8:18 am, September 16, 2024
A cut in VAT on electric vehicles could boost consumer demand as car makers struggle to hit tough sales targets, believes an Auto Trader director.
Speaking in a Car Dealer Live video interview (above), chief operating officer Catherine Faiers explains that stimulating new electric vehicle demand is currently the industry’s ‘biggest challenge’.
Faiers believes a cut in the VAT rate charged on public charging would help coupled with other incentives including a possible cut in VAT on new electric vehicles as well as working out how to charge EVs differently if road charging were to come into force.
Faiers says most EV owners are early adopters who are happy to make sacrifices, but the challenge now is convincing the ‘next cohort of consumers’ to buy an EV as the market approaches ‘mass adoption’.
‘We all know that private new car sales are not where they need to be,’ she said.
‘The volume of electric vehicles has been driven by fleet and business registrations, and some of that demand from fleet and businesses will just naturally unwind in the coming months, and we’ll see the industry much more dependent on retail demand to drive those registration numbers.’
Faiers explained that currently two thirds of car brands are missing their EV targets. The government’s ZEV Mandate requires car makers to sell 22% of their fleets as EVs in 2024.
Faiers said this could lead to ‘unpalatable choices’ being made by car makers as this year draws to a close, such as restricting the supply of petrol and diesel cars to hit targets.
Faiers said that EV discounts are already up – and rising – as car manufacturers try to hit these tough targets.
She said: ‘We have seen that average [EV] discount grow from about seven per cent to 11% on Auto Trader for new electric vehicles.
‘Overall, we’re seeing new electric vehicle demand growing, but not at a rate that is going to enable brands to organically hit that 22% number.’
This weekend, national newspaper reports suggested the government may be about to make it clear that hybrids will be allowed to stay on sale until 2035, clearing up confusion that all cars with tailpipe emissions would be banned by 2030.
The Sunday Telegraph quoted government sources who confirmed the ZEV Mandate would remain in place which will require 80% of new car sales to be electric by 2030 – but it is thought the remaining 20% will be allowed to be hybrids.
Auto Trader will publish its updated Road to 2035 report shortly and Faiers said this will lay out some of the things the marketplace believes are needed to hit the targets.
‘We publish this report every few months, and we do a lot of work with the government, with industry bodies to try and present what we think are the actions that need to be taken,’ she explained.
‘That talks about transparency and road pricing, taxes and support for the industry to speed up charging and other installation that we know needs to happen for that transition – the transition that’s now here and very much upon us – to be a success.’
Despite these issues, Faiers remains ‘cautiously optimistic’ about the car market for the remainder of 2024.
‘It’s early days in September, but between retailer feedback data, consumer engagement and metrics that we track, these first few days are really important to then determine the rest of this quarter, and I think the lead indicators are pretty positive on all of those measures.
‘Both on new and used car, macro data looks pretty robust. Data we’re seeing on the site looks pretty robust. Feedback from retailers is very mixed depending on the stock profile, vehicle cohort that they’re operating in.
‘But overall, there’s a used car market there. Transactions are up year on year. Prices are pretty stable, there are challenges over supply and how people get hold of that supply, but where people have got supply, they’re absolutely selling cars, so there’s a market there, for sure, and there’s plenty of opportunity.’
Watch the video interview in full at the top of this post.
