The Society of Motor Manufacturers and Traders (SMMT) has called for a VAT reduction on electric vehicles (EVs) and public charging points to boost the struggling EV market in the UK.
- Manufacturers are facing challenges in meeting the government’s zero-emission vehicle sales targets for 2024, with EV registrations falling short this year.
- Despite record EV registrations in September, the market share for EVs remains below government expectations, which is causing concern among industry leaders.
- The SMMT has outlined several financial and policy recommendations to encourage EV adoption and support manufacturers.
- There is a significant financial impact expected on the Treasury, but the measures are deemed essential by industry leaders to meet environmental goals.
The Society of Motor Manufacturers and Traders (SMMT) has issued a public appeal to the UK Chancellor, urging for a substantial reduction in Value Added Tax (VAT) on electric vehicles (EVs) and charging infrastructure over the coming three years. This appeal arises from the manufacturing sector’s difficulties in aligning with stringent zero-emission vehicle sales targets set for this year, which require that 22% of all new car sales and 10% of van sales be electric.
Despite a record high of 56,362 battery electric vehicles (BEVs) registered in September, the market penetration for these vehicles has only reached 17.8% so far in 2024. This figure is projected to ascend to 18.5% by the end of the year, falling short of governmental objectives. The SMMT reports a decline in private demand for EVs by 6.3% year-to-date, even as manufacturers provide significant discounts to drive sales—a move forecasted to cost the industry upwards of £2 billion by the close of 2023.
Petrol and diesel vehicle sales persist in their downtrend but continue to dominate with 56.4% of consumer purchases as of September. In light of this, the SMMT advocates for a 50% VAT cut on new EV purchases, a policy estimated to cost the Treasury approximately £7.7 billion by the end of 2026. Additionally, the industry body suggests reducing VAT on public charging points to 5%, aligning it with the tax rate on home charging solutions, and proposes government-imposed mandatory infrastructure targets for charging stations to accommodate the expanding EV fleet.
The SMMT further proposes deferring the road tax for EVs, which is scheduled for implementation next year, while extending subsidies for commercial electric vans beyond the planned March cessation. These policy suggestions coincide with global hurdles faced by the EV market. Renowned manufacturers such as Volvo, Ford, and Toyota have recalibrated their EV production goals, with Toyota specifically announcing delays in its U.S. operations and Tesla failing to meet quarterly delivery benchmarks.
Concurrent with Europe’s curtailed government assistance for EVs—exemplified by France’s 20% subsidy cut for affluent buyers and Germany’s cessation of subsidization—the UK has largely discontinued grants for individual EV acquisitions. Nevertheless, tax benefits linger for corporate EV users. Industry experts caution that without intensified governmental support, the ambitious zero-emission targets may remain unattainable.
In summary, the call for VAT reductions and additional government intervention is seen as crucial for invigorating the UK’s EV market and ensuring compliance with environmental objectives.
