UK new car sales have surged to their highest level in twenty years this February, marking a significant milestone in the automotive sector. Corporate entities have played a pivotal role in driving this growth, particularly through the acquisition of electric vehicles for their fleets. However, amidst this success, there's a contrasting trend as private adoption of EVs experiences a decline.
UK New Car Sales Soar Amidst Shifting Dynamics and EV Challenges
According to the Society of Motor Manufacturers and Tradersew, cars registrations have rose by 14% year-on-year to 84,886 vehicles the previous month, the best performance since 2004.
For the 19th consecutive month, UK new car sales continued to rise, primarily fuelled by corporate fleets upgrading to the latest models. February, typically a low-volume month, saw this trend persist as buyers often defer purchases until March with the new number plate release.
In terms of electrified vehicles, there was significant growth. Hybrid electric vehicle sales increased by 12.1%, though their market share slightly decreased to 12.7%. Plug-in hybrids experienced the largest surge, with a 29.1% rise, now constituting 7.2% of the market. Battery electric vehicles (BEVs) also saw impressive growth, up by 21.8%, capturing 17.7% of registrations, outpacing the rest of the market.
The Society of Motor Manufacturers and Traders (SMMT) highlighted that the clearest insights into the long-term trajectory would emerge in March, the peak month for car sales.
The surge in electric vehicle (EV) adoption is primarily attributed to corporate fleets, buoyed by fiscal incentives. Conversely, private buyers have only contributed to a fraction (18.2%) of new battery electric vehicle (BEV) purchases this year.
Consumer apprehensions regarding EV affordability, battery durability, and charging infrastructure persist. Addressing these concerns, a House of Lords committee recently urged governmental intervention to stimulate the second-hand EV market and alleviate anxieties regarding battery health. Peers from the environment and climate change committee echoed these sentiments, calling for intensified government efforts to promote EV adoption.
SMMT's Call for Bold Fiscal Measures to Accelerate EV Transition
The SMMT emphasized that accelerating the transition to electric vehicles (EVs) hinges on increased participation from private buyers, highlighting the absence of substantial incentives as a key deterrent.
They proposed leveraging the upcoming budget as an opportunity for the Chancellor to bolster demand by implementing several measures: halving VAT on new EVs for a three-year period, revising proposed vehicle excise duty changes, and aligning VAT on public charging with that of home charging.
In contrast to other emission-reduction technologies like heat pumps and solar panels, private EV buyers currently bear the full 20% VAT, regardless of the vehicle's emission type. The SMMT advocated for halving VAT on new EV purchases, estimating that this move would save the average buyer approximately £4,000 on the initial purchase price. Notably, they argued that this initiative would cost the Treasury less than the discontinued plug-in car grant introduced in 2022.
Furthermore, the impending alterations to vehicle excise duty next year are poised to disproportionately penalize the majority of battery-powered electric vehicle (BEV) buyers by imposing an additional £1,950 due to the "expensive car" supplement.
For those unable to charge a BEV at home, there is a "pavement penalty" involving a 20% VAT on public charging—four times the rate borne by those with home charging capabilities.
Mike Hawes, the Chief Executive of the SMMT, emphasized the significance of this week's budget, stating, "The new car market’s ability to deliver growth continues with its best February for 20 years, and this week’s budget is an opportunity to ensure that growth is greener. Tackling the triple tax barrier as the market embarks on its busiest month of the year would boost EV demand, cutting carbon emissions and energizing the economy. It will deliver a faster and fairer zero-emission transition, putting Britain’s EV ambition back in the fast lane."