UK electric car manufacturers warn of subsidised demand as sales surge
The UK’s new car market grew by 5.4% in October, all driven by electric vehicles. But Britain’s carmakers are warning that they cannot continue stimulating demand through discounts and incentives.
The latest data from the Society of Motor Manufacturers and Traders (SMMT) shows that plug-in hybrid vehicle registrations grew by 30.1% in the last year, while battery electric vehicles grew by 32.7%.
This growth is seeing a significant transformation in the UK’s vehicle market, with battery electric vehicles alone now almost accounting for the same market share as petrol vehicles.
32% of new car registrations in the UK are now battery electric vehicles, with 37.2% being petrol vehicles. Plug-in hybrid and hybrid electric vehicles account for 15% and 12% of new car registrations, respectively.
More than half a million battery electric vehicles were registered in the past year, an increase of 30.4% compared to the previous period.
The SMMT said that manufacturers are driving this transition through significant investments in EV manufacturing technology, committing £14.3 billion to UK EV manufacturing since 2020.
It also noted that the UK’s Zero Emission Vehicle (ZEV) Mandate targets are putting manufacturers in a position where making a return on these investments is becoming challenging.
The problem with meeting the UK’s ZEV Mandate
The ZEV Mandate requires a rising percentage of every manufacturer’s new vehicle sales to be zero-emission each year. These targets might have been realistic when they were set in 2023, but economic conditions have since made it more difficult for them to be met, the SMMT argues.
Manufacturers have said that to meet these requirements, they have been forced to spend billions on schemes such as discounts, low finance schemes, deposit contributions, and subsidising charging to incentivise sales and stimulate demand.
The trade body argues that this behaviour undermines the UK’s attractiveness as an EV market and manufacturing location, eroding profitability.
“Achieving this year’s steep ZEV Mandate has necessitated billions in discounts and generous additional incentive packages on brand-new models to stimulate sales and avoid punitive compliance costs,” said SMMT chief executive Mike Hawes.
“This is because underlying demand remains far below the 33% mandated target for this year and, with only a 26.6% share year to date, is notably behind Germany’s 28.2% and France’s 32.5% – major European markets without mandates but with generous state incentive support.”
The latest outlook shows that the gap between actual registrations and the government’s ZEV Mandate targets is set to continue widening, and Hawes said it would be impossible to achieve these targets without risking future investment.
He pointed out that the recent Budget statement did little to aid in increasing underlying demand for electric vehicles in the UK, and he urged the government to take action and support Britain’s EV manufacturing industry.
