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SMMT urges chancellor to axe VAT on electric vehicles in Budget

Time 1 year ago

THE SMMT is urging new chancellor of the exchequer Rishi Sunak to abolish VAT on electric vehicles when he presents his first Budget next week.

It says such a move would boost sales of EVs to nearly a million over the next five years, result in an extra CO2 saving of 1.2 million tonnes over this period, and cut the price of a battery-electric vehicle (BEV) by £5,600, encouraging take-up.

The industry body made its plea in the wake of today’s release of the February registration figures for new cars, which saw them fall by 2.9 per cent. A total of 4,566 BEVs and plug-in hybrid electric cars joined UK roads last month, but at just 5.8 per cent the market share remains low.


It now wants Sunak to use the March 11 Budget to announce bold new measures to make new-tech zero-emission-capable cars, including plug-in hybrids, more affordable for mass market buyers.

Rishi Sunak

In 2020, manufacturers will bring more than 23 new battery-electric and 10 plug-in hybrid electric cars to the UK to add to the 65-plus already on sale, but take-up of these new models depends on affordability and the provision of adequate charging infrastructure.

The SMMT is calling for the removal of VAT from all new battery-electric, plug-in hybrid electric and hydrogen fuel cell electric cars. Combined with additional measures, including the long-term continuation of the plug-in car grant at current levels and its reintroduction for plug-in hybrids; and exemption from VED and insurance premium tax, the upfront cost of these vehicles could be cut by as much as £10,000, said the SMMT, helping to deliver greater cost parity with conventionally powered vehicles and making them a viable option for many more buyers.

However, it added that this must be part of a comprehensive package of incentives alongside substantial investment in the charging infrastructure to ensure a sustainable transition for consumers and businesses of all incomes, regions and lifestyles. Only by addressing both these issues can the government’s accelerated ambitions for zero emission vehicle sales be met, said the industry body.

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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 the government is serious about delivering on its environmental ambitions.

‘Industry has invested in the technology, with a huge influx of new zero- and ultra-low-emission models coming to market in 2020, and we now need the government to match this with a comprehensive package of incentives and infrastructure spending to accelerate demand.

‘To drive the transition to zero-emission motoring, we need carrots, not sticks. As the evidence shows, talk of bans and penalties only means people hang on to their older, more-polluting vehicles for longer.

‘It’s time for a change of approach, which means encouraging the consumer to invest in the cleanest new car that best suits their needs. If that is to be electric, the government must take bold action to make these vehicles more affordable and as convenient to recharge as their petrol and diesel equivalents are to refuel.’

MORE: UK new car market falls by nearly three per cent in February

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