The automotive industry has warned that the UK could risk losing thousands of jobs unless the Government takes urgent action to boost demand for electric vehicles.
The Society of Motor Manufacturers and Traders (SMMT) has called on ministers to introduce new incentives for electric vehicles, which have already cost the industry billions.
This includes cutting the VAT on public chargers from 20 per cent to five per cent and reconsidering plans to introduce Vehicle Excise Duty (VED) payments for EV owners, which "disincentivises" people to switch to electric cars.
The call comes as manufacturers face mounting pressure to meet ambitious Government targets for electric vehicle sales under the Zero Emission Vehicle mandate.
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The mandate requires at least 28 per cent of new car sales to be electric by the end of this year before moving to 100 per cent in 2035.
The Society has warned that without intervention, the UK's automotive sector could face significant challenges in the coming years.
New modelling by the SMMT suggested that under current market conditions, 1.78 million new electric vehicles will be registered between 2025 and 2027.
However, halving the amount of VAT on new EV purchases would drive up demand by 15 per cent, putting 267,000 additional plug-in cars on the road over the next two years. This would raise total registrations to 2.05 million electric vehicles by 2028.
The additional vehicles would require charging, insurance, maintenance and energy services, ultimately increasing supply into the used car market, the report detailed.
While the intervention would incur a temporary cost to the Treasury, an average of around £1,000 per car, the SMMT argued it would be worth it considering the Government has accrued £2.5billion in VAT receipts from electric car charging fees over the last five years.
This investment would be offset by the economic benefits of a stronger automotive sector, the association explained.
It also stated that automotive manufacturers were forced to underwrite the transition to the tune of £4.5billion worth of unsustainable discounting offered to UK buyers last year alone.
Industry experts suggest that with the right support from Government, the temporary reduction in VAT would give consumers an additional £4,000 in buying power when purchasing an electric vehicle.
This measure, when combined with flexible regulation and mandated charge point rollout, could help drive a bigger and cleaner new car market, driving down CO2 emissions by six million tonnes a year, the report urged.
Mike Hawes, SMMT chief executive, said: "Manufacturer investment has meant 10 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 charge point rollout and more flexible regulation, would create a virtuous circle of rising demand that stimulates green economic growth."
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Only 23.1 per cent of would-be new car buyers plan to get an electric car between now and 2028, which is well below the Government's ZEV mandate for this year.
Transport minister Lilian Greenwood had previously shared how the UK has a "formidable public charging network" with 75,000 chargers, but "we need to go further".
She said: "That’s why we’re running hell for leather to deliver the charging infrastructure we need to meet our ZEV targets. We knew this fundamental transition – like any big change – wasn’t going to be easy, but with each passing year, we see record numbers of drivers going electric."
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The Society of Motor Manufacturers and Traders (SMMT) has called on ministers to introduce new incentives for electric vehicles, which have already cost the industry billions.
This includes cutting the VAT on public chargers from 20 per cent to five per cent and reconsidering plans to introduce Vehicle Excise Duty (VED) payments for EV owners, which "disincentivises" people to switch to electric cars.
The call comes as manufacturers face mounting pressure to meet ambitious Government targets for electric vehicle sales under the Zero Emission Vehicle mandate.
Do you have a story you'd like to share? Get in touch by emailing [email protected]
The mandate requires at least 28 per cent of new car sales to be electric by the end of this year before moving to 100 per cent in 2035.
The Society has warned that without intervention, the UK's automotive sector could face significant challenges in the coming years.
New modelling by the SMMT suggested that under current market conditions, 1.78 million new electric vehicles will be registered between 2025 and 2027.
However, halving the amount of VAT on new EV purchases would drive up demand by 15 per cent, putting 267,000 additional plug-in cars on the road over the next two years. This would raise total registrations to 2.05 million electric vehicles by 2028.
The additional vehicles would require charging, insurance, maintenance and energy services, ultimately increasing supply into the used car market, the report detailed.
While the intervention would incur a temporary cost to the Treasury, an average of around £1,000 per car, the SMMT argued it would be worth it considering the Government has accrued £2.5billion in VAT receipts from electric car charging fees over the last five years.
This investment would be offset by the economic benefits of a stronger automotive sector, the association explained.
It also stated that automotive manufacturers were forced to underwrite the transition to the tune of £4.5billion worth of unsustainable discounting offered to UK buyers last year alone.
Industry experts suggest that with the right support from Government, the temporary reduction in VAT would give consumers an additional £4,000 in buying power when purchasing an electric vehicle.
This measure, when combined with flexible regulation and mandated charge point rollout, could help drive a bigger and cleaner new car market, driving down CO2 emissions by six million tonnes a year, the report urged.
Mike Hawes, SMMT chief executive, said: "Manufacturer investment has meant 10 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 charge point rollout and more flexible regulation, would create a virtuous circle of rising demand that stimulates green economic growth."
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Only 23.1 per cent of would-be new car buyers plan to get an electric car between now and 2028, which is well below the Government's ZEV mandate for this year.
Transport minister Lilian Greenwood had previously shared how the UK has a "formidable public charging network" with 75,000 chargers, but "we need to go further".
She said: "That’s why we’re running hell for leather to deliver the charging infrastructure we need to meet our ZEV targets. We knew this fundamental transition – like any big change – wasn’t going to be easy, but with each passing year, we see record numbers of drivers going electric."
Find Out More...