Currently reading: Industry calls for EV grants to build demand for ZEV mandate
Car brands in the UK need 22% of their sales to be EVs in 2024, but demand from private buyers is stalling

Car industry executives have called for incentives for private electric car buyers to be reintroduced ahead of the start of the zero-emissions vehicle (ZEV) mandate in 2024.

Under current plans – which have still to be finally signed off just three months before their implementation – 22% of all manufacturers’ new car sales in the UK will need to be ZEVs from 1 January 2024, rising annually to 80% in 2030 and 100% in 2035, when sales of new hybrid cars will be banned. Fines will be imposed upon manufacturers who do not hit the targets.

However, sales of new battery-electric cars (BEVs) – by far the dominant form of ZEV in the UK – are currently far behind the 22% target. During the first six months of 2023, BEVs represented 16.1% of all new car sales in the UK. Their market share remained at 16.1% in July, but a particularly strong August – in which they represented one in five new-car sales – increased their year-to-date share to 16.4%.

Giving evidence to the House of Lords Environment and Climate Change Committee’s inquiry on electric vehicles, Vauxhall managing director James Taylor partly attributed this stagnation to the withdrawal of the Plug-in Car Grant (PiCG) in June 2022. This has “subdued demand in those smaller car segments where we’ve got vehicles available today,” said Taylor.

The PiCG was offered from 2011 and initially offered £5000 off the purchase of all plug-in models – including plug-in hybrids (PHEVs) and BEVs.

Nissan Leaf 2011 front quarter cornering

The PiCG’s value was reduced on several occasions as uptake of plug-in vehicles grew. It was cut to £4500 for BEVs and £2500 for PHEVs in 2016. Two years later, the sum provided for BEVs fell to £3500, and PHEVs were entirely omitted from the scheme. It dropped by a further £500 in 2020 and again in March 2021, when it was also limited to BEVs costing less than £35,000.

There were swingeing cuts  in December 2021, when the grant was limited to £1500, and the value of compliant cars was capped at £32,500. The price cap significantly limited the choice of models available to EV buyers.

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Six months later, the grant was withdrawn entirely, with the government hailing “success in the electric car revolution” as the rationale behind its cancellation.

Taylor told the inquiry that manufacturers face a challenge in ensuring “at a market level, the demand is there to achieve these targets holistically”.

Vauxhall Mokka side static charging

“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. 

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Ora Cat driving alongside MG 4 front tracking

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.

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Red Volkswagen ID 5 front quarter driving in autumn

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%.

Kia EV6 GT in Norway – rear quarter static

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“Where it’s different is where there are incentives still in place. Norway maintains its incentivisation. Consumers don’t always respond to sticks. They like a carrot.”

He suggested that the UK could reduce the VAT charged on new electric cars to stimulate demand, adding that “you need to look at every single lever, because you’re trying to shift a marketplace that has been familiar with one or two types of technology for 120 years”.

Responding to a suggestion that the government cut VAT on public EV charging from 20% to 5% – which would bring it into line with private home charging – Lauren Pamma, programme director for the Green Finance Institute, said the industry would be “absolutely delighted” with such a measure.

Charlie Martin

Charlie Martin Autocar
Title: Editorial Assistant, Autocar

As a reporter, Charlie plays a key role in setting the news agenda for the automotive industry. He joined Autocar in July 2022 after a nine-month stint as an apprentice with sister publication, What Car?. He's previously contributed to The Intercooler, and placed second in Hagerty’s 2019 Young Writer competition with a feature on the MG Metro 6R4

He is the proud owner of a Fiat Panda 100HP, and hopes to one day add a lightweight sports car like an Alpine A110 or a Lotus Elise S1 to his collection.

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scotty5 9 September 2023

Had a brief look into changing my soon to be 3yr old car, a XC60 PHEV was a possible option. Had a more detailed look in to charging and costing for that.

To cut a long story short it only made sense if I were to charge it at home but even then there's a £1000 outlay for a charger that needs to be recouped.

Not only were many public chargers more expensive than petrol, you'd be charged money if your car was in the charging bay not being charged.

Forget about range anxiety, EV comes with a whole new list of issues which you pay handsomely for. And let's don't even mention depreciation !

As a private motorist, any type of electric or plug-in electric would be so much more expensive for me to run than I have now, a few thousand pounds subsidy would make zero difference.

I'd also add I currently have a Skoda Kodiaq. As soon as the word PHEV or EV is mentioned, I'm also loosing much needed cargo volume.

Paulito 9 September 2023
I do wish they would stop calling them "zero emissions..."
Volvo did their own study a while back and compared the emissions from the manufacture of their big 4x4 EV with the TD equivalent.
They found that due to the extra emissions from the EV the TD version could drive over 50,000 miles before the EV started its "Green credit"....
Then we have the issue of how we dispose of the battery at the end of its useful life.....500kg of hazardous waste....
gagaga 9 September 2023

Alternative headline: 'Foreign car companies demand taxpayer cash to maintain their post covid inflated profit margins'

No, just no.