UK: Auto industry calls for EV incentives

VW Group's boss is worried private buyers don't see the "direction of travel".

Volkswagen Group BEVs (MEB-based)

Angel Sergeev

By: Angel Sergeev

Feb 13, 2024 at 4:27am ET

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A recent report from the House of Lords has thrown a spotlight on the UK government's approach to electric vehicles, criticising its decision to prematurely end incentives that were aimed at promoting the adoption of EVs in the country. This critique comes amidst a milestone moment for Britain, as the Society of Motor Manufacturers and Traders (SMMT) announced that the nation welcomed its one-millionth battery electric vehicle to the roads in January 2024.

Despite this significant achievement, challenges persist in the EV market, particularly concerning the volatility of supply for battery electric vehicles. Also, the latest data showed electric cars are popular as an option for fleet buyers but the demand from private buyers is dropping. Only about 3 per cent of cars on UK roads are currently electric.

The House of Lords report included words from Baroness Parminter, who said that "surface transport is the UK’s highest emitting sector for CO2, with passenger cars responsible for over half those emissions. The evidence we received shows the government must do more – and quickly – to get people to adopt EVs. If it fails to heed our recommendations, the UK won’t reap the significant benefits of better air quality and will lag in the slow lane for tackling climate change." Following that statement, the SMMT also added that "the industry will continue to work with government to ensure this is a transition for all – including Ministers whose cars should also be electric by the end of the year."

The report has ignited discussions within the automotive industry and among policymakers about the necessary measures to accelerate the transition towards electric vehicles. Alex Smith, Managing Director of Volkswagen Group UK, echoed the sentiment expressed in the report, calling for incentives to stimulate demand for EVs among private buyers. Smith emphasised the importance of signaling to consumers that electric vehicles are the future of transportation, especially as the UK aims for a fully electric car market by 2035.

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As reported by Autocar, Smith's remarks underscore a growing consensus within the industry regarding the need for government intervention to support the widespread adoption of EVs. He suggested various incentives, including a reduced VAT rate to 10 per cent on the sale of new EVs and a reinstatement of incentives such as the Plug-in Car Grant, which was terminated in 2022. Additionally, Smith advocated for long-term stability in benefit-in-kind tax rates for EVs and called for binding targets for the rollout of EV charging infrastructure to ensure accessibility nationwide.

“We would be absolutely in favour of well-targeted, specific and realistic incentives to signal that decarbonisation of road transportation is the aim and that battery-electric vehicles are a very, very significant tool in achieving that. Therefore having incentives in place is eminently sensible in the private market, because you're sending that signal that this is the direction of travel. You do need signalling behaviour in order to ensure that there isn't consumer confusion,” Smith told the publication.

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In September last year, Mike Hawes, CEO of the SMMT, made early remarks regarding the government's EV policy, stating that "to move to a mass market, we need something more for individual consumers." It seems that more and more voices from the auto industry are joining the call now. In response, Transport Secretary Mark Harper told media representatives that the government wants to "back motorists to travel how they want, where they want to and when they want to."

As discussions continue, all eyes remain on policymakers to see how they will respond to the recommendations put forth by industry leaders and the House of Lords report to shape the future of transportation in the UK.

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