The sale of Electric Vehicles in the UK has flatlined, provoking industry calls to cut VAT and improve incentives.

2023 saw EVs account for 16.5 per cent of new vehicles sold in the UK, a minor decline from 16.6 per cent in 2022. This means 2023 is the first year in which battery cars failed to gain market share since sales began to rocket in 2018. This has raised new concerns that buyers are either sceptical of EV technology and unsure of its benefits, or simply have few incentives to make the switch.

“Just one in 11 private consumers last year chose an EV,” says Mike Hawes, head of the Society of Motor Manufacturers and Traders (SMMT).  “When it comes to market share, we have fallen behind partly because there aren’t incentives for the private buyers that other countries have. There aren’t any grants or any incentives other than for the next 12 months zero vehicle excise duty,” he added.

Despite a stall in EV sales, just over 425,000 new EVs were registered in 2023. However, the market share is stalling. The average EV has lower running costs that their petrol and diesel counterparts, but an upfront price roughly 30-40 per cent higher. This is deterring many first time buyers from making the switch.

VAT incentive to improve sales

 Prime Minister Rishi Sunak announced a delay to the banning of new petrol and diesel vehicle sales in September last year, pushing back the ban by five years from 2030 to 2035. Alongside this, the Zero Emissions Vehicle (ZEV) mandate will require 22 per cent of all vehicles manufactured by carmakers to be ZEVs by the start of next year, rising significantly to 80 per cent by 2030. However, industry leaders argue that these targets are not being supported with incentives at the consumer’s end.

Presently, a call for the government to cut VAT on all new ZEV purchases across the next three years is being heralded as a solution to the incentive issue. The SMMT has estimated that this plan would equate to an average saving of £4,000 per purchase, saving consumers £7.7bn over the period and putting 250,000 ZEVs on the road by 2026.

A VAT cut could reinvigorate the EV industry and contribute to an improved market share for the sector. In particular, the second wave of EV buyers in the market, the ones who are perhaps more sceptical than the early-adopters and first wave of buyers, will respond to greater incentives and savings when it comes to making the switch.

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