- The UK’s Society of Motor Manufacturers and Traders (SMMT) has echoed earlier calls to introduce new purchase incentives for consumer EVs, to drive EV sales across the country ahead of the 2030 ZEV mandate.
- The SMMT has called for VAT to be halved on the purchase of new EVs, which currently stands at 20%.
- Modelling carried out by the group suggests this move could boost electric car demand by 15% over the next two years, benefitting manufacturers and customers alike.
SMMT calls for EV VAT reduction to 10%
Under current projections, the SMMT expects UK EV registrations between 2025 and 2027 to total 1.782 million vehicles. With this recommended change to VAT, however, it predicts demand for an additional 267,000 electric vehicles within the same period, which would take the place of 267,000 ICE-powered vehicles which would otherwise be registered. This equates to a demand rise of around 15%, which would also help some manufacturers to comply with increasingly stringent ZEV targets. Earlier this week, the government confirmed that ‘substantial’ changes would be made to these targets, but what form that takes is yet to be seen.
The SMMT has estimated that such a change in VAT would cost the treasury an average of £1,000 for every new EV sold. However, with the increased sales it would provide, it could reduce annual CO2 emissions by a projected six million tonnes.
Whether or not the government choose to review these VAT recommendations put forward by the SMMT, tax cuts will play just one of several parts to drive up electric car adoption across the UK. Earlier this week, The AA also put forward its own recommendations for improving EV acceptance – which included improved consumer messaging, as well as more specific changes such as improved visibility of public charging through signage – and tax breaks on the charging infrastructure side.
Mike Hawes, Chief Executive at SMMT, commented:
“Manufacturer investment has meant ten times as many drivers are going electric compared with just five years ago. This is great progress but, with the right support for consumers, we can go beyond current expectations to put a total of more than two million new EVs on the road by 2028. Government investment to convert the ‘electric sceptics’ would energise business across the country far beyond just the automotive sector. Every stakeholder would benefit from the impact of consumer incentives which, when combined with binding targets for chargepoint rollout and more flexible regulation, would create a virtuous circle of rising demand that stimulates green economic growth.”
