SMMT urges ‘fair tax for a fair transition’ for EV market growth

A new SMMT survey has found that last September’s decision to delay the UK’s end of sale of new petrol and diesel cars and vans from 2030 to 2035 has led to almost one in four drivers delaying their plans to transition to an EV, while one in seven say won’t make the switch at all.

Whilst the actual number of EVs on UK roads are rising, the SMMT said the rate of growth has slowed and EV market share has stabilised.

According to the researchers, growth in the market is being sustained by fleets and businesses, which benefit from compelling tax incentives. Private retail uptake, however, has been in decline since 2022, with these buyers now accounting for fewer than one in four new EV registrations, compared with one in three previously.

When the survey was conducted before the governments delay announcement, only 11 per cent of survey respondents interested in driving electric said they would wait until after 2030. That has now risen to almost half (46 per cent).

Responding to the latest survey, almost three quarters (73 per cent) of consumers named vehicle affordability, chargepoint availability, or chargepoint costs as being their biggest barrier to going electric.

In a statement, SMMT chief executive Mike Hawes, said: “The Budget is a crucial opportunity to re-energise the EV market, with fair tax for a fair transition. 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.”

Researchers found that a VAT cut on EVs would be the single most effective measure to encourage drivers to go electric sooner. 37 per cent of drivers interested in going electric said a VAT cut would accelerate their plans. Even a quarter of drivers (26 per cent) who weren’t interested in switching named it as the option most likely to change their mind.

SMMT said that buyers of other CO2-saving technologies such as heat pumps and solar panels benefit from VAT incentives, but motorists pay the full 20 per cent regardless of whether they buy a zero emission or fossil-fuel powered car. With EVs having typically higher purchase costs, this discrepancy has seen Treasury reap a VAT windfall of around £1.7bn over the past half-decade, as EV uptake has risen almost 20-fold.

Halving VAT on new EV purchases, said the researchers, 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. Such a step would deliver an additional 270,000 EVs, instead of petrol or diesel, to the road over the next three years.

SMMT said Vehicle Excise Duty (VED) also needs to ensure fairness. Forthcoming changes to VED due in 2025 will result in around seven in ten currently sold EVs being subject to an ‘expensive car’ VED supplement from next year, meaning EV purchasers would effectively be ‘penalised’ a total of £1,950 for choosing to buy an electric car.

Finally, SMMT found that the industry wants to see an end to the ‘unfairness’ of taxation on public charging, with VAT reduced from 20 to 5 per cent, in line with home charging.

Researchers said Britain’s net zero goals are dependent on everyone going electric but the current system actively discourages drivers without access to a home charger – such as those in housing with no off-street parking – from moving to an EV, by charging them four times more tax than homeowners with driveways.

The new research was published today (March 1, 2024).