Electric vehicles sales have grown so strongly in the UK in recent years that the government dropped its plug-in vehicle grant altogether in 2022, its job to turn people onto EVs is seemingly done. But a year on that, growth has stalled and automakers are desperate to persuade the government to introduce tax cuts to kick-start demand.
EV sales in Britain haven’t exactly fallen off a cliff. The country’s car industry has just had its best year since the pandemic, shifting 1.9 million cars during 2023, and BEVs accounted for one in six of them. The problem is that EVs have made no progress in taking market share since 2022 when they also accounted for one in every six cars sold, yet automakers now need to meet the government’s stipulation that 22 percent of their sales this year be made up of zero-emission vehicles.
The solution, as the Society of Motor Manufacturers and Traders, the group that represents automaker interests in the UK, sees it, is to slash the VAT (value-added tax) applied to EVs, Bloomberg reports. Effectively a 20 percent sales tax on most goods, including cars, VAT contributes a significant portion to the bill car buyers have to pay when they’re picking up a new vehicle. The SMMT’s suggestion that VAT on EVs be cut to 10 percent for a limited period could lop £5-10k ($6-13k) off the final sale price of many electric cars.
Related: UK Government Pulls The Plug On Electric Car Grant
The UK government’s decision to terminate EV grants, leaving it the only major European country not to offer subsidies, can’t have helped sales, and neither can a cost-of-living crisis fuelled by soaring interest rates that have cut consumers’ disposable cash reserves through bigger mortgage payments and made car loans more expensive. But the SMMT’s CEO, Mike Hawes thinks the government’s decision to push back its ICE ban from 2030 to 2035 sent a confusing message to customers, while the zero emissions mandate leaves automakers with a headache, and a ton of EVs still to sell.