The automotive industry has called on the Government to halve VAT on new EV purchases to energise demand from ‘electric sceptics’.

Nearly two in five electric sceptics say they’d change their mind with a purchase incentive

Just one in eight new car buyers intend to switch to electric in the next three years – but nearly two in five EV cynics say they’d change their mind with a purchase incentive, according to a new study from the Society of Motor Manufacturers and Traders (SMMT).

Modelling by the automotive industry body suggests that under current market conditions, 1.782 million new EVs will be registered between 2025 and 2027.

But halving VAT on new EV purchases which would drive up demand by a further 15%, putting 267,000 additional new EVs – rather than fossil fuel vehicles – on the road.

This would raise registrations to 2.05 million electric vehicles – powering up the wider economy due to demands for charging, insurance, maintenance and energy services, and ultimately increasing supply into the used car market.

The SMMT acknowledges such a step would incur a temporary cost to the Treasury – an average of around £1,000 per car – but points out that the past five years have seen the UK government accrue a £2.5bn VAT receipt windfall as EV uptake has increased tenfold.

And accompanied by “flexible regulation” and mandated charge point rollout, a bigger and cleaner new car market would drive down CO2 emissions by six million tonnes a year – equivalent to cutting UK aviation emissions by almost a sixth and stimulating growth nationwide.

A new SMMT publication, In It Together: Why every sector wins with EV volume, stressed why action is needed to spur EV demand. It says carmakers have invested billions to enable a plentiful 130-plus supply of ZEV model choices in every shape and size and, on average, capable of driving almost 300 miles on a single charge.

But it warns that manufacturers had to offer £4.5bn worth of “unsustainable discounting” to UK buyers last year alone to meet the ZEV mandate target for 2024 and says natural demand must still be lifted if the mandate’s incremental targets are to be achieved.

A new survey by SMMT, conducted by Censuswide, reveals that 23.1% of would-be new car buyers plan to get into an electric car between now and 2028 – below the ZEV mandate’s 28% EV market share target for this year alone.

The survey also suggests that the EV market is highly reliant on drivers who have already gone electric, comprising almost half (48.7%) of respondents – while fewer than one in eight (11.6%) new buyers polled are actively intending to switch to an EV.

But purchase incentives, along with greater charge point rollout and a reduction in the cost of charging through a VAT cut, would encourage around two in five consumers to drive electric.

Mike Hawes, SMMT chief executive, said: “Government investment to convert the ‘electric sceptics’ would energise business across the country far beyond just the automotive sector.

Mike Hawes, SMMT chief executive

“Every stakeholder would benefit from the impact of consumer incentives which, when combined with binding targets for charge point rollout and more flexible regulation, would create a virtuous circle of rising demand that stimulates green economic growth.”

The new SMMT publication also explores how larger EV volumes boost business for multiple sectors beyond automotive, and how those same sectors can play a vital role in driving up EV uptake themselves – creating a “virtuous carbon-cutting circle of economic growth, cleaner mobility and social change”.

And it says better infrastructure rollout, more cost-effective insurance and ample EV maintenance provision would help accelerate the van market’s transition – which is also governed by the ZEV mandate and is particularly struggling to hit targets.

A larger EV fleet overall would also lead to more investment in grid connections, supporting depot charging, which is essential to de-risking investment in zero-emission HGVs.

Commenting on the report, Vicky Read, CEO of ChargeUK, said: “The continued acceleration of charging infrastructure, in all the locations where it is needed, and at affordable prices, is a non-negotiable part of an EV transition that works for the UK and for individual drivers.

“Our sector needs three things to deliver that outcome.

“First – stable regulation that gives us confidence to invest ahead of demand. That means not fiddling with the ZEV mandate. ChargeUK members have committed £6bn of investment by 2030 based on the trajectories set out in the ZEV mandate. Upending it after barely a year would be a disaster for investor confidence.

“Second – a further boost to growing EV demand. We’d urge the Government to seriously consider all the consumer incentive measures being suggested today. Making it easier and more affordable for drivers to switch is essential.

“Third – barriers to rapid deployment and affordable charging removed. We welcome the SMMT echoing our own calls for action on charging VAT, standing charges, planning, permitting and grid connections.

“But we should equally be clear about the actions that will drive the opposite charging outcome.

“We do not need ‘binding targets’ to accelerate rollout. Rolling out chargers is our raison d’etre. A new charge point is already going into the ground every 25 minutes on average and ChargeUK members want to go further and faster still. We can and will achieve that with certainty of demand, and barriers removed.

“Above all else, we do not need a regulatory re-set that results in fewer electric miles being driven in the UK – that will lead to less charging investment, fewer chargers and a failed EV transition for the UK.”

The full SMMT report is online here.