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New incentives for electric car buyers

Car industry body the SMMT wants the new government to make buying an electric car more affordable – here’s how!

Dan Trent

Words by: Dan Trent

Published on 25 July 2024 | 0 min read

You might think stat-heavy number crunching from industry bodies like the Society of Motor Manufacturers and Traders (SMMT for short) is best left to the business pages. But this stuff matters to everyone using Auto Trader, whether you’re a buyer or a seller. And as we face the uncertainty of a new government with fresh demands on the public purse, the need to balance the increased purchase price of electric cars against a cost of living crisis and more besides what will organisations like the SMMT be doing to protect the interests of the industry building and selling cars in the UK and, by extension, the customers like us buying from them? We joined its mid-year press briefing to find out.
Affordability is, of course, a massive issue, especially as governments and regulators steer us out of combustion engined cars and into electric alternatives. And it’s here at the sharp end of the buying process where the SMMT’s work on bigger stuff like import tariffs, zero emissions mandates and more matters to us consumers. So, while much of the talk was about industrial strategies, trade regulations, taxation and other weighty topics we wanted to ask SMMT Chief Executive Mike Hawes what the organisation will be doing to ensure electric vehicles remain an attractive – and affordable – option for new car buyers. As he points out, buyers tend to respond better to carrots than sticks (many might consider things like the London’s controversial ULEZ extension the latter) and he listed several proposals the SMMT will be pushing for to improve take-up.
In the face of slowing electric car sales one would include looking again at financial incentives to help offset the fact they’re still more expensive to buy, finance or lease than equivalent petrols, diesels or hybrids. Previously we had things like the Plug in car grant and help with the cost of installing home chargers but while incentives like cheaper Benefit In Kind are still there for company car drivers help for private buyers has dwindled. Asked what the SMMT can do to help this group make the switch Hawes had various ideas the new government could consider.
These include halving VAT on electric vehicles to help them look more affordable to buyers, a move he said could inspire as many 250,000 ‘substitutional’ sales for people choosing battery powered model over the petrol or hybrid they might otherwise have gone for. He also proposes scrapping the ‘expensive car supplement’ for VED (or ‘road tax’ as many call it) due to come into force in April next year for all electric cars costing over £40,000. This is already in place for combustion-engined models and adds hundreds to the cost of taxing a car for the first five years of ownership. Originally intended to target ‘premium’ cars SMMT data says the higher upfront cost of electric ones means 70 per cent of models in the market today would be hit by the extra tax, regular family cars most woudn’t consider ‘premium’ included.
He'd also like to see VAT on energy from public chargers reduced to the same amount as that for domestic energy, given the current arrangement favours those with off-street parking and ability to install a home charger while penalising those dependent on the public network. This would help initiatives like Vauxhall’s ‘Electric Streets’, and make the costs of charging an electric car for those living in places without off-street parking – estimated as around 40 per cent of UK homes – much more attractive. Hawes also accepts there has, until now, been something of an imbalance in investment in the public network to favour motorways and regions like the South East at the expense of rural and other areas.
Bigger picture the SMMT’s work also focuses on the industrial strategy side of attracting investment – and manufacturers – to the UK, with a view to more good news stories like Nissan’s construction of battery giga factories to support its plant in Sunderland. The UK may no longer be part of the EU but Europe remains a significant export market for cars built here, so the regulations, tariffs and other rules need to be aligned as the wider industry considers how to respond to new players from China. Back at the sharp end for car buyers, though, the SMMT says that while the current picture is turbulent as carmakers, retailers and their customers transition from combustion engines to electric power with the right investment the UK car industry can remain vibrant and ready to respond to the challenges ahead.