SMMT calls for removal on VAT on EV sales in the UK

SMMT has called on the Chancellor to use next week’s Budget to announce bold new measures to make new-tech zero emission-capable cars, including plug-in hybrids, more affordable for mass market buyers.

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 more than 65 already on sale, but take up of these new models depends on affordability and the provision of adequate charging infrastructure.

SMMT is calling for the removal of VAT from all new battery electric, plug-in hybrid electric and hydrogen fuel cell electric cars - a move which would cut the purchase price of an average family battery electric run-around by some £5,600 ($7,280). Combined with additional measures, including the long term continuation of the critical 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 ($13,000), helping to deliver greater cost parity with conventionally powered vehicles and making them a viable option for many more buyers.

Based on current market forecasts, SMMT calculations show that the removal of VAT could increase sales of battery electric cars alone to just under one million between now and 2024, resulting in an additional CO₂ saving of 1.2 million tonnes over this period. However, this must be part of a comprehensive package of incentives implemented alongside substantial investment in 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.

Mike Hawes, SMMT Chief Executive, said, “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, 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.”