Chancellor urged to abolish VAT on electric cars

Published 05 March 2020

Dropping VAT from electric cars could provide a sales boost of nearly one million over the next five years, according to forecasts released this morning by the Society of Motor Manufacturers and Traders (SMMT).

The plea comes as data reveals that registrations of new electric cars surged by more than 240 per cent last month, compared to the same period in 2019.

>> Government set to ban petrol, diesel and hybrid cars by 2035

Despite this growth, battery-electric vehicles still remain a niche product, with 2508 registered in February, compared to more than 48,000 petrol cars and nearly 17,500 diesels.

The SMMT is calling on the Chancellor to announce 'bold new measures' in next week's budget (11 March) in a bid to make zero-emission capable cars (including plug-in hybrids) more affordable for mass market buyers.


It says that, by allowing buyers to purchase electric cars VAT-free, the purchase price of an average family electric car will drop by more than £5000.

Currently, the Government provides a £3500 grant towards electric cars - something which the SMMT deems 'critical' to the success of EVs. To be eligible for the grant, the car needs to be capable of travelling at least 70 miles without any tailpipe emissions and have CO2 emissions below 50g/km - meaning it doesn't currently apply to any plug-in hybrid vehicles.

The SMMT is calling for this grant to be extended to plug-in hybrids, as well as free road tax and an exemption from insurance premium tax, lowering insurance costs for drivers of electric and hybrid vehicles.

“To drive the transition to zero emission motoring, we need carrots, not sticks," said the SMMT's chief executive, Mike Hawes.


"Talk of bans and penalties only means people hang on to their older, more polluting vehicles for longer. It’s time for a change of approach, which means encouraging the consumer to invest in the cleanest new car that best suits their needs. If that is to be electric, government must take bold action to make these vehicles more affordable and as convenient to recharge as their petrol and diesel equivalents are to refuel.”

The organisation's calculations suggest that the removal of VAT alone could increase sales of battery-electric vehicles by nearly one million between now and 2024, cutting 1.2 million tonnes of CO2 during that period.

It also says that substantial investment in charging infrastructure is required to provide a smooth transition from petrol and diesel cars to electric vehicles in a bid to meet targets to ban the sale of petrol and diesel cars by 2035.


glidermania    on 5 March 2020

Yeah, drop the VAT and the manufacturer's will not price their EVs higher. Go figure.

BrendanP    on 5 March 2020

A much better idea would be for the car manufacturers to simply drop the prices of their cars

conman    on 6 March 2020

There is no such thing as zero emmisions. It has been worked out that even an electric car produces around 65 mgs of C02 to produce the electricity needed to power the car, which makes my 99 mgs of Co2 my diesel produces pretty £20,000 cheaper. Can travel up to 570 miles on one refill and has a spare wheel.
Also you thought the fuel to mpg was underrated wait till the reports of how many actual miles you will get out of an electric car, even when going uphill uses more power and reduces range. There are quite a few YouTube videos of Americans living with electric cars(Tesla) One journey took the person an extra 3 hours on top of his estimated original time because of recharging. Electric cars make sense for city driving and shopping not much more. YET!.

gavsmit    on 6 March 2020

I'd like the car manufacturers to explain why EVs cost so much more than ICE equivalents - even when they've been hugely increasing the prices of their ICE cars regularly in recent times (e.g. almost £25k for an entry level Golf).

Abolishing VAT on EVs will just swell car manufacturer's profits further as prices will continue to be huge and still regularly increase, under the misleading and incorrect defence that it will somehow save the planet - whilst public services go without that money.

I'm all for stopping the £3500 EV grant too that every tax-payer is paying towards at the moment even if they don't drive - I do, but I still can't afford an EV so no good to me either!

The SMMT should be investigated for corruption too.

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