The UK motor industry calls for VAT reductions on electric vehicles (EVs) and public charging points to stimulate market growth.
- The Society of Motor Manufacturers and Traders (SMMT) has urged the Chancellor to cut VAT on EVs and charging infrastructure.
- Despite record registrations, the EV market is lagging behind government sales targets.
- Manufacturers face significant challenges, including a decline in private demand and financial losses from discounts.
- Global trends show a reduction in governmental support for the EV sector, heightening the need for UK intervention.
The Society of Motor Manufacturers and Traders (SMMT) has made a compelling plea to the Chancellor for a reduction in VAT on electric vehicles and charging infrastructure for the upcoming three years. This appeal aims to address the hurdles manufacturers encounter in meeting stringent zero-emission vehicle sales targets. Currently, the targets dictate that 22% of all new car sales should be electric, alongside 10% of van sales.
In September, a record of 56,362 battery electric vehicles (BEVs) were registered, yet they only account for 17.8% of the market this year. This figure is marginally expected to rise to 18.5% by year-end, still below the mandated thresholds. Despite significant discounts provided to boost sales, private demand has decreased by 6.3% compared to the previous year, imposing potentially over £2 billion in costs to the industry by the end of 2023.
Petrol and diesel vehicle sales continue to decline; however, they remain the preference for 56.4% of buyers as of September. In response, the SMMT proposes a 50% reduction in VAT for new electric vehicle purchases, which could cost the Treasury approximately £7.7 billion by 2026. This initiative is coupled with advocacy for reducing VAT on public charging points to 5%, aligning it with home charging rates.
Furthermore, the SMMT has called for mandatory targets for charging infrastructure to support the expanding electric fleet. There is also a suggestion to postpone the introduction of road tax on EVs due next year and extend the subsidy for commercial electric vans beyond its scheduled cessation in March.
These recommendations emerge amidst a global challenge within the EV market. Major manufacturers like Volvo, Ford, and Toyota are reassessing their EV strategies, with notable adjustments and reduced ambitions. European governments, notably France and Germany, have scaled back subsidies, prompting urgency for UK governmental action to maintain the momentum. Although the UK has phased out most electric vehicle purchase grants, business buyers can still capitalize on existing tax incentives for company EVs. However, the effectiveness of these measures remains uncertain without robust government backing.
Continued government support is crucial for the UK’s EV market to achieve its ambitious zero-emission targets.
