UK automakers demand tax incentives to encourage the switch to electric vehicles

The UK auto industry has requested tax incentives for motorists to switch to electric cars to offset the weakening demand among private buyers for battery models.

Our EV market has emerged from its early adopter phase. “To move from the early adopter phase to the mass market we need to find a way to motivate consumers,” said Mike Hawes. He is the chief executive of the Society of Motor Manufacturers and Traders which represents the UK auto industry.

He said at a SMMT Conference on Monday that if the UK fails to convince consumers to switch to battery powered models, it will be harder to achieve its net zero goal.

Hybrids will be allowed to continue being sold until 2035. The UK government has plans to phase-out the sale of petrol and diesel vehicles by 2030. In the UK, electric vehicles make up 16 per cent. There are more than one million on the roads.

Only a quarter of the sales are made by private buyers, a number that is declining.

Tax incentives are available for battery-powered cars purchased through company car schemes or salary sacrifice . However, motorists who buy a car privately from a dealer do not receive any direct incentives since the “plug-in vehicle grant” has been discontinued.

Alex Smith, the head of Volkswagen UK, which sells about a fifth (or more) of all cars in the UK said that there was “stagnation”, among non-business buyers. He claimed that the phase-out of incentives has hurt private buyers and now demand is “flatlining”.

He said that the incentive program was successful in promoting electrification as the preferred direction. “There has to be a leveling up of some sort if we are going to accelerate this transition.”

The SMMT has called on Ministers to lower the VAT on electric cars and scrap plans to raise vehicle excise duties paid on them starting in 2025.

The trade association also wants the government set a target for installing public charging points. Long-time critics have pointed out that the lack of a comprehensive charging network is one of the main barriers for motorists to switch to all-electric cars.

Mark Harper, UK Transport Secretary, told the conference the government must “earn the trust of consumers” as they “consider going electric”. He also said that the charging infrastructure “must be able to keep up with the demand”.

He said that the Treasury would make the final decision on whether or not the government offers consumer incentives.

In a Monday statement, the Treasury stated: “To accelerate the UK’s transition to electric vehicles, over £2bn has been provided to reduce purchase costs for motorists and to build necessary infrastructure that will support their use, such as funding local electric vehicle infrastructure, grants targeted at plug-in vehicles and low first year vehicle excise duties.”

Smith stated that there are still significant concerns among mass-market purchasers about the availability of charging infrastructure. This is primarily focused on London and south-east England.

Smith said that charging at home is “inherently unfamiliar” to most people. “The next group, who will likely adopt the perception that EVs inherently expensive”, has a different view.

Smith said that carmakers need to do more to convince customers of the benefits of EVs. They are still more expensive than gasoline-powered cars, but they cost less to operate and require less maintenance when recharged at home.