Electric car sales UK: SMMT calls for removal of VAT on electric cars in order to boost sales

Industry figures show that new-car registrations are down year-on-year – but it’s good news for electric, hybrid and plug-in hybrid cars

New-car registrations fell by 2.9% year-on-year in February 2020, according to the Society of Motor Manufacturers and Traders (SMMT) – but the outlook is still good for hybrid, plug-in hybrid and electric cars

According to SMMT figures, electric-car registrations numbered 2,508 in February, triple that of the same month last year. Hybrid registrations were up 71.9% year-on-year in the same period, while plug-in hybrid registrations were up 49.9%. 

However, the SMMT stated that these categories of car only make up 5.8% of the market; purely electric cars make up just 3.2%.

The SMMT has suggested that it would like to see the Government’s upcoming Budget in March include measures to help make zero-emission vehicles more affordable – specifically the removal of VAT on electric cars. 

In a statement, SMMT chief executive Mike Hawes said: “Another month of decline for the new-car market is especially concerning at a time when fleet renewal is so important in the fight against climate change.

“Next week’s Budget is the Chancellor’s opportunity to reverse this trend by restoring confidence to the market and showing that Government is serious about delivering on its environmental ambitions.”

The UK hybrid and electric-car market in 2019

The news comes following a great year for alternative-fuel cars. Electric-car sales shot up by 220% in December 2019, ensuring that battery-electric vehicle registrations ended the year with a record 1.6% share of the overall market.

37,850 electric vehicles joined the UK’s roads last year, up from 15,510 in 2018. This is despite total car sales – which are still dominated by petrols and diesels – falling by 2.4% over the last 12 months.

While the overall market share remains low, demand for electric cars is rising at a rapid rate: Kia has recently boosted supply of its popular e-Niro SUV in order to clear its lengthy waiting list.

Elsewhere, plug-in hybrid registrations rose for the second month in succession, with 21.8% more PHEVs sold last month than in December 2018. Total sales for the year remained significantly down, however, with 17.8% fewer plug-in hybrids being registered compared to the year before.

The 34,734 PHEVs sold in 2019 was less than the figure achieved by battery-electric vehicles, however this is likely due to the fact that several of the most popular models were taken off sale for a large portion of the year.

Sales of petrol-electric mild-hybrids increased on 2018 levels: 26,316 sales represents a 172.1% increase, although that number is dwarfed by the 740.5% increase achieved by diesel-electric hybrids.

Late in 2018, the Government’s plug-in car grant was restructured in such a way that all plug-in hybrids became ineligible for the previous £2,500 incentive. A discount for fully electric vehicles remains – albeit reduced from £4,500 to £3,500 – and future plug-in hybrids could qualify for this under the new rules, although they’d need to be capable of travelling at least 70 miles with zero tailpipe emissions.

At the time of writing, the BMW X5 xDrive45e comes closest with 54 miles of electric range.

Reacting to the latest figures, SMMT chief executive Mike Hawes said: “A third year of decline for the UK new-car market is a significant concern for industry and the wider economy. Political and economic uncertainty, and confusing messages on clean-air zones, have taken their toll on buyer confidence, with demand for new cars at a six-year low.

“A stalling market will hinder industry’s ability to meet stringent new CO2 targets and, importantly, undermine wider environmental goals. We urgently need more supportive policies: investment in infrastructure; broader measures to encourage uptake of the latest, low and zero emission cars; and long-term purchase incentives to put the UK at the forefront of this technological shift.

"Industry is playing its part with a raft of exciting new models in 2020 and compelling offers, but consumers will only respond if economic confidence is strong and the technology affordable.”