Halve the VAT on EVs to boost private sales, says VW boss

Volkswagen Group’s UK boss Alex Smith has called for a halving of the VAT rate on electric vehicles to boost private sales. 

Smith said cutting the VAT on EVs from 20% to 10% would “give a clear signal” to private buyers about the importance of electric cars. He described the UK as having “two-speed adoption”, with tax incentives for company car drivers, but very little help for the private driver. 

Smith highlighted the dropping of the plug-in-car grant, the forthcoming introduction of Vehicle Excise Duty on EVs and the lack of exemption from the expensive car VED supplement as elements that could be reversed if Government wanted to send a clear signal that EVs are important. “Those are fiscally relatively minor signals that would say actually, there's a clear advantage in adopting electromobility as a private consumer.” 

But VW’s UK managing director said a bigger gesture would help change customer confidence, drawing parallels with other industries where eco tech attracts lower rates of VAT, such as solar panels. “I'd like to see a cut in VAT. Because that would be a very, very clear signal to the private consumer that electromobility is the direction of travel in this country.”

Smith said Volkswagen has “worked out a scenario in which we might want to order more cars from Germany”, if the Government was to implement a VAT reduction, predicting a significant boost in EV demand. 

He likened EV incentives to the Government scrappage scheme in 2009, where it incentivised trading-in older vehicles for new, more efficient ones. “Look at the support that the Government and manufacturers put into a scrappage scheme – clear cooperation between government and industry can yield very significant results,” Smith concluded. 

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