Skip advert
Advertisement

Electric car tax cuts needed to boost sales, says SMMT

The Chancellor is under pressure to slash VAT on new EVs to provide a ‘fair tax for a fair transition’

BMW i5 - front static

The car industry is urging the Chancellor of the Exchequer to cut the price of new electric cars for private buyers, via a hefty 50 per cent discount on the rate of VAT. This, it says, would see average EV prices drop by £4,000 and boost EV sales by 270,000 over three years.

Advertisement - Article continues below

The call comes as new research for the Society of Motor Manufacturers and Traders (SMMT) shows that almost half of the would-be electric car buyers are intending to wait until after 2030 to make the switch from their internal combustion-powered models, a number that has shot up from just 10 per cent last year before the new petrol and diesel car ban was delayed.

The SMMT points to a 19 per cent year-on-year drop in private sales of EVs to private buyers in 2023, and says its research shows a third of drivers perceive upfront cost as their biggest concern. The industry trade body says a 50 per cent VAT cut should be backed up by changes to road tax to avoid disincentivising EVs, and a cut to VAT on public charging to help reassure motorists over their cost concerns.

Latest SMMT survey data reveals that Rishi Sunak’s decision last December to delay the ban on selling new petrol and diesel models from 2030 to 2035 has significantly dented the keenness of drivers to make the transition to EVs. It says that 24 per cent of drivers admit to delaying their own plans, while 14 per cent don’t believe they’ll make the transition at all.

Advertisement - Article continues below
Skip advert
Advertisement
Skip advert
Advertisement - Article continues below

While the number of EVs on the road continues to rise thanks to strong fleet sales, the rate of growth has slowed and market share for EVs has stabilised at around 16 per cent, the SMMT says. That’s a big headache for manufacturers who are compelled by the Zero Emissions Vehicle mandate to reach a 22 per cent EV market share this year, and their biggest problem is private buyers, with so-called ‘retail sales’ in decline since 2022.

“The upcoming Budget is an opportunity to put Britain’s electric switch back on track, supporting drivers to go green by halving VAT on new EVs, changing upcoming Vehicle Excise Duty rates so EVs are treated as essentials, not luxuries, and giving drivers more affordable public charging,” the SMMT says. The industry body says its survey data shows 37 per cent of drivers interested in switching to EVs would “accelerate their plans” following a VAT cut, and 25 per cent of drivers not interested in switching said it was the option most likely to make them change their minds.

According to the SMMT, cutting VAT on car purchases would save individual buyers around £4,000 each, while costing the Treasury less than the now scrapped Plug-in Car Grant.

The SMMT is also concerned about the forthcoming changes to road tax rates, that from April will see around 70 per cent of all EVs on sale falling foul of the £40,000-plus ‘expensive car’ VED supplement of £390 per year - a total penalty of £1,950 for choosing to go electric. VAT on public charging is also in the SMMT’s firing line, and it’s calling for a reduction from the current 20 per cent to five per cent, in line with the VAT on home charging.

“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,” SMMT chief executive Mike Hawes said. “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.”

Do you think electric cars should be cheaper? Let us know your thoughts in the comments section...

Skip advert
Advertisement
Current affairs and features editor

Chris covers all aspects of motoring life for Auto Express. Over a long career he has contributed news and car reviews to brands such as Autocar, WhatCar?, PistonHeads, Goodwood and The Motor Trader.

Skip advert
Advertisement

Recommended

Faulty smart motorway tech putting drivers in danger
Smart motorway
News

Faulty smart motorway tech putting drivers in danger

BBC’s Panorama finds smart motorway tech is putting drivers at risk every day, with 397 power outages in last two years
22 Apr 2024
Labour to U-turn on 20mph speed limit in Wales after harsh criticism
Welsh 20mph zone road sign
News

Labour to U-turn on 20mph speed limit in Wales after harsh criticism

Wales’ Transport Secretary, Ken Skates says Labour will reverse its blanket 20mph rules “as soon as we can”
22 Apr 2024
Government says ‘no’ to new cash incentives for electric car buyers
Parliament
News

Government says ‘no’ to new cash incentives for electric car buyers

A Lords Committee report backing car-makers’ calls for discounts to boost EV sales falls on deaf ears
19 Apr 2024
Tesla slashes Supercharger membership cost with 42 sites now open to all EVs
Tesla Superchargers
News

Tesla slashes Supercharger membership cost with 42 sites now open to all EVs

Tesla has cut the costs of its Supercharger Membership, which grants access to lower charging rates, by £2 per month
19 Apr 2024

Most Popular

Car Deal of the Day: sensational BMW M2 is a bargain at this price!
BMW M2 - front tracking
News

Car Deal of the Day: sensational BMW M2 is a bargain at this price!

Our Day of the Day for 18 April is the formidable BMW M2 performance car
18 Apr 2024
New 2024 Hyundai Santa Fe goes on sale with specs and prices announced
New Hyundai Santa Fe - front
News

New 2024 Hyundai Santa Fe goes on sale with specs and prices announced

The big, bold seven-seater starts from £46,775, and is available with full-hybrid and plug-in hybrid power
18 Apr 2024
Best small SUVs to buy 2024
Best small SUVs - header image
Best cars & vans

Best small SUVs to buy 2024

There's a huge range of small SUVs out there, so we’ve picked out the very best
19 Apr 2024