UK carmakers call for tax incentives to help switch to EVs

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The UK car industry has called for tax incentives to help motorists switch to electric vehicles to offset weakening demand for battery models among private buyers.

“Our EV market is emerging from the early adopter phase. To move to the mass market, we need something to incentivise consumers,” said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, which represents the UK car industry.

He told an SMMT conference on Monday that a failure to convince mainstream buyers to switch to battery-powered models would make it harder for the UK to meet its net zero goals.

The UK government plans to phase out the sale of new petrol and diesel cars by 2030, with some hybrids allowed until 2035. Electric vehicles account for 16 per cent of new vehicles sold in the UK, with more than 1mn on the road.

But businesses make up the vast majority of sales, with only a quarter bought by private buyers — a level that is falling.

Battery-powered vehicles bought through company car schemes or using salary sacrifice receive generous tax incentives, while motorists buying a vehicle privately from a dealership have no direct purchase incentives after the so-called “plug-in car grant” was wound down last year.

Alex Smith, who runs Volkswagen in the UK, which accounts for about a fifth of cars sold in the country, said there had been “stagnation” among mainstream non-business buyers. He said that the phaseout of incentives had hurt demand among private buyers, and it was now “flatlining”.

“Where the incentivisation really succeeded was in sending the message that electrification is the desired direction of travel,” he said. “There needs to be some kind of levelling up if we’re going to reaccelerate this transition.”

The SMMT called on ministers to lower VAT on electric vehicles and scrap plans to increase the vehicle excise duty paid on them from 2025.

The trade body also wants the government to set a mandatory target for the installation of public charging points. The lack of a comprehensive network of chargers has long been flagged as one of the biggest barriers to motorists switching to all-electric vehicles.

UK transport secretary Mark Harper told the conference that the government still needed “to earn the confidence of consumers as they consider going electric”, adding that charging infrastructure “must keep pace” with demand.

When asked by the Financial Times whether the government would consider offering consumer incentives, he said the decision was for the Treasury.

In a statement on Monday the Treasury said: “To drive the UK’s move to electric vehicles, we have provided over £2bn to cut down purchase costs for drivers and to build the necessary infrastructure to support their usage, such as local electric vehicle infrastructure funding, targeted plug-in vehicle grants and low first-year vehicle excise duty.”

Smith said that mass-market buyers still had significant questions over the availability of charging infrastructure, which is predominantly focused on London and the south-east of England.

Charging at home was “inherently unfamiliar” for most people, Smith added, while there was a “perception in the next group who are likely to adopt that EVs are inherently expensive”.

Smith said carmakers needed to do more to convince consumers of the running cost benefits of EVs, which remain more expensive to purchase but are cheaper to run when recharged at home, and have lower servicing costs.