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Car industry urges government action as EV sales fall short of targets
Electric car and van sales are on course to fall way short of emissions targets, prompting a call to action from the car industry
Words by: Mark Nichol
Published on 4 October 2024 | 0 min read
In an open letter by the Society of Motor Manufacturers and Traders (SMMT), carmakers including Ford, BMW, the Volkswagen Group and Stellantis have urged the government to help boost electric car and van sales. Strict zero emissions targets, which will ultimately see sales of new petrol and diesel cars banned in 2035, are looking increasingly unrealistic.
The net zero mandate says that by the end of 2024, at least 22 percent of new cars sold by any manufacturer must be zero-emissions models. By 2030 that number will rise to 80 percent, before the total ban in 2035. The 2024 year-to-date overall share of EV sales in the UK is less than 18 percent, however - despite a record number of electric vehicles being sold in September. Most of that growth is from fleet sales, which the SMMT says demonstrates the importance of incentivising consumers; the current tax system makes running an EV as a company car extremely cost-effective. For private buyers, on the other hand, electric vehicles are often prohibitively expensive, costing thousands more than an equivalent petrol or diesel car. The ‘free VED’ status that electric cars have enjoyed so far will end in April 2025, too, meaning electric car drivers will soon have to pay ‘road tax’ for the first time. New electric cars are frequently priced above the £40,000 ‘luxury car’ threshold too, which makes their owners liable for additional tax (VED) payments throughout ownership. Removing this additional tax burden for electric vehicle buyers is just one of the things that the SMMT is urging the government to do, to stimulate EV sales. It’s also suggesting that the government halves VAT on new EV sales, reduces VAT on public charging to five percent (it's currently 20), and extends the plug-in van grant indefinitely, due to end in March 2025. (Electric van sales are way behind the mandate too, accounting for 5 percent of the overall market when the 2024 target is 10 percent.) The SMMT argues that the car industry is already doing all it can to make electric vehicles more affordable. So far this year, an estimated £2bn worth of offers and discounts have been given to customers to incentivise them into electric vehicles; discounts of up to 12 percent can currently be found on new electric cars sold on Auto Trader. Speaking to the Today programme on BBC Radio 4 on discounting of EVs, Auto Trader Editorial Director Erin Baker said that this situation is unsustainable: “If they could do it permanently I’m sure they would, but profit margins on electric cars have always been slim. They’re very expensive to manufacture – batteries are extraordinarily expensive still – and although costs are coming down and efficiency is improving, simply discounting can’t last forever. We need stimulus injected into the market from the government.” In its letter to the government, the SMMT said: “There is still a job to be done. With the right measures, the right consumer support and the right ecosystem, we can fix the foundations of this transition and with it deliver the biggest technology transition ever attempted, and the economic growth and environmental improvements that should be non-negotiable.” Car manufacturers are set for huge fines for missing the EV sales mandate: £15,000 for every car that misses the target. In other words, if a manufacturer sells 10000 cars in 2024, the mandate requires that 2200 must be electric vehicles. So if they sell 2000 EVs, they'll be fined £15,000 for every one of the 200-car shortfall. A £3,000,000 fine. Some manufacturers are getting around this by buying 'credits' from other car companies that do hit the targets - makers like Tesla or Polestar, who don't produce any petrol or diesel cars. This is a situation that the SMMT argues is far from ideal in its letter: "No company wants to support a competitor, especially if they may have had competitive advantages in production. And any amount will have to be provisioned, with a consequent cut in investment, R&D or jobs. And in any market, costs are invariably passed on, so it is the consumer who pays." The government is yet to respond to the SMMT's call for action.
The net zero mandate says that by the end of 2024, at least 22 percent of new cars sold by any manufacturer must be zero-emissions models. By 2030 that number will rise to 80 percent, before the total ban in 2035. The 2024 year-to-date overall share of EV sales in the UK is less than 18 percent, however - despite a record number of electric vehicles being sold in September. Most of that growth is from fleet sales, which the SMMT says demonstrates the importance of incentivising consumers; the current tax system makes running an EV as a company car extremely cost-effective. For private buyers, on the other hand, electric vehicles are often prohibitively expensive, costing thousands more than an equivalent petrol or diesel car. The ‘free VED’ status that electric cars have enjoyed so far will end in April 2025, too, meaning electric car drivers will soon have to pay ‘road tax’ for the first time. New electric cars are frequently priced above the £40,000 ‘luxury car’ threshold too, which makes their owners liable for additional tax (VED) payments throughout ownership. Removing this additional tax burden for electric vehicle buyers is just one of the things that the SMMT is urging the government to do, to stimulate EV sales. It’s also suggesting that the government halves VAT on new EV sales, reduces VAT on public charging to five percent (it's currently 20), and extends the plug-in van grant indefinitely, due to end in March 2025. (Electric van sales are way behind the mandate too, accounting for 5 percent of the overall market when the 2024 target is 10 percent.) The SMMT argues that the car industry is already doing all it can to make electric vehicles more affordable. So far this year, an estimated £2bn worth of offers and discounts have been given to customers to incentivise them into electric vehicles; discounts of up to 12 percent can currently be found on new electric cars sold on Auto Trader. Speaking to the Today programme on BBC Radio 4 on discounting of EVs, Auto Trader Editorial Director Erin Baker said that this situation is unsustainable: “If they could do it permanently I’m sure they would, but profit margins on electric cars have always been slim. They’re very expensive to manufacture – batteries are extraordinarily expensive still – and although costs are coming down and efficiency is improving, simply discounting can’t last forever. We need stimulus injected into the market from the government.” In its letter to the government, the SMMT said: “There is still a job to be done. With the right measures, the right consumer support and the right ecosystem, we can fix the foundations of this transition and with it deliver the biggest technology transition ever attempted, and the economic growth and environmental improvements that should be non-negotiable.” Car manufacturers are set for huge fines for missing the EV sales mandate: £15,000 for every car that misses the target. In other words, if a manufacturer sells 10000 cars in 2024, the mandate requires that 2200 must be electric vehicles. So if they sell 2000 EVs, they'll be fined £15,000 for every one of the 200-car shortfall. A £3,000,000 fine. Some manufacturers are getting around this by buying 'credits' from other car companies that do hit the targets - makers like Tesla or Polestar, who don't produce any petrol or diesel cars. This is a situation that the SMMT argues is far from ideal in its letter: "No company wants to support a competitor, especially if they may have had competitive advantages in production. And any amount will have to be provisioned, with a consequent cut in investment, R&D or jobs. And in any market, costs are invariably passed on, so it is the consumer who pays." The government is yet to respond to the SMMT's call for action.