SMMT calls for UK tax incentive for EVs

The head of British automotive trade association the Society of Motor Manufacturers and Traders has called on the UK government to halve value added tax (VAT) on electric vehicles in a move to spur adoption.

SMMT CEO Mike Hawes says that halving VAT on EVs would " in the next three years, put more than a quarter of a million BEVs on the road above current expectations, remove more than 5mn t of CO2 emissions, and give consumers £7.7bn ($9.8bn) in additional buying power."

"Temporarily halving VAT on new BEVs for three years would give consumers a fiscal incentive at a level similar to that enjoyed by businesses and fleets, yet would reduce the Treasury’s tax take by just 22pc per vehicle. The halo effect would be a more attractive charge point investment proposition — spurring on faster, wider rollout — and increased supply into the used market over time, massively increasing zero emission mobility availability for all," Hawes says.

The idea echoes such policies as those seen in Norway, which exempted EVs from VAT altogether on EVs until early 2023, and only introduced a 25pc tax on the value of EVs over a threshold of NOK500,000 (c.$42,000). Norway has grown to be one of the leaders for EV adoption in Europe.

Fleet vehicles lead the way in the UK EV market, far outstripping privately purchased EVs as a result of legislation in place to incentivise commercial fleets turning to electric. According to the British Vehicle Rental and Leasing Association, 42pc of new vehicles added to the UK commercial fleet parc are now fully electric.

"We need to see the share of EVs growing faster to help reduce emissions quicker, and that may need more work to reassure consumers that buying an EV is a no-brainer rather than something involving a leap of faith," says Richard Hebditch, UK director of thinktank Transport and Environment.

"The only way to move from the early adopters to mass market, is to provide some sort of incentive to break the resistance of the second wave of consumers. VAT is one of the possible options and possibly the most immediate one," agrees Theodoros Striftompolas, packaging engineer at Chinese-owned OEM Lotus.

"Other ideas that may worth considering as incentives is an annual percent discount for electricity for home-installed stations, or an annual recharging credit to use at charging stations," suggests Striftompolas.