VAT cut demands grow in bid to boost key EV sector as car sales suffer slump

Motor giants are calling for VAT cuts on expensive electric cars to boost sales.

The call comes on the back of figures showing private purchases of electric cars are on the slide against the background of high prices and concerns about charging.

Just 3,600 of the EVs were bought by individual motorists last month, which was down by 22 percent on the same month last year.

Despite this fall the total number of battery electric vehicle sales was up 10.7 percent due to higher purchases by fleet firms providing vehicles to company car drivers.

Of the 22,717 electric vehicles (EVs) sold last month, the majority went to fleets - companies purchasing more than 25 units in one go.

Fleet and company car drivers get tax incentives to switch to electric, which are not available to individuals.

The figures come from the Society of Motor Manufacturers and Traders (SMMT) which said there is a need to "re-enthuse" private buyers to switch.

While EVs have lower running costs than petrol and diesel, the upfront price is around 30-40 percent higher.

Mike Hawes, chief executive of SMMT, said: “The new car market continues to grow even in the quieter months, driven primarily by fleet demand.

“This is particularly true of the electric vehicle sector, where the absence of government incentives for private buyers is having a marked effect.'

He added: “Although attractive deals on EVs are in place, manufacturers cannot fund the mass market transition single-handedly.

“Temporarily cutting VAT, treating EVs as fiscally mainstream not luxury vehicles, and taking steps to instil consumer confidence in the chargepoint network will drive the market growth on which Britain's net zero ambition depends.”

The overall car market grew just 1 per cent year on year in April, according to SMMT, with hybrid cars enjoying the largest uplift.

Plug-in hybrids rose 22 percent year on year whilst hybrid EVs climbed 17 per cent.

And although petrol engine sales fell 3 per cent, they still accounted for more than half the total amount sold in April.

Ian Plummer, commercial director of Auto Trader, the UK's largest car marketplace, said high prices are putting people off buying new vehicles.

He said: “With new car prices up 29 percent on average since 2020, there's a risk that many consumers will be priced out of the market.

“The discounts we've seen manufacturers offer to incentivise consumers into new electric cars seems to be working, with battery electric vehicle registrations up on 2023.

“That said, we'll need to see even more price action to achieve mass electric adoption.”

Richard Peberdy, UK Head of Automotive for KPMG, said: “Consumer new car sales are continuing to be impacted by pressure on household budgets, and a higher cost of finance and insurance.”