Rude Awakening: EV sales stagnate in the UK, carmakers ask government for subsidies, cuts in VAT

The growth of electric vehicles (EVs) in the UK has reached a plateau, prompting automakers to seek government support through a tax cut for consumers.

The Society of Motor Manufacturers and Traders (SMMT), representing major automakers such as Jaguar Land Rover, Nissan, and BMW, revealed that approximately one in six new cars registered in the UK last year was battery-electric, a rate consistent with the previous year, as per a report by Bloomberg.

To reignite EV adoption, the SMMT is urging the government to halve the value-added tax (VAT) on EVs to 10 per cent for a limited period. The proposed VAT reduction for three years is estimated to save consumers around 7.7 billion Pounds ($9.8 billion) and facilitate the addition of 270,000 more EVs on the road.

This move would also assist automakers in meeting the UK’s new mandate, requiring 22 per cent of each manufacturer’s sales in 2023 to be zero-emission, with a gradual increase to 80 per cent by 2030.

SMMT Chief Executive Mike Hawes emphasized that while a mandate can stimulate supply, it cannot drive demand. He highlighted the need for incentives to encourage private consumers to embrace EVs and meet the ambitious targets set by the government.

Despite being the second-largest market for EVs in Europe, the UK lags behind countries like Germany and France in terms of market share. The absence of EV purchase incentives further complicates the situation, as the UK ended its plug-in car grant in June 2022. The SMMT believes that re-introducing incentives is crucial for increasing consumer interest in EVs.

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The UK’s zero-emission vehicle mandate, finalized after Prime Minister Rishi Sunak’s announcement in September, allows the purchase of petrol and diesel cars until 2035. The SMMT expressed concerns about the conflicting messaging between the government’s intentions and the regulations affecting manufacturers.

While overall new-car registrations saw an 18 per cent increase last year to 1.9 million, it remained approximately 18 per cent below pre-pandemic levels. Business and fleet buyers drove this growth, and the SMMT forecasts a modest 4 per cent increase in sales in the coming year. However, the EV segment faces challenges, with businesses and fleet buyers dominating the market, largely due to compelling tax incentives, while private consumers lag behind in EV adoption, representing only one in eleven buyers.

(With inputs from agencies)