The UK automotive industry is urgently calling for new EV incentives to revive the stagnant electric vehicle market. The Society of Motor Manufacturers and Traders (SMMT) has pressed the government to swiftly implement incentives and reconsider the mandate for zero-emission vehicles (ZEVs). Carmakers are advocating for a 50% cut in VAT on new electric vehicles.
The SMMT concedes that implementing the measure would temporarily cost the Treasury around £1,000 per car. However, the UK government has gained a £2.5 billion VAT over the past five years as EV adoption has soared tenfold. As per the UK mandate, manufacturers must ensure that 28% of new cars sold this year are zero-emission vehicles. Each non-compliant vehicle incurs a £15,000 penalty.
According to a recent study by SMMT, only one in eight car buyers intends to switch to electric vehicles within the next three years. Projections from the automotive industry body indicate that, under current market conditions, 1.782 million new EVs are expected to be registered between 2025 and 2027.
It is expected that cutting the VAT in half for new EV purchases would boost demand by 15%, resulting in 267,000 more plug-in cars on the road over the next two years. It would augment registrations of EVs to 2.05 million.
Mike Hawes, the Chief Executive of SMMT, pointed out that manufacturer investment has led to an increase in the number of drivers switching to electric vehicles.
The industry spent £4.5 billion last year, offering discounts on EVs to customers to achieve sales targets. While grants for early adopters have already ceased, EV owners will be required to pay vehicle excise duty, including premium cars starting in April.
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