Electric Vehicle Demand Declines as Private Buyers Shy Away
In recent industry data, it has become evident that electric vehicle (EV) demand is losing momentum, with less than one in four new battery cars being purchased by private buyers.
The Society of Motor Manufacturers and Traders (SMMT) reported a 14.3% growth in car registrations across all fuel types, marking the highest level in five years.
However, the appetite for EVs is waning, posing a challenge for manufacturers striving to meet binding targets for increasing zero-emission car sales starting in January.
Rising Car Registrations Across Fuel Types
The latest data from SMMT reveals that car registrations across all fuel types grew by 14.3%. This surge led to the highest number of cars sold in an October month in five years.
However, the standout statistic is that electric vehicle uptake is not accelerating at the desired pace. Manufacturers now face the risk of missing costly targets set by the Zero Emission Vehicle (ZEV) mandate, which demands increased sales of zero-emission cars starting from January.
SMMT’s Call for Government Support
In response to the slowing EV demand, the SMMT has called upon the government to introduce incentives and invest in EV infrastructure.
The SMMT hopes that such measures will boost EV adoption. The statistics reveal that in October, EV uptake grew by 20.1% year-on-year, with a total of 23,943 registrations.
However, the majority of these were purchased by large fleets, indicating a decline in consumer demand. Only one in four EVs were bought by private individuals.
Challenges in Meeting ZEV Mandate Targets
The data indicates that EVs constituted only 15.6% of all car sales in October, falling short of the 22% required of manufacturers from 2024 when the ZEV mandate comes into effect.
The mandate imposes progressively increasing sales targets on manufacturers, which will face penalties if they fail to meet these targets.
It’s worth noting that the ZEV mandate’s thresholds were confirmed in September shortly after the UK government postponed the ban on sales of new petrol and diesel cars from 2030 to 2035. This delay is believed to have contributed to the recent stagnation in EV demand.
Penalties for Manufacturers Failing to Meet ZEV Targets
Manufacturers that fail to meet the ZEV mandate’s sales targets face substantial fines. For every car sold short of the binding targets, they will be fined £15,000.
The penalty for vans will be £9,000 per vehicle in the first year, rising to £18,000 for the remaining duration of the mandate. Manufacturers can also purchase EV credits from other brands, such as Tesla and Polestar, to meet the ZEV mandate requirements.
Government’s Role in Boosting EV Sales
The SMMT’s Chief Executive, Mike Hawes, emphasizes the pivotal role of the government in supporting EV sales. He calls for an increase in public charging points, reduced taxation on charging, and the introduction of schemes to encourage motorists to switch to electric vehicles.
The Autumn Statement is seen as a key opportunity for the government to introduce these incentives and promote EV adoption.
Revised Market Forecasts
The slowdown in EV demand has compelled the SMMT to revise its market forecasts for this year and the next.
While overall new car registrations are expected to reach 1.89 million by the end of the year, an increase of 2.1% from previous expectations, the projections for EV uptake have been downgraded by 1.7% to 324,000 units.
This results in an expected market share of 17.2% for EVs by year-end. For 2024, the outlook remains optimistic, with a market share of 22.3% projected for EVs.
Impending Rule of Origin Tariffs
In addition to the challenges faced by the EV market, there is a looming threat of post-Brexit “rule of origin” trade tariffs.
These tariffs, set to be imposed in 2024, are expected to increase the price of electric cars by an average of £3,600. The rule of origin tariffs will apply to exports of electric cars between the UK and the EU if at least 45% of the vehicle’s value does not originate from the UK or EU.
As most electric vehicle components, including expensive batteries, are sourced from other markets like China, manufacturers are unlikely to avoid these tariffs, potentially passing on the cost to consumers.
Industry Reaction to Tariffs
Car manufacturers have already responded by offering substantial discounts on EV models, both for cash purchases and financing.
However, the introduction of rule of origin tariffs in 2024 threatens to undermine these discounts.
Fleet operators have also expressed concerns about the impact of these tariffs on demand in their sector, which could have significant implications for both registrations and the government’s green targets.
Calls for Clarity on Tariff Deadline
Industry experts emphasize the need for urgent clarity on whether there will be flexibility or a delay in the implementation of the rule of origin tariffs.
These experts believe that the tariffs could erode confidence in the EV market and hinder progress toward the 22% target set for 2024 by the ZEV mandate.
Zero Emission Vehicle (ZEV) Mandate Explained
The ZEV mandate, set to take effect on January 1, 2024, imposes binding targets on “mainstream” car manufacturers producing over 2,500 vehicles annually.
The mandate requires manufacturers to increase the share of zero-emission vehicles in their sales. From 2024, 22% of all car registrations in the UK must be electric vehicles.
This percentage will rise to 52% by 2028 and reach 100% by 2035.
Challenges and Future Prospects
Electric vehicle sales continue to face challenges, both from waning consumer demand and the potential impact of trade tariffs.
Government support, incentives, and infrastructure investment are seen as crucial in revitalizing the EV market and meeting ZEV mandate targets.
Despite the recent slowdown, the future of electric vehicles remains promising, provided that the necessary steps are taken to stimulate adoption and ensure a successful transition to a greener automotive landscape.