Slashing the VAT charged on new electric vehicles would drive up demand by 15% and put sales closer to the UK Government’s targets for zero emission vehicles.
That’s according to scenario modelling by the Society of Motor Manufacturers and Traders (SMMT), which suggests that under current market conditions, 1.782 million new EVs will be registered between 2025 and 2027. Were the VAT to be cut specifically for EVs, that would reduce their cost by an average of £1,000 per car, and the SMMT says the increased appeal would help boost that 1.78m EVs by another 267,000 plug-in cars.
To put that achievement into context, however, from 2030 the UK Government wants 80% of new cars sold annually to be zero emission vehicles – which equates to more than 1.5 million every year, assuming the current level of yearly new car registrations is maintained at almost 2m units.
The growth curve demanded has been a considerable concern for the motor retail industry which has seen good interest in EVs from early adopters but reticence, or even resistance, from many general private buyers who still see EVs as expensive plus fear that charging them will be an inconvenience.
A new survey by SMMT, conducted by Censuswide, reveals that 23.1% of would-be new car buyers surveyed plan to get into an electric car between now and 2028 – well below the Government’s aspiration, which calls for a 28% EV market share this year alone.
The survey also suggests that the EV market is highly reliant on drivers who have already gone electric, comprising almost half (48.7%) of respondents – while fewer than one in eight (11.6%) new buyers polled are actively intending to switch to an EV.
The UK’s ZEV Mandate targets, drawn up under more optimistic market conditions and when energy and raw material costs were expected to fall, are putting huge pressure on the sector with automotive manufacturers forced to underwrite the transition to the tune of £4.5bn worth of unsustainable discounting offered UK buyers last year alone, says SMMT, which has consistently called for a VAT reduction from the Treasury.
Mike Hawes, SMMT chief executive, said: “Manufacturer investment has meant 10 times as many drivers are going electric compared with just five years ago. This is great progress but, with the right support for consumers, we can go beyond current expectations to put a total of more than two million new EVs on the road by 2028.
“Government investment to convert the ‘electric sceptics’ would energise business across the country far beyond just the automotive sector.
“Every stakeholder would benefit from the impact of consumer incentives which, when combined with binding targets for charge point rollout and more flexible regulation, would create a virtuous circle of rising demand that stimulates green economic growth.”
A new report from the SMMT to coinciden with the SMMT Electrified event explores how larger EV volumes boost business for multiple sectors beyond automotive, and how those same sectors can play a vital role in driving up EV uptake themselves.
But opponents question whether taxpayer funds should support the market. The Resolution Foundation, a think-tank focused on improving the living standards of Britons on lower to medium incomes, argues that it is not a justifiable use of public money to incentivise electric car purchase because buying a new car is an activity of people heavily concentrated at the top of the income spectrum.
