The motor industry is advocating for tax changes to accelerate electric vehicle (EV) uptake in the UK.
- An open letter to the Chancellor highlights struggles to meet zero-emission sales targets despite record EV registrations.
- The industry seeks a three-year VAT reduction on electric cars and charging infrastructure.
- Current private EV demand is declining, threatening sales targets and industry stability.
- Global trends show a reduction in EV support, further necessitating UK government intervention.
As the UK market for electric vehicles seeks to expand, the motor industry is calling for a strategic reduction in Value Added Tax (VAT) on electric cars and charging infrastructure. This appeal is directed towards the UK Chancellor through an open letter by the Society of Motor Manufacturers and Traders (SMMT), an organisation representing the UK’s automotive industry. The call comes amidst increasing difficulties faced by manufacturers in adhering to governmental zero-emission vehicle sales targets, demanding that 22% of new car sales and 10% of van sales be electric this year.
Despite the industry’s efforts, including a record registration of 56,362 battery electric vehicles (BEVs) in September, these vehicles only constitute 17.8% of the current market. Projections suggest a marginal increase to 18.5% by year-end, insufficient to meet established targets. Notably, private demand has waned by 6.3% year-to-date, despite manufacturers implementing significant discounts to propel sales. These price reductions are anticipated to be a substantial financial burden, costing the industry over £2 billion by the end of 2023.
The industry has been vocal in its proposition for a 50% VAT cut on new electric vehicles, estimating that this could impose a cost of £7.7 billion on the Treasury by 2026. In addition, the SMMT advocates for aligning the VAT on public charging points with that of home charging, reducing it to 5%. Further, they propose mandatory infrastructure targets for charging points to support the increasing number of EVs on UK roads.
There is also a suggestion to postpone the introduction of road taxes on EVs, originally set for implementation next year, while prolonging subsidies for commercial electric vans beyond their scheduled termination in March. These measures are seen as vital given the global context, where other major manufacturers like Volvo, Ford, and Toyota are scaling back EV production ambitions, with governmental EV support also waning across Europe.
The backdrop of these requests is a challenging global market for EVs, evidencing a curtailment in production and sales forecasts from prominent players. For instance, Toyota has announced delays to its EV production in the United States, and Tesla has missed its delivery targets. Concurrently, countries like France have slashed subsidies for high-income EV buyers, while Germany has abolished its subsidy programmes. Although the UK has retracted most grants for electric vehicle purchases, tax incentives remain for EVs in business use. Industry leaders caution that without renewed governmental action, achieving zero-emission vehicle targets remains improbable.
In light of global challenges and diminishing private demand, the UK’s motor industry underscores the necessity for Government intervention to foster the EV market’s growth.
