The Society of Motor Manufacturers and Traders (SMMT) has called on the next government to re-instate fiscal incentives for private car buyers by halving VAT on battery electric vehicles (BEVs) for three years1. The call came in the industry body's half year registration figures, published on 4 July 2024, the day of the general election1.
The SMMT said the measure would put an additional 300,000 private BEVs, rather than petrol or diesel cars, on the road over the next three years, on top of current outlooks, and would help ensure that in 2035 half of all cars in use would be zero emission, cutting road transport CO2 emissions by 175 million tonnes between now and then1. It also said Vehicle Excise Duty plans should be revised so zero emission vehicles are classed as essential rather than "luxury" vehicles, by amending the "expensive car" supplement due to be applied from next April, and that public charge point use could be made fairer by reducing VAT from 20% to 5%, in line with home charging1.
"The private consumer market continues to shrink against a difficult economic backdrop, but with the right policies in place, the next government can re-energise the market and deliver a faster, fairer zero emission transition."
The figures show the UK new car market grew 1.1% in June to 179,263 units, taking registrations to 1,006,763 in the first half of 2024, up 6.0% on the previous year but still down 20.7% on 2019, when 1,269,245 cars were registered in the same period1. Growth was driven by the fleet sector, where uptake rose 14.2%, while private retail demand fell 15.3%, the ninth consecutive monthly decline; retail buyers accounted for 37.7% of new cars registered1.
| Powertrain | June change | June market share |
|---|---|---|
| Plug-in hybrid (PHEV) | up 30.0% | 9.3% |
| Hybrid electric (HEV) | up 27.2% | 14.9% |
| Battery electric (BEV) | up 7.4% | 19.0% |
BEVs took their highest monthly share of the year in June at 19.0%1. Private BEV uptake has fallen 10.8% year to date, with fewer than one in five new BEVs going to private buyers, and BEVs comprise 16.6% of the new car market so far this year, slightly above the 16.1% achieved in the same period last year and behind the levels mandated by government1.
Why it matters for households
The figures describe a market in which private buyers, the households that pay for a car outright or on finance, are pulling back while fleet purchases, typically made through an employer or leasing arrangement, drive registrations1. The SMMT's proposed VAT reduction is aimed squarely at that private buyer, and its stated effect is on the number of electric cars reaching households rather than company pools1. For a home weighing up electric motoring, the running-cost picture is also in play: the SMMT notes that public charge point use carries VAT at 20% while home charging is taxed at 5%, and argues the two should be aligned1. Home charging depends on a household's own supply and tariff, which the announcement does not address. The SMMT's other proposal, on the "expensive car" supplement for Vehicle Excise Duty from next April, concerns the annual tax bill attached to zero emission vehicles rather than their purchase price1. No costings for the VAT proposal, and no response from government or opposition parties, have been reported1.
What happens next
The SMMT's call is addressed to the next government, with no commitment from any party reported1. The Vehicle Excise Duty "expensive car" supplement it wants amended is due to be applied from next April1. The SMMT has not set out a timetable for a decision on the VAT proposal1.