EV incentives must improve, not go into reverse
Driving up market confidence and economic growth is crucial in 2025 and the latest SMMT figures reflected that this week, with new car and light commercial vehicle registrations declining in January. It was the fourth consecutive monthly decline in the new car market amid difficult economic conditions and weak consumer and business confidence to invest. EVs delivered more positive news, with uptake across both cars and vans rising, significantly against January 2024 although down on December’s performance.
This illustrates the dangers of drawing too many conclusions on the basis of one month but, as we have seen consistently, underlying demand for EVs remains significantly below government targets, underscoring the scale of the challenge in transitioning to a mass market. Affordability remains a major barrier to switch amid stubbornly higher EV and battery production costs. In the absence of meaningful fiscal incentives to encourage uptake, particularly in the private retail sector, manufacturers are being forced to discount heavily to bridge the gap between natural demand and those mandated by regulation.
That’s why we must ensure every lever is pulled to encourage consumers – especially private consumers who lack incentives – to make the switch. And it’s why the forthcoming change to Vehicle Excise Duty placed on EVs is the wrong measure, at the wrong time.
It is not the fact that EV drivers will now have to pay road tax but that most of them will be liable for the Expensive Car Supplement – an additional £3,110 tax bill across the first six years after purchasing a new EV above £40,000. That threshold has been unchanged for eight years and applying it to EVs risks discouraging more motorists, in both the new and used markets, from switching.
Looking more broadly across the changes facing the industry, we need inspiration from every quarter. SMMT was delighted this week to host the inaugural Drivers of Change awards, in partnership with Autocar, to highlight the achievements of people influencing positive change in our sector. The initiative focuses on DE&I, which is a critical issue both societally and for business competitiveness, bringing significant benefits to creativity, innovation and productivity.
Following a flood of nominations from across the sector, we were delighted to announce the “top 40” Drivers of Change with Barbara Bergmeier, Executive director, Industrial Operations at JLR as the overall winner – recognition of a lifelong career nurturing talent and diversity in the sector. Congratulations to each of the recipients for setting the standard for industry to ensure that progress, in all its forms, becomes business as usual. You can read about their outstanding achievements here.
