambitious climate change objectives in the world it's going to be carbon neutral by 2050 a big bit of getting to that target was electrifying transport because transport is kind of one of the big emitters and the government introduced a bit of legislation called the vehicle emissions trading scheme and what that means is each year manufacturers have got to sell a bigger and bigger mix of electric vehicles.

7:31Now when that was decided and set a number of years ago the outlook for demand around electric vehicles was really buoyant and there seemed to be momentum behind electric vehicles. What we're seeing now is that customer demand is not in line with that ambition. So by 2030 we need to sell 80 % of our vehicles, passenger cars is electric and 70 % of vans is electric. And if we don't hit the year by year targets, we have really punitive fines. So what we're seeing is it's really easy to sell people things they want. It's hard to sell people things they don't want. So electric vehicles in some instances have gone from being a great thing to being something that we're trying to push people into.

8:17And that comes in terms of heavy discounting and it is resulting in lower residual values. The used car market has got lower prices for those vehicles because it doesn't have the demand for it. So we're seeing sort of a market, that EV market as a marketplace under quite a lot of pressure as opposed to sort of saying that it's normalising because we, as manufacturers, we're pressurising the market. It hasn't quite got to be a normal market. It's very much a distorted market. So people don't want electric cars as much as they did? They do want electric cars, but maybe not at the level and ambition that the government has targeted us with.

8:58So I'll talk to you specifically about cars and not vans at the minute. So the car market isn't just one big homogenous market. There's different sectors of it. There's a bit of it that's retail customers, that's individuals. It's a bit of it that's businesses or whose employees buy vehicles. Some of it is motability and the rest is rental or demonstrators. That company car bit of the market, there's a really beneficial tax benefit. If you drive an electric vehicle, your company car taxes much lower than driving a petrol or diesel. And that bit of the market is about 40 % electric because end customers want to have that benefit and they want to drive electric vehicles.

9:38The retail bit of the market, that end user bit of the market, is round about 15 % or 16%. and our target for VETS compliance is 28 % on cars this year. So we're seeing very much a variability of demand. Yes, there is demand, but it's just not quite at the level that the government has set an ambition for us to reach. But why has that desire for those cars gone, given at first there might have been a novelty, so you get that wave of people wanting a new bit of tech and interested in that, but people have been able to try and test these things now, and it sounds like they're thinking, actually maybe not for me i think so i'm not sure that everybody has tried and tested and rejected i think would be my my first point i think people have a lot of concerns over electric and they don't have to buy because you can still buy petrol or diesel so i think a lot of people are not just not taking the chance and they're sticking with what they know and what they feel really comfortable with because it is actually quite a big change i mean driving the car getting in and driving it it's the same as driving a petrol or diesel but the whole way of transport the idea that you charge overnight that you plan your journeys that's something that you've never had to do before i think a lot of people are concerned or anxious about that so we've had a lot of things mooted in the run-up to the budget one of them has been potential charge per mile on electric vehicle cars and those drivers possible tax business rates being introduced for charging companies you You mentioned the employee car ownership scheme as well.

11:13Given where you've described where customers are at the minute, what would all that do to the electric car market? Obviously, when you drive a petrol vehicle, you pay fuel duty and you pay that as you pay for your fuel at the pump. You don't have any knowledge of paying it. It just happens as you pay for your fuel. It's a tax, but it's not very transparent. The implementation of the pay per mile, obviously at some point we need to normalise electric taxation versus petrol or diesel but this doesn't feel like the right time to do it and what it's doing is it's calling out the electric mileage in a very different and separate way and kind of adding an admin burden onto electric car buyers that your petrol or diesel equivalent doesn't have so we understand as an industry that we need to find a way to normalise this but we would ask for it to be done in an equitable way.

12:09So if the government had kind of reviewed everything altogether and said we're going to implement this scheme for everybody and do it in the same way, that kind of works. What we're doing is calling out electric vehicle drivers as if you like a special case, making a really visible payment that they have to make and adding an extra admin burden onto them. But I think that in the face of really fragile demand for electric vehicles, it's just another break. And we've certainly seen through some of our dealer businesses, customers who had placed orders, put them on hold or cancel pending what happens in the budget.

