Car industry demands budget aid to get electric vehicle sales back on track

The UK car industry has pleaded with the chancellor to help get the transition to electric vehicles (EVs) back on track when he delivers his budget next week, accusing the government of creating an own goal.

The Society for Motor Manufacturers and Traders (SMMT) said it was clear that the decision to delay the ban on the sale of new cars powered by petrol and diesel to 2035, announced by Rishi Sunak in September last year, had backfired.

The industry had been targeting a 2030 deadline before the government’s U-turn, on cost grounds, and warned at the time that the move would damage investment and prove a backwards step in efforts to combat climate change.

The SMMT said on Friday that while the UK electric vehicle market remained the second-largest in Europe by volume, sales were lagging levels that had been expected before the government’s delay.

It reported that private EV uptake was 19% down year on year in 2023 after the end of consumer incentives.

A survey for the body showed that almost half of would-be EV buyers now planned to wait until after 2030 to switch – compared with one in 10 last year.

The up-front cost was the main barrier, the SMMT said.

It called on Jeremy Hunt to use the budget on 6 March to ensure “fair taxes for a fairer transition”, claiming electric car customers were being unfairly treated.

The SMMT suggested a three-point plan to “recharge the market” and accelerate the UK’s progress towards net zero.

Top of the wish list was for the 20% rate of VAT on a new electric car to be cut to 10%.

It said that would save the average buyer around £4,000 off the upfront purchase price – yet cost the Treasury less than the scrapped Plug-in Car Grant.

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The body also demanded that Vehicle Excise Duty was reformed to stop the majority of electric vehicles being classed as an “expensive car” from next year when a new supplement is due to be implemented.

The final measure was for public charging points to charge VAT at 5% instead of at 20% – bringing it into line with home charging costs.

SMMT chief executive Mike Hawes said: “The Chancellor must end the perverse fiscal system that discourages drivers from moving away from fossil fuels and send a clear signal that the time to go electric is now.

“Success will see our economy powered up by zero emission mobility, delivering cleaner air, quieter roads and cheaper running costs, ending the uncertainty we are seeing amongst motorists.”