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Gloucestershire Business News

ANALYSIS: Electric cars: give us a bump start, say automakers

Britain's millionth battery-driven electric car (EV) reached the road in January 2024.

And while that might sound like a positive headline, the Society for Motor Manufacturers and Traders (SMMT) says VAT's an obvious handbrake on faltering private sales.

January's innings for the new car market overall showed a growth of 8.2% and marked 18 months of uplift, SMMT research reveals.

But dig into the data and it's clear that the appetite is coming from fleet buyers, while business and private customers are proving to be shy.

With 142,876 new cars registered, January marked the best performance for the month since 2020. Underpinning that, there was a rise of 29.9% from sales into fleet car parks, while private retail uptake fell by 15.8%. 

In all, fleets accounted for more than six in 10 (63.2%) new cars registered, up from just over half (52.7%) last year.

With the marker post for a million UK EV sales finally achieved, some 20,935 BEVs were registered, a YOY rise of 21.0%. That means that since 2002, 1,001,677 EVs have rolled out onto UK roads, an achievement the SMMT said was "testament to the commitment of manufacturers to deliver ever-increasing numbers of zero emission models".

With a YOY market share of 14.7%, the figure represents a shrinkage on 2023's overall performance of 16.5%. Allied to this, plug-in hybrids (PHEVs) recorded volume growth of 31.1% (8.4% of the market), while hybrid (HEV) volumes fell by 1.2%, with a 13.1% share.

So what's driving the stutter for EVs?

The SMMT's analysis suggests supply, amid political machinations, may be an obvious answer.

Its January report said: "Volatility in BEV supply has been expected and is likely to continue as manufacturers adjust product allocation following the last-minute resolution over UK-EU rules of origin, which had threatened to apply tariffs to EVs, restricting affordability.

"However, while fleet and business demand for BEVs grew by 41.7% in January, registrations by private buyers fell by 25.1% - an ongoing trend that will undermine Britain's ability to deliver net zero."

With the UK now the only major market to have combined a 2035 end of sale date on combusion cars with a mandated zero emission vehicle market share, there are no significant consumer incentives, the SMMT warns, to wean buyers off the forecourt nozzle.

One solution, is clear: "it is increasingly clear that private buyers need more support to switch. Ahead of next month's Budget, industry is calling for government to support consumers by temporarily halving VAT on new BEV purchases."

The report added: "Such a step would cost the Treasury an average of just £1,125 per car, which is less than the cost of the previous Plug-in Car Grant and would put more than a quarter of a million electric - rather than petrol or diesel - cars on the road by the end of 2026, on top of those already expected. Not only would this cut CO2 by more than five million tonnes during that time, it would mean that the next million EVs could be delivered in just two years."

A temporary VAT cut for EVs would also partly mirror the tax exemption already offered to consumers on other carbon reduction technologies, such as heat pumps. Furthermore, supporting the EV consumer today would ensure wider benefits, such as increasing the supply of used EVs, enlarging the overall market to make it more attractive for charging and manufacturing investment, and slashing Britain's carbon footprint.

Mike Hawes, SMMT CEO, said: "It's taken just over 20 years to reach our million EV milestone - but with the right policies, we can double down on that success in just another two. Market growth is currently dependent on businesses and fleets. Government must therefore use the upcoming Budget to support private EV buyers, temporarily halving VAT to cut carbon, drive economic growth and help everyone make the switch.

"Manufacturers have been asked to supply the vehicles, we now ask government to help consumers buy the vehicles on which net zero depends."

The latest 2024 outlook for the new car market estimates a total overall volume of 1.974 million units, which is a 4,000 unit increase on October's estimate – but with the BEV forecast reduced to a market share of 21.0% over the year, compared with the 22.3% anticipated in October (and the 23.3% expected a year ago). 

While myriad factors, such as high energy prices, inflation and interest rates, charging anxiety and mixed messaging from government have restricted demand, 100,000 more BEVs will still reach the road in 2024 compared with last year, the SMMT calculates - equating to more than one in five new cars. This volume, the SMMT concludes, would increase further still if the Chancellor listens and makes that VAT reduction.

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