12:44So I think it's very concerning because we feel like we've just actually had an electric car grant implemented, which was really, really fantastic and great news for us. But now we then have this, which is a break against that, which just doesn't seem the right thing. And it's certainly not the right time to do it. What's at risk if they all came in? if everything that's in the budget comes out. I think what we just see is just a further suppression of demand for electric vehicles, which we absolutely don't need at the moment. And you say you don't need it because you reflected that customers have those concerns about electric cars already.

13:18What are they worried about? Well, I think people are worried about charging, number one. Some of them are worried about range and the practicality of an electric vehicle. Some are worried about running costs. Some are worried about what happens if you run out of charge on the motorway or whatever. Very recently, we implemented a thing called, it's a customer offer called a Power Promise to try to help overcome some of those issues. So we give people a free wall box. We give them free miles. They have roadside recovery. We've tried to kind of knock down the barriers, which has helped with customers, but not everybody.

13:58So not everybody has a driveway to be able to have a home charger. Some customers, if you live in a terrace house, how do you charge? You're dependent on a public charge network, which is potentially more expensive. There are barriers for many customers. We're trying to sell to the customers at the moment who have the easiest adoption rates. But there are use cases that are more challenging. and that's very true in the commercial vehicle world as well where not every, the functional requirements of every vehicle can't really be well met by an electric vehicle. So if you carry heavy loads long distances, a battery electric vehicle just isn't really suitable for that at the moment.

14:43And is it fair to say still quite a way off that? For those that have aspirations or do own a white transit van And the thinking, am I going to have an electric one one day, which I know you do sell, but that concept of being able to tow, being able to have heavy loads, still being an expensive long distance aim. So our future plans fix that. We'll have products that that will work for it. Today, not every vehicle, not all the time in the commercial vehicle world is suitable for electric electrification, but many, many vehicles are. And we've got a little bit of technology that helps us look at a fleet of vehicles, how they're used to realistically tell a fleet owner or a business owner which vehicles could be electrified and which ones would be practical.

15:27And we also help them with some of the practical considerations as well. With cars, how much is the influx of Chinese cars on the market in the UK having an impact on the way customers are viewing their buying decisions at the moment, whether choosing Chinese cars right now because many see them as cheaper or just thinking there might be cheaper ones on the way so i'll hold fire i think that's a really good question john i don't know if i can like reliably answer that for you certainly there's many there's many many more competitors in the market than there ever has been and there's certainly been you know much more choice for consumers and we're seeing your consumers exercising that choice beyond that i'm not sure i can give you you know a really good answer to that question i don't think what how How does that change things for Ford, one of the most established car brands globally now, maybe having the biggest competition battle on its hands it's ever had?

16:22How do you approach that as a wider business? What do those in America say to you when they see that you're coming up against these? I mean, well, our CEO, Jim Ford, he's certainly been very public and saying that, you know, the battle with the Chinese is a global battle, one that he's kind of set out to win. Competition is good for customers, right? We can't say that it's not and it keeps everybody on their toes, but it's very tough. And our job is to try to make sure that we're relevant to customers, that we maintain relevance and we offer value. And I think very much we look at our passenger vehicle lineup and we think about what we put in the market to try to give customers what we need.

17:01We were really pleased that we got the highest level of electric car grant, and that's based off of, obviously, price, but also around environmental credentials around the manufacturing process. And we're the first manufacturer to get that level of grant. So that kind of endorses our investment in our manufacturing in Europe. On commercial vehicles, our focus is very much around we've been leader in the UK market, the UK commercial vehicle market for 30 plus years. We know commercial vehicle customers and we know that it's really important that we keep their vehicles on the road. So my focus is making sure that we keep focused on that, leverage the knowledge we have of those customers and make sure we keep delivering for them.

