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The share of electric cars sold in the UK fell for the first time last year, casting doubt over whether manufacturers will meet binding new green targets and prompting industry calls for tax cuts.
Electric cars accounted for 16.5 per cent of new vehicles sold in the UK last year — marginally down from the 16.6 per cent seen during 2022, according to figures released by the Society of Motor Manufacturers and Traders on Friday.
Although the total number of EVs sold rose by 18 per cent to a record 315,000, overall UK car sales increased by the same amount, rising to 1.9mn.
“Just one in 11 private consumers last year chose an EV,” said Mike Hawes, SMMT head, as he called for a VAT cut to get sales back on track and meet new government targets. “We do need to look at incentives for the private consumer.”
Last year marked the first time battery cars failed to gain market share since sales began in earnest in 2018, raising concerns that private buyers remain sceptical of the new technology and concerned about higher prices.
EV demand is still rising globally, but carmakers across the US, Europe and the UK have warned there is slowing appetite as the market shifts from early adopters to more cautious mass-market consumers.
Although EVs have lower running costs than petrol cars, the upfront price is around 30-40 per cent higher, the SMMT said.
Rishi Sunak’s government has delayed a ban on the sale of new diesel and petrol cars from 2030 to 2035 — a move decried by some manufacturers and denounced by green campaigners. But the government has retained binding targets for manufacturers to increase EVs’ share of total vehicles sold.
Under rules introduced this month, 22 per cent of vehicles sold by each carmaker in the UK this year must be zero-emission, a percentage that will rise each year to 80 per cent in 2030.
The SMMT’s Hawes said the new sales mandate could “compel supply, but it can’t compel demand”.
At present, anyone buying an EV in the UK through a business, or a company car or salary sacrifice scheme, receives generous tax incentives. But grants for individuals were phased out by the government two years ago.
“All the evidence will show over the course of the year that private demand isn’t increasing on its own to meet future trajectories,” Hawes said. “We might be all right this year, but in future years we are really going to struggle.”
He added that other major European markets, including Germany and France, still offered incentives to retail customers buying electric cars, leaving the UK in the “bottom half” of Europe for EV market share.
Norway leads Europe’s EV industry, with 83 per cent of sales during the first nine months of 2023 being electric. The UK also lags Germany, where the figure was 18 per cent; in Belgium it was 19.3 per cent; and in Portugal it reached 17 per cent.
Ian Plummer, commercial director at Auto Trader, warned that falling enthusiasm for EVs from mainstream buyers was “a sign of what’s to come if the government doesn’t support the industry in making the transition by incentivising consumers”. He pointed to interest in EVs among private buyers “faltering amid doubts over affordability and charging”.
While more charging stations are being installed, the UK’s rollout is slower than promised and remains concentrated in London and the south-east.
The SMMT said that cutting VAT from 20 per cent to 10 per cent on new EVs over three years would take roughly £4,000 off the price of a new model if the savings were passed on. Campaigners have previously warned that VAT cuts are not always passed on.
The industry body calculated this would increase EV sales by 250,000 over the three years, while probably costing the government around £7.7bn in lost income.
