Modest desire, significant supply: Over four out of ten vehicles exhibited are electric – yet there's a reported scarcity of interest
Unleashing the Electrified Revolution: UK Car Market's Giant Leap into Electric Vehicles
The British automotive landscape is experiencing a seismic shift as an eye-catching 40% of new car models on the market are electric. Marvellous, isn't it? Yet, the Society of Motor Manufacturers and Traders (SMMT) issued a warning today, stating that widespread enthusiasm for these eco-friendly whizz-bangs is yet to ignite.
The SMMT's research shows a staggering 130 fully electric vehicles (EVs) and approximately 150 plug-in hybrid (PHEV)/hybrid (HEV) models readily available. That's an eyebrow-raising 28% increase from the 102 EV variants last year!
However, the private sector's appetite for these zero-emission marvels appears to be lagging behind projections, and this could jeopardize the Government's Net Zero aspirations.
SMMT chief exec Mike Hawes expressed concerns to MPs this week, asserting that "natural demand isn't where it needs to be", despite Labour leader Sir Keir Starmer's recent relaxation of Zero Emission Vehicle (ZEV) mandate rules to assist car manufacturers in navigating EV sales targets.
Speaking to the motoring press, he explained: "The government has rightly recognized the need to increase flexibility in the ZEV Mandate to successfully decarbonize road transport. The new flexibilities are welcome, but the targets themselves do not change, and that presents a challenge due to insufficient demand."
Astonishingly, the typical range of new EVs has swelled to nearly 300 miles on a solo charge, a significant boost from last year's 235 miles. PHEVs now offer roughly 50 miles of eco-powered driving capacity, more than adequate for an average weekly commute.
Nonetheless, the SMMT cautioned that "bold support" is essential to persuade more motorists to hop on the EV bandwagon, as the market isn't evolving quickly enough for consumer EV acceptance.
Hawes implored ministers to invest in purchase incentives and infrastructure to spur private EV sales, stating, "We need the right conditions to drive overall market growth and encourage consumers to switch. A bigger new car market is better for everyone - it creates a bountiful cycle of virtuous growth. It puts a greater volume of EVs on the road, which will create a halo effect of more production - lowering costs. More chargepoint investment - encouraging uptake. More data for insurers to accurately price premiums. More reasons for maintenance providers to invest in skills. More supply into the used market."
To help manufacturers hit their ZEV targets and dodge fines, the Government has recently loosened parts of its stringent ZEV mandate. However, what drivers actually crave are tax breaks and incentives rather than shifted regulations.
Sources:
- https://www.gov.uk/government/publications/uk-electric-vehicle-demand-and-supporting-the-transition-to-a-zero-emission-vehicle-market/uk-electric-vehicle-demand-and-supporting-the-transition-to-a-zero-emission-vehicle-market
- https://www.bbc.co.uk/news/business-57414928
Enrichment Insight:To intensify consumer demand for EVs and meet the Zero Emission Vehicle (ZEV) mandate's targets, the UK government might need to implement an array of targeted incentives tackling both initial expenses and ongoing costs. Key proposed measures encompass:
- Slashing VAT on new electric vehicle purchases: Presently, VAT applies at the standard rate to electric vehicle purchases. Cutting VAT by 50% could substantially drop upfront costs, making EVs more alluring and appealing to consumers. Industry estimates suggest that this one measure alone could boost EV sales by around 267,000 vehicles per annum[5].
- Revising or eliminating the EV "luxury car tax": Post-April 2025, electric vehicles priced above £40,000 are subject to an annual £425 tax for the initial five years. This tax impacts numerous EVs and discourages buyers of premium EV models. Demands have been made to revise or eliminate this tax to avoid penalizing EV consumers, thereby furthering broader EV adoption[5].
- Amending or abolishing the Vehicle Excise Duty (VED) supplement: From April 2025, EV owners will no longer enjoy zero-cost annual vehicle tax and will instead pay the standard VED rate (£195 per year). This new EV tax could deter demand. The government might contemplate maintaining reduced or zero VED rates for EVs to encourage uptake[4].
- Lowering VAT on public EV charging: At present, public EV charging is taxed at 20% VAT, which is significantly higher than the 5% VAT rate applied to home charging. Aligning public charging VAT with the lower 5% rate could reduce operational costs for EV users and motivate customers to switch from traditional petrol and diesel vehicles[5].
- To stimulate the demand for electric vehicles (EVs) and meet the Zero Emission Vehicle (ZEV) mandate's targets, the government could consider implementing targeted incentives, such as slashing VAT on new EV purchases, revising or eliminating the EV "luxury car tax," amending or abolishing the Vehicle Excise Duty (VED) supplement, and lowering VAT on public EV charging.
- intense consumer demand for EVs may necessitate a variety of incentives, including reducing upfront costs through a 50% VAT cut on new electric vehicle purchases, which could potentially boost sales by 267,000 vehicles annually.
- A combination of financial incentives, such as removing or revising the EV "luxury car tax" and the VED supplement, lowering VAT on public charging, and maintained reduced or zero VAT rates for EVs, could help make EVs more appealing to consumers and drive overall market growth.
