Electric vehicle surge marks transformative year in UK automotive sector

  • UK automotive sector surges by 17.9% in 2023, led by fleet investment.
  • Record BEV volumes, but market share drops to 16.5%, prompting calls for a 3-year VAT cut.
  • SMMT CEO urges government support for a green recovery; 2024 outlook anticipates BEVs at 22.3% market share.

EV registration and fleet investment fuel bumper year for UK automotive sector

In a massive year for the UK automotive sector, the spotlight is firmly on electric vehicles (EVs). New car registrations surged an incredible 17.9% in 2023, reaching an impressive 1.903 million, according to the latest SMMT report. This upward trajectory is fueled largely by a substantial acceleration in fleet investment.

The overall market growth is extremely praiseworthy, however the focal point remains on the EV sector. Battery electric vehicle (BEV) volumes soared to unprecedented heights, recording 314,687 new registrations. This milestone not only represents a record-breaking achievement but also exceeds the cumulative figures for both 2020 and 2021.

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At the forefront of the resurgence was a robust fleet investment, witnessing an eye-catching 38.7% year-on-year rebound. While business registrations faced a minor setback at -1.5%, private consumer demand remained unwavering, maintaining stability with 817,673 units after a robust recovery in 2022.

However, despite the commendable growth, the market share for BEVs experienced a modest decline, settling at 16.5%. This prompts a closer examination of the factors influencing consumer choices in the rapidly evolving UK automotive sector.

The data underscores a discernible shift in consumer preference towards electric and hybrid options, with hybrid electric vehicles (HEVs) witnessing an impressive growth rate of 27.1% and capturing a 12.6% market share. Simultaneously, plug-in hybrids (PHEVs) surged by 39.3%, securing a 7.4% market share. This dual success for hybrid technologies signifies an evolving landscape where consumers increasingly consider and adopt electrified solutions.

Despite the promising growth, a nuanced pattern emerges in private consumer behaviour.

While BEVs constitute a substantial share of new car registrations, with one in six vehicles in 2023 being electric, private buyers remain somewhat cautious. Statistics reveal that only one in eleven private buyers opted for a BEV, indicating potential barriers that merit attention.

In response to this consumer trend, industry leaders are making a compelling case for government intervention. The proposed solution comes in the form of a three-year Value Added Tax (VAT) cut specifically for new BEVs. This strategic move aims to make electric vehicles more financially accessible for private consumers, mirroring the fiscal benefits enjoyed by business and fleet buyers. Projections accompanying this proposal suggest that the VAT reduction could inject an additional £7.7 billion in BEV buying power by the end of 2026.

Mike Hawes, SMMT Chief Executive, commented:

“With vehicle supply challenges fading, the new car market is building back with the best year since the pandemic. Energised by fleet investment, particularly in the latest EVs, the challenge for 2024 is to deliver a green recovery. Government has challenged the UK automotive sector with the world’s boldest transition timeline and is investing to ensure we are a major maker of electric vehicles. It must now help all drivers buy into this future, with consumer incentives that will make the UK the leading European market for ZEVs.”

As the automotive industry looks towards 2024, the outlook remains optimistic.

Forecasts anticipate not only the continuation of market growth but also an increased market share for BEVs, aiming for a substantial 22.3%. The push for a more sustainable automotive future is evident, with electric vehicles leading the charge. As the government contemplates fiscal incentives and industry players strategize to make EVs more accessible, the coming years hold the promise of a greener, electrified road ahead for the UK automotive sector.

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