The UK's spending watchdog the Office of Budget Responsibility (OBR) has downgraded its forecast for the rollout of EVs in the country to reflect slowing growth in uptake of the vehicles. The revised expectation see a smaller-than-expected penetration rate in this year, but the difference becomes starker by the middle of the second half of the decade.
In its March forecast the OBR modelling showed EVs forming 25pc of new vehicle sales in 2003 and 67pc of new vehicle sales in 2027. The OBR has now downgraded this in its latest report to show EVs accounting for 18pc of new vehicle sales in 2023 and just 38pc of new vehicle sales in 27 — 29 percentage points lower than previous expectations.
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In previous forecasts the EV share of new car sales had repeatedly exceeded the OBR's expectations, increasing from 0.5pc of new car sales in fiscal year 2017-18 to 13.6pc in 2021-22.
"To reflect this, in our March 2022 forecast, we made an upward revision to our assumption on the pace of EV take-up," says the OBR's latest economic forecast.
For the 2026-27 fiscal year, for example, this meant a forecast EV share of new sales of 59.6pc. However EV take up has slowed in the 2022-23 fiscal year, accounting for just 16.5pc of new car sales, 1.2 percentage points below the March 2023 forecast of 17.7pc, leading to the decision to downgrade the forecast.
The OBR sees the contributing factors to the slowdown in take up as mainly economic. The decline in the price premium for EVs at the point of purchase over ICE vehicles is not happening as sharply as it was. The gap fell by 15 percentage points in the two years to March '22 but only 6 percentage points between March '22 and current price levels.
"The generally higher upfront costs of EVs relative to ICEVs will likely still be disincentivising many consumers, especially purchasers using car finance as interest rates are significantly higher than we had anticipated in 2022," says the OBR's economic forecast.
Petrol and diesel prices have also declined from a spike in 2022 due to a combination of both wholesale price falls and fuel duty cuts. And the government recently announced a five year delay on the ban of new ICE vehicle sales from 2030 to 2035, which the OBR says may result in some consumers delaying a switch to EVs.
The main policy framework informing the OBR's thinking on EV uptake forecasts is now the Zero Emission Vehicle (ZEV) mandate – which, from January 2024, sets a minimum share for the amount of cars and vans sold by each manufacturer that must be be zero emissions.
The OBR's uptake figures are now set in line with the sales required by that mandate.
"We judge sales are unlikely to materially exceed this across the forecast horizon," says the outlook.
A report released in September by the UK car marketplace Auto Trader found that just 47pc of 4,000 drivers polled across the UK thought that owning an EV would fit with their lifestyle.
"Consumers are still worried about affordability and charging, which is why we need a clear statement of intent from the government," says Auto Trader's commercial director Ian Plummer.
Auto Trader is calling for equal VAT treatment for public and private charging points, VAT cuts on the sale of used EVs and cheaper financing deals for new models.
Tom is an experienced business writer, specialised in the energy transition
Tom is passionate about Electric Vehicles and how Tesla, BYD, Rivian, Lucid and others are transforming automotive
