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Gloucestershire Business News

SPECIAL REPORT: Auto economics? It's the fleet buyers, stupid

No one's buying electric cars - or at least no-one with their own money.

That's a traffic-stopping suggestion to come out of the data that landed this morning from the Society of Motor Manufacturers and Traders (SMMT).

Its latest monthly snapshot applauds the 21st consecutive month of growth and celebrates the fact that new-car registrations went up 1% in April.

Underpinning that, sales of electric vehicles (termed BEVs in the industry as an acronym for battery-electric vehicles) rose to a sizeable 16.9% – but the report states this was "sustained entirely by business buyers, as private retail demand continues to drop".

Mike Hawes, SMMT CEO said: "The new-car market continues to grow even in the quieter months, driven primarily by fleet demand. This is particularly true of the electric vehicle sector, where the absence of government incentives for private buyers is having a marked effect."

Mr Hawes is clear on the solutions for unblocking this issue: "Although attractive deals on EVs are in place, manufacturers cannot fund the mass-market transition single-handedly. Temporarily cutting VAT, treating EVs as fiscally mainstream not luxury vehicles, and taking steps to instil consumer confidence in the chargepoint network will drive the market growth on which Britain's net zero ambition depends."

With the new data out, the SMMT has recalibrated its 2024 market outlook - and revised its overall uptake upwards to 1.984m units. At the same time though, its anticipated BEV share has been downgraded to 19.8% as "weakened private retail demand moderates expectations".

The SMMT added: "Continuing the trend seen throughout the year, [April's] growth was driven entirely by fleets, where registrations rose by 18.5% to reach 81,207 units - more than six in 10 of all new cars registered in April. Private buyer uptake fell by -17.7% to 50,458 units, while business registrations declined by -16.1%, to 2,609.

Despite governmental apathy though, SMMT figures show electrified vehicles continued to be the main drivers of market expansion. Plug-in Hybrids (PHEVs) recorded the strongest growth, rising by 22.1% to account for 7.8% of the market, followed by Hybrid Electric Vehicles (HEVs), up 16.7% with a 13.1% share of demand.

A spokesman added: "April was a brighter month for battery electric vehicle (BEV) registrations, predominantly due to compelling fiscal incentives for businesses. Overall, BEV uptake rose 10.7%, pushing up market share to 16.9%, a significant uplift on last April's 15.4%.

"While the overall increase in BEV demand is positive, urgent action is needed to re-enthuse private buyers into switching. Fewer than one in six new BEVs bought in April went to consumers, whose uptake volumes fell by -21.9%.

"Drivers today enjoy the widest ever choice of BEV models - more than 100 - powered by the latest technology, and manufacturers continue to provide compelling offers to encourage their uptake. However, the lack of government incentives for private motorists remains a barrier that cannot be overcome by industry alone."

With tax incentives proving to be behing a rapid shift to BEVs in the fleet market, providing private buyers with a similar level of support would accelerate an overall market shift, fuel economic growth and deliver a sustainable, fair transition, the trade body said.

In specifics, the SMMT would like to see:

● A temporary 50% off VAT on new BEV purchases. This would help more than a quarter of a million drivers to switch from fossil fuel to electric over the next three years.

● Raising the threshold for the 'expensive car' supplement to Vehicle Excise Duty - due to apply to EVs from April 2025 - this would send the message to the market that zero emission vehicles are necessities, not luxuries.

● Action on infrastructure, with nationwide chargepoint installation essential for consumer confidence. While last year saw more chargepoints installed than ever before, there is currently just one standard charger available for every 35 plug-in cars on the road - a negligible improvement on 2022 when the ratio was one for every 36.4 With current levels of infrastructure insufficient to inspire more consumers to go electric, there is a clear need for measures to accelerate chargepoint rollout.

Mr Hawes added: "Such actions are crucial as, based on current conditions, the latest market outlook shows a diminishing share for BEVs, despite a growing overall new car market".

With anticipated market share now 19.8%, BEV volumes for this year have been revised downwards by -5.2%, which is significantly below the government target of 22% per manufacturer under the Vehicle Emissions Trading Scheme. Flexibility in the scheme means manufacturers can still meet government mandated targets, but long-term success depends on a growing market built on strong consumer EV demand.

Meanwhile, a drop of more than 25%, as shown above, for sales of diesel cars in April against the same month in 2023, coincides with a report today from the AA which suggests consumption of diesel has dropped by almost one billion litres in the last year. 

We bought 3.2% less derv in the financial year 2023-4 and, with diesel averaging a price north of £1.60 per litre, higher average prices are cited as a key reason for drivers turning to petrol. 

While diesel purchases fell in total by 968m litres, petrol rose 702m. 

The AA says more drivers are now switching to hybrid and electric cars, as well as standard petrol models, despite diesel cars' mpg advantage on the latter. 

Spokesman Luke Bosdet said diesel still has its place, though: "While cities and built-up areas may be trying to run diesel out of town, out on the open road and in rural areas a diesel vehicle can be king."

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