SMMT call for VAT on electric cars to be halved

Mikes Hawes, the Chief Executive of the Society of Motor Manufacturers and Traders has today called for the government to slash VAT on battery electric cars in order to re-energise BEV sales to the public. 

Worryingly, although more new Battery Electric Vehicles were sold in 2023 than in the previous two years combined, the market share of BEVs actually slipped back to 16.5% last year.

Overall, sales of new cars rose 17.9% over the previous year but this growth was entirely driven by fleet operators who responded to the improved supply of new vehicles by investing in 38.7% more vehicles. Sales of new cars to private owners was effectively static.

The market share of BEVs fell because, although sales grew by 17.8%,other types of vehicles saw more impressive growth eg: Hybrid electric vehicles up 27.1% and plug-in hybrids up 39.3%.

While it is true that, in a number of countries around the World, the roll out of BEVs has stagnated, most of the markets outside the UK fall into two categories: those in which incentives have recently been withdrawn (eg Germany) and those in which incentives are about to be introduced.

France are planning a social leasing scheme whereby low-income drivers can lease BEVs for as low as €40, with no down payment and up to six months free charging.

In  Italy, it is thought that the government is about to pump €930m towards encouraging people to switch to BEVs.

The UK has been famously reluctant to dangle a BEV-shaped carrot in front of its motorists and this is something Mike Hawes says needs to change: ‘Re-energising consumer demand for BEVs is crucial to take us from ‘early adopter’ to ‘mass market’. Fleets and businesses benefit from compelling incentives that are clearly driving up their demand for BEVs. If private buyers are to join them, they need similar support to switch.

‘There is an answer – one that would, in the next three years, put more than a quarter of a million BEVs on the road above current expectations, remove more than five million tonnes of CO2 emissions, and give consumers £7.7 billion in additional buying power. Temporarily halving VAT on new BEVs for three years would give consumers a fiscal incentive at a level similar to that enjoyed by businesses and fleets, yet would reduce the Treasury’s tax take by just 22% per vehicle.

‘The halo effect would be a more attractive chargepoint investment proposition – spurring on faster, wider rollout – and increased supply into the used market over time, massively increasing zero emission mobility availability for all.’