The car industry is calling on the UK government to cut VAT on new electric vehicles (EVs) and public charging points in a bid to combat a slowdown in the EV market.
The Society of Motor Manufacturers and Traders (SMMT) has written an open letter to the Chancellor, calling for a VAT cut on electric cars and charging infrastructure for the next three years.
The letter comes as manufacturers struggle to meet the government’s tough targets for zero-emission vehicle sales, which require 22% of all new car sales and 10% of van sales to be electric this year. Despite a record 56,362 registrations of electric vehicles (BEVs) in September, BEVs represent just 17.8% of the market this year, a figure expected to rise to 18.5% by the end of the year – still is below the government’s target.
The SMMT noted that private demand for electric vehicles has fallen 6.3% this year, even as manufacturers have offered unprecedented discounts to boost sales. These price cuts are expected to cost the sector more than £2 billion by the end of 2023. Although sales of petrol and diesel vehicles continue to decline, they still represent the choice of 56.4% of buyers in September.
To encourage the uptake of electric cars, the SMMT has called for a 50% VAT cut on the purchase of new electric vehicles, a measure it estimates could cost the Treasury £7.7 billion by the end of 2026. The trade association also advocates VAT on public levies. points are reduced to 5%, in line with the home charging rate. They have also called on the Government to introduce mandatory infrastructure targets for charging points to support the growing fleet of electric vehicles on UK roads.
The SMMT has also recommended delaying the introduction of the electric vehicle road tax, which is currently due to start next year, and extending the subsidy for commercial electric vans beyond its planned end in March.
This push for VAT cuts and expanded subsidies comes as the global EV market faces challenges. Manufacturers including Volvo, Ford and Toyota have scaled back their EV ambitions, with Toyota announcing delays in US EV production and Tesla missing its quarterly delivery targets. Governments across Europe are also scaling back their support for the sector, with France cutting electric car subsidies for higher-income buyers by 20% and Germany ending its subsidy program altogether.
Although Britain has ended most subsidies for the purchase of electric vehicles, business buyers can still benefit from tax breaks for electric vehicles used as company cars. However, industry leaders warn that without further government intervention, the market could struggle to meet its ambitious zero-emission vehicle targets.