Car industry urgers to bring in ‘fair taxes for a fair transition’ to boost EV uptake

Did you know that the car industry is urging the UK Government to introduce a “fair tax for a fair transition” during the upcoming Budget? The goal is to accelerate the adoption of electric vehicles (EVs).

According to Business Green, recent research conducted by the Society of Motor Manufacturers and Traders (SMMT) and Savanta reveals that a significant number of potential EV buyers are considering delaying their switch to electric cars.

The SMMT proposes tax reforms that would recharge the EV market and support the UK’s progress towards net zero emissions. The suggested measures include:

  • Halving VAT on new EVs: This would make electric vehicles more affordable for consumers, and encourage people to go electric sooner says AM Online.
  • Reforming Vehicle Excise Duty (VED): Treating EVs as essentials rather than luxuries.
  • Affordable Public Charging: Ensuring accessible and reasonably priced public charging infrastructure. Improving charging infrastructure across the country can alleviate range anxiety and encourage more people to embrace electric mobility.

These strategic tax reforms are essential for accelerating the adoption of electric vehicles and achieving a greener transportation system. Let’s hope that policymakers take these recommendations into account during the upcoming Budget!

Challenges and trends of proposal

Despite the UK being Europe’s second-largest new electric car market by volume, the rate of growth in EV adoption has slowed. Last year, there were 314,687 battery-electric vehicle (BEV) registrations in the UK, compared to Germany’s 524,219.

While fleets and businesses continue to drive EV adoption, private uptake has declined since 2022. Private buyers now account for fewer than one in four new EV registrations, down from one in three previously, according to SMMT. The SMMT is concerned that this shift in sentiment could hinder the UK’s net zero emissions goals.

VAT Cut on EVs

The research indicates that a VAT cut on EVs is the most effective incentive for encouraging drivers to switch to electric sooner. Nearly 37% of interested drivers believe a VAT reduction would accelerate their plans, and even 26% of initially disinterested drivers consider it a compelling option.

What did the SMMT say?

The SMMT also wants to see an end to the imbalance of taxation on public charging, with VAT reduced from 20% to 5% in line with home charging.

Mike Hawes, SMMT chief executive, said: ‘The Budget is a crucial opportunity to re-energise the EV market, with fair taxes for a fair transition.

‘The chancellor must end the perverse fiscal system that discourages drivers from moving away from fossil fuels and send a clear signal that the time to go electric is now.

‘Success will see our economy powered up by zero-emission mobility, delivering cleaner air, quieter roads and cheaper running costs, ending the uncertainty we are seeing among motorists.’

Halving VAT on new EV purchases would be a significant step toward encouraging more people to adopt cleaner transportation and would save the average buyer around £4,000 off the upfront purchase price, says Global Data. This financial incentive would make electric cars more accessible and appealing.

The SMMT says that such a step would be cost-effective for the Treasury as this would cost  the Treasury less than the scrapped Plug-in Car Grant. This means that the government could achieve significant EV adoption without compromising its budget, according to SMMT.

Overall, the car industry is calling for strategic tax adjustments to boost EV demand and facilitate a smoother transition to cleaner transportation. We can only hope that the Chancellor’s Budget includes measures that drive us toward a greener future and put’s Britain’s electric switch back on track!

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