The motor industry is calling on the UK government to cut VAT on new electric vehicles (EVs) and public charging points in an effort to counter a slowdown in the EV market.
The Society of Motor Manufacturers and Traders (SMMT) has written an open letter to the Chancellor, urging for a VAT reduction on electric cars and charging infrastructure for the next three years.
The letter comes as manufacturers struggle to meet the government’s stringent zero-emission vehicle sales targets, which mandate that 22% of all new car sales and 10% of van sales must be electric this year. Despite a record 56,362 battery electric vehicle (BEV) registrations in September, BEVs account for just 17.8% of the market this year, a figure expected to rise to 18.5% by the year’s end—still shy of the government’s target.
The SMMT noted that private demand for electric vehicles is down 6.3% year-to-date, even as manufacturers have offered unprecedented discounts to drive sales. These price cuts are expected to cost the industry over £2 billion by the end of 2023. Although petrol and diesel vehicle sales continue to decline, they still represent the choice of 56.4% of buyers in September.
To stimulate EV uptake, the SMMT has called for a 50% VAT reduction on new electric vehicle purchases, a measure it estimates could cost the Treasury £7.7 billion by the end of 2026. Additionally, the industry body is advocating for VAT on public charging points to be lowered to 5%, in line with the rate applied to home charging. They have also requested that the government introduce mandatory infrastructure targets for charging points to support the growing fleet of electric vehicles on UK roads.
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