Amidst a downturn in private purchases of electric cars and sluggish overall car market growth, prominent motor companies are advocating for VAT reductions on electric vehicles (EVs) to stimulate sales.
Recent figures indicate a decline in private EV purchases, with only 3,600 units bought by individual motorists last month, marking a significant 22% decrease compared to the same period last year. However, despite this decline, the total number of battery electric vehicle sales saw a modest increase of 10.7%, primarily due to heightened purchases by fleet firms providing vehicles to company car drivers.
Fleet and company car drivers currently enjoy tax incentives to switch to electric, a privilege not extended to individual buyers. The Society of Motor Manufacturers and Traders (SMMT) underscores the need to reignite interest among private buyers to transition to EV’s. Although EV’s boast lower running costs than traditional petrol and diesel cars, the upfront price remains a significant deterrent, being approximately 30-40% higher.
Mike Hawes, chief executive of SMMT, emphasises the sustained growth in the new car market driven predominantly by fleet demand. However, he highlights the adverse impact of the absence of government incentives for private buyers in the EV sector. Hawes suggests temporary VAT reductions, positioning EV’s as fiscally mainstream rather than luxury vehicles, and bolstering consumer confidence in the charging infrastructure as critical drivers for market growth essential for achieving Britain’s net-zero ambitions.
Despite an overall 1% year-on-year growth in the car market in April, hybrid cars experienced the most substantial uplift, with plug-in hybrids rising by 22%. Nevertheless, petrol engine sales, albeit declining by 3%, still accounted for more than half of the total sales in April.
Ian Plummer, commercial director of Auto Trader, underscores the adverse effect of high prices on new vehicle purchases, with average new car prices soaring by 29% since 2020. While manufacturer discounts have incentivised consumer uptake of new electric cars, Plummer emphasises the necessity for further price actions to achieve mass adoption of electric vehicles.
Richard Peberdy, UK Head of Automotive for KPMG, highlights the ongoing impact of pressure on household budgets and increased costs of finance and insurance on consumer new car sales. As the automotive industry grapples with pricing challenges and consumer affordability concerns, concerted efforts to address these barriers and promote the adoption of electric vehicles are crucial for realising a sustainable and greener automotive landscape in the UK.