17:46And that's kind of what I think our job can be. you can become obsessed with watching what your competition is doing which is always important but I think you've also got to focus on what you need to do to make sure that you deliver for your customers that you know well. Do you feel like you have almost more of a head start in the commercial world than perhaps in the car environment at the minute where you know we see headlines like of the weekend of Jaycoo eating into the market share of the Range Rover which people might have thought one point would be untouchable and yet here we are and that cars and companies like that will have rivals going up against some of your best sellers i think i mean one thing i'd say is we don't take anything for granted you can't assume that because you've been something for a very long time that you're gonna keep that that's the one thing i say is we absolutely don't assume that our job is to be as paranoid as possible and to make sure that we are constantly evolving changing and improving and so i think yes we've got a really good knowledge of customers because we've operated in the commercial vehicle business for such a long time and the business isn't just one thing so you see your white van or blue or silver or whatever color it is in the car park or at your house but we're involved in conversions refrigerated units big vans little vans plug-in hybrid vans electric vans and you've we've got a knowledge of those different segments but that doesn't mean to say that somebody else can't come in and offer a really good offering as well we have to keep evolving and and keep changing and keep thinking about what's next and when you talk about competition being good for customers does the quality of these chinese cars surprise you do you see them and think that these are really good cars that people have an alternative now that they might not have had before?

19:34I think the days of bad cars are long gone. I don't think we have poor quality. You know, I think everyone, consumers nowadays demand a standard of quality, particularly in Europe. And I think probably Europe is one of the most competitive markets in the world, both in terms of the number of competitors and also the quality of what they're bringing into the marketplace. Do you think customers are less brand loyal? Do you notice that than they were in the past? Yeah, I think that's probably fair. I think that's very fair to say that people are less brand loyal. I think also, you know, if you look at France or Germany where they have more, a stronger home manufacturer, there's probably a little bit more brand loyalty in those markets.

20:18But certainly in the UK where we don't really, I mean, obviously we manufacture, have manufactured here. We have a strong representation here, as does other manufacturers, but we don't have kind of that really big home manufacturer. I think there's less brand loyalty in the UK. Of course, once upon a time, Dagenham and his heyday, etc., people would have felt like the Ford they were buying was a British car. Has that actually made it harder for Ford with its sales in the UK by making its manufacturing base smaller? I don't think it's made it harder. I mean, we still have a really big footprint in the UK.

20:55So we've got our research and development centre in Essex, which is primarily involved in developing commercial vehicles, is kind of a really big footprint for us in Europe is based here. We manufacture engines in Dagenham still, and we manufacture transmissions and the power units that drive some of our European electric vehicles are built in Halewood, which we're really pleased about. So we still have a really big footprint in the UK. hey, we're just not producing vehicles. And Dagenham's future, given how much we're talking about electric vehicles and its diesel engines that are being built there, is it inevitable that Dagenham will not have a manufacturing base there or do you have plans to transform that into something that's part of your electric supply chain?

21:44So still working on, Dagenham will build diesel engines right up to 2030 and maybe a little bit beyond. It's not just for Europe. they don't just build for the European market. It's not long away now though, is it? No, it's not. And it's one of the things that we're working really hard on and what the next life of Dagenham looks like. What could that be when you say working really hard on it if it's not diesel engines? There's lots of different opportunities for Dagenham. Nothing that we've settled on at the moment and still kind of exploring different opportunities in conjunction with the workforce there.

22:14Is this why, you know, we've heard just in recent months that Ford in the UK has had a billion pound loan guarantee through the export scheme with the government. People might wonder, such a huge car company globally, why do you need a billion pound loan guarantee backed like that for doing business in the UK? The loan for us is about cash and about solvency and just helping us manage the transition between ice and electrification. Those combustion engines. Yeah, and it's a kind of tricky transition. at the moment because we're not all one and we're not all another and we're trying to manage the pace through.

22:54And investing in electric has cost quite a lot of money. The investment in Hailwood was just under£400 million to make that transition happen. We've invested$2 billion in Cologne to build electric vehicles, electric cars actually. So the transition is a really big investment for us. it's a big bet that it's all going to happen. But are you now confident that it will happen or are there still questions to be answered about whether this can work for UK car manufacturing? So I think that, coming back to what I said at the beginning, it's all around how do we jointly drive consumer demand for electric vehicles rather than having regulation and mandates.

