Electric car sales flatline as manufacturers call for VAT cut

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The number of new cars registered in the UK has jumped by nearly 18% but electric vehicle demand is flatlining, prompting the industry to call for a VAT cut to stimulate sales.

Annual figures released by the Society of Motor Manufacturers and Traders (SMMT) on Friday show 1.9m new cars were registered last year, well up on the previous year’s figure of 1.6m and the highest level since the 2.3m registrations of 2019.

The increase is a boost for the automotive industry after the pandemic led to supply chain problems and a shortage of vital computer chips that slowed production.

Across the year, 315,000 new battery electric vehicles were sold. That was 50,000 more than 2022, but the number being bought as a share of total registrations failed to grow as expected. They represented just 16.5% of the total, slightly down on last year’s 16.6%.

The lacklustre growth in the electric vehicle market comes despite a government goal to totally phase out petrol, diesel and hybrid vehicles by 2035, albeit one that was diluted by Rishi Sunak last September from an original target of 2030.

The changeover is being supported by the zero emissions vehicle (ZEV) mandate, which will require 22% of all vehicles manufactured by carmakers to be ZEVs by the start of next year, with this rising to 80% by 2030.

After the latest figures showing the sector is still well short of that target and that the switchover is stalling, the SMMT is calling for the government to halve VAT on all new ZEV purchases across the next three years. It has estimated the plan, which equates to an average of £4,000 per purchase, would save consumers a total of £7.7bn over the period and would put 250,000 extra ZEVs on the road by 2026.

Mike Hawes, the SMMT chief executive, said: “Government has challenged the UK automotive sector with the world’s boldest transition timeline and is investing to ensure we are a major maker of electric vehicles.

“It must now help all drivers buy into this future, with consumer incentives that will make the UK the leading European market for ZEVs.”

The increase in overall registrations was largely driven by registrations for fleet deliveries – mainly used for the car leasing market – which grew to just over 1m of all cars sold, a 38.7% increase on the previous year.

The number of hybrid electric vehicles sold rose to 380,000 over the year, and accounted for 20% of all new registered vehicles.

Superminis – small hatchbacks such as the Ford Fiesta and Vauxhall Corsa – continued to be the country’s most popular category of car, making up nearly 30% of all new vehicles.

Hawes said he believed the VAT cut on new ZEVs would be a significant step to reinvigorate electric vehicle sales. In 2022, the government scrapped its last financial incentive for private electric vehicle buyers when it ended grants of up to £1,500 for new purchases.

Hawes said: “We thought the taking away of previous consumer support for EV take-up was too early. When you get through the first adopters, they will buy an EV, it is that second wave of people, getting it to mass market, to the people that are more hesitant, they are the ones that will benefit from support.

“We think the VAT cut is the right support to give, it is time limited, it is appropriate and it delivers the consumer and the government the environmental outcome it wants.”

A government spokesperson said: “To drive the UK’s move to electric vehicles, we have provided over £2bn to cut down purchase costs for drivers and to build the necessary infrastructure to support their usage, such as local electric vehicle infrastructure funding, targeted plug-in vehicle grants and low first year vehicle excise duty.”