CUT EV VAT IN HALF: UK car industry calls for government action to boost EV demand
Updated: 3 days ago
The UK’s automotive industry is urging the Government to act swiftly in converting sceptical drivers to electric vehicles (EVs). Industry leaders argue that targeted incentives, such as halving VAT on new EV purchases, could drive demand and deliver an additional 267,000 electric cars on UK roads by 2028.
New research from the Society of Motor Manufacturers and Traders (SMMT) suggests that, under current conditions, 1.782 million new EVs will be registered between 2025 and 2027. Cutting VAT on EVs could raise this figure to 2.05 million. This would generate demand for chargepoints, insurance, and maintenance services while significantly reducing road transport emissions.
While reducing VAT would cost the Treasury around £1,000 per car, the Government has already gained a £2.5 billion VAT windfall from the tenfold increase in EV adoption over the past five years. Industry experts believe that combining this tax cut with a mandated chargepoint rollout and flexible regulations would strengthen the market while cutting annual CO2 emissions by six million tonnes—equivalent to reducing UK aviation emissions by a sixth.
More than 1.3 million EVs are already on UK roads, with over 130 models available and average ranges nearing 300 miles per charge. Despite this, demand needs a further boost if the Zero Emission Vehicle (ZEV) Mandate targets are to be met. These targets were set under assumptions that energy and raw material costs would fall, but car manufacturers have instead had to absorb £4.5 billion in discounts to encourage uptake.
A new SMMT survey highlights that while 23.1% of prospective buyers plan to go electric by 2028, this falls short of the Government’s target of a 28% EV market share this year. Almost half of current EV registrations come from repeat buyers, meaning only 11.5% of new car buyers are actively considering the switch.
Industry leaders argue that with the right government incentives, including chargepoint expansion and reduced VAT on public charging, two in five hesitant drivers could be persuaded to go electric. This would not only cut carbon emissions but also stimulate the wider automotive market, boosting jobs and business across multiple sectors.
Mike Hawes, SMMT Chief Executive, said: “Manufacturer investment has meant ten times as many drivers are going electric compared with just five years ago. This is great progress but, with the right support for consumers, we can go beyond current expectations to put a total of more than two million new EVs on the road by 2028.
“Government investment to convert the ‘electric sceptics’ would energise business across the country far beyond just the automotive sector. Every stakeholder would benefit from the impact of consumer incentives which, when combined with binding targets for chargepoint rollout and more flexible regulation, would create a virtuous circle of rising demand that stimulates green growth.”
