“We don’t want to be forcing people to have an electric [car],” he added.
“Again, that comes back to [improving the charging infrastructure] and the total cost of ownership, and particularly pertinently, incentives are needed for private retail customers within the small and family car area to help that transition and to help that cost of ownership.”
Research published by car sales platform Auto Trader in April, nine months after the grant was axed, stated that the number of enquiries sent to retailers about new electric cars had fallen by 65% year on year. BEVs accounted for 9% of all new car enquiries at that point, a third of the proportion recorded a year earlier.
Nonetheless, sales of BEVs continue to rise. During the first half of 2023, 152,968 new electric cars were sold in the UK, 32.7% greater than during the same period last year, according to figures published by industry body the Society of Motor Manufacturers and Traders (SMMT) in July.
However, the SMMT believes that business and fleet buyers are driving this growth, rather than the private market, “thanks to the attractive financial incentives on offer” to fleet and business users.
Chief among the incentives given to business users of electric vehicles are low benefit-in-kind company car tax rates: zero-emission cars are taxed at 2% until 2025, whereas the least polluting electrically unassisted petrol or diesel cars are taxed at 15%. This makes it significantly cheaper to run an electric car as a business user.
In contrast, there has been minimal government-provided financial incentive for private buyers to choose an electric car since the PiCG was axed in June 2022. Owners of electric cars are currently not liable for vehicle excise duty or the expensive vehicle supplement (a tariff charged for cars with a list price of more than £40,000). However, both exemptions are set to end in July 2025, which will slightly increase the annual cost of EV ownership.
Some manufacturers have stimulated demand themselves by offering significant discounts on electric models. Fiat, for example, cut £3000 from the price of the electric 500 and its convertible variant, branding the move an ‘E-Grant’ to mark the one-year anniversary of the PiCG’s end. Volkswagen has now followed suit with cash discounts of up to £4500 on the ID 3, ID 4 and ID 5 (also offering lower reductions on several petrol models), linking these to the London Ultra Low Emissions Zone (ULEZ) scrappage scheme.
SMMT chief executive Mike Hawes, who also gave evidence to the Environment and Climate Change Committee inquiry, noted that financial incentives have played a key role in boosting the electrification of Norway – the world’s EV capital.
Until 1 January 2023, Norway exempted electric cars from VAT and high import tariffs, amid other bonuses such as exemption from toll charges (until 2017) and free municipal parking (also ended in 2017).
As a result of government support, BEVs held a 79.2% market share in the nation at the end of 2022 and it is on track to completely phase out sales of petrol, diesel and hybrid cars by 2025.
Hawes told the inquiry: “If you look at where demand is for EVs across Europe, we’re not dissimilar [in the UK]. We accelerated to around 20% and it’s plateauing around 16-20%.