23:45and the government has supported us in, we have a plug-in van grant that is very helpful. We've got the electric car grant, which was great news for us. But what we're not seeing is demand and momentum growing. So it's really important that we work with government to have a joined up policy framework, maybe you would say, to make sure that we encourage customers and don't disincentivise them into electric vehicles. We do all we can across every avenue to us to encourage customers into electric vehicles. And that's what will make that transition a success. Will you, I may know the answer to this, given what you've said so far, but we have seen some other major car manufacturers do tie-ups with Chinese car companies.

24:30Is that something on the horizon for Ford? That's a really good question, Sean, and not one I'm going to answer today. Oh, interesting. So we may well stay tuned. No, we will stay tuned for that then. And we'll make sure that we're the first to be able to ask you that question when there may be clearer answers further down the line. How do you view UK manufacturing more widely at the moment? The car industry is visually, for many people, such a historic part of it. Does it feel like it can thrive and grow? So that's a tough one, isn't it? I think that the first thing I would say is it's really important that we protect what we've got in the UK.

25:19And that's thinking about how do we make sure that we don't put more breaks or more penalties on industry, on the automotive industry in the UK. for an industry to thrive it's kind of got to have critical mass so you've got because you look at your manufacturing base as the you the big factories that make vans and cars but beneath that you've got to have a supplier network that supports them and for that to thrive and be effective you've got to have critical mass and scale so it's important that we keep what we've got the industry as a whole is has got too much capacity so you know the thought of being able to grow that is quite a challenge, I would say, in an automotive sector, but who knows what might be possible.

26:06We were able to bring investment into the UK. So Healwood would typically, what they were building before was very much historic. It's petrol and diesel transmissions. And we were able to invest in Healwood to win business with the support of the government, to invest, to protect for the future with power pack generation. So it's about being nimble. It's about looking at opportunities and it's not putting disincentives in place to stop the industry as it stands. And obviously part of that is making sure that you can export freely. And because you don't just build in the UK for the UK market, you build for a European market or even a global market.

26:45If we're looking at particular regions of the UK where manufacturing is maybe a more dominant sector of its economies, Northern Ireland, with which you have a very strong affinity. Yes. From your role as being one of the business leaders in the UK in charge of one of the biggest workforces and one of the most high-profile workforces as well, do you have a perspective on Northern Ireland, its economy, what's going on there at the moment? That's another good question, Sean. I don't really have anything – we don't have a current footprint in Northern Ireland, actually. Have you tried over the years?

27:23Well, you know, I would love to be able to do something, but unfortunately I've not been able to make that happen. So I'm not really that close to the economy as I would have been whenever I lived there. I think it's got a lot of opportunity and certainly the universities in Northern Ireland have done a great job around technology. And you're setting up small seed businesses and looking at opportunities. So there's a really vibrant tech industry in Northern Ireland that people don't really know about, I don't think. And there's a lot of great things happening in the medical sector as well there.

27:52So I think it's got a great, a great, there's a great amount of opportunity. just the environment needs to be right for that to thrive and take off. When you talk about the potential attempts to have tried to do something with Ford in Northern Ireland something that's come up in a few of these interviews that we've been doing on Big Boss Interview has been the journey that chief executives, managing directors have gone on throughout their lives from their hometowns and maybe not being able to have the benefits and the career path that they had many years ago. Do you have the same confidence that, you know, if you were starting out again now in the car industry that somebody would be able to have a long, fruitful career?

28:42So the world's very different from whenever I started. It feels like, well, it was a completely different century when I started. And I think that, actually, I would say that the automotive industry is an industry that's very much overlooked because people don't think about the, don't see the opportunities there. And certainly with electrification, with connected vehicles, data, digital are great skills that are in great demand in our industry. And even if you think about dealerships and workshops, our technicians that are working on electric vehicles now, yes, obviously they need to be able to change brakes and work on mechanical bits of a vehicle, but they need to be equally skilled in terms of electronics.

29:28So I think actually the opportunity is there for people and individuals starting out if they're prepared to give it a go. And actually we sometimes find it difficult to, in the face of tech companies and other things that are other avenues out there to raise automotive above the noise to make people think that it might be a great industry to work in. So I think if you're prepared to give it a chance, there is still an opportunity to come and do really well in our business in a really wide variety of areas and skills, many of which probably people don't really think about. I do think, though, that probably if you think about the number of businesses and the number of jobs, we're a much smaller industry than we were 30 years ago.