Auto industry wants VAT cuts on electric cars and charging stations to boost EV market
The car industry is calling on the UK government to reduce VAT on new electric vehicles (EVs) and public charging stations in a bid to combat the downturn in the EV market.
The Society of Motor Manufacturers and Traders (SMMT) has written an open letter to the Chancellor, calling for a reduction in VAT on electric vehicles and infrastructure charges over the next three years.
The letter comes as manufacturers struggle to meet strict government sales targets for zero-emission vehicles, which mandate that 22% of all car sales and 10% of van sales must be electric this year. Despite the registration of 56,362 battery electric vehicles (BEV) in September, BEVs make up only 17.8% of the market this year, a figure expected to rise to 18.5% by the end of the year—still shy of the government’s target.
The SMMT noted that private demand for electric vehicles has fallen by 6.3% year to date, as manufacturers have offered unprecedented discounts to drive sales. These price cuts are expected to cost the industry more than £2 billion by the end of 2023. Although petrol and diesel car sales continue to decline, they still represent the choice of 56.4% of consumers in September.
To encourage EV adoption, the SMMT has called for a 50% reduction in VAT on the purchase of new electric vehicles, which it estimates could cost the Treasury £7.7 billion by the end of 2026. In addition, the industry body advocates VAT in charging the public. points to be reduced to 5%, in accordance with the rate used for domestic charging. They also called for the government to introduce mandatory standards for charging infrastructure to support the growing fleet of electric vehicles on UK roads.
The SMMT also recommended delaying the introduction of the road tax for EVs, which is currently due to start next year, and extending the subsidy for electric vans beyond its planned end in March.
This push for reduced VAT and increased subsidies comes as the global EV market faces challenges. Manufacturers such as Volvo, Ford, and Toyota have scaled back their EV ambitions, with Toyota announcing delays in US EV production and Tesla missing its quarterly delivery targets. Governments across Europe are also reducing their support for the sector, with France cutting EV subsidies for high-income consumers by 20%, and Germany ending its subsidy program entirely.
Although the UK has ended many subsidies for the purchase of electric vehicles, business buyers can still benefit from tax benefits for EVs used as company vehicles. However, industry leaders warn that without government intervention, the market may struggle to meet its ambitious targets for zero-emission vehicles.
