Call to eliminate electric vehicle tax as UK new car sales lose speed

Electric vehicles should be made tax-free to boost sales, the automotive industry has urged - as demand for new cars fell by 2.9 per cent last month.

The Volkswagen Golf was the most popular model last month. Picture: Volkswagen AG.

Some 79,594 new cars were registered in February compared with 81,969 during the same month in 2019, according to the Society of Motor Manufacturers and Traders (SMMT). The trade association blamed weak consumer confidence and confusion over what fuel technology to buy.

It called for the Chancellor to use next week's Budget to remove VAT from all new battery electric, plug-in hybrid electric and hydrogen fuel cell electric cars. Such a move could cut the purchase price of an average family battery-powered runaround by around £5,600.

Removing VAT could boost sales of battery electric cars alone to nearly one million over the next five years, saving an additional 1.2 million tonnes of carbon dioxide, according to the SMMT.

Some 79,594 new cars were registered in February compared with 81,969 in the same month in 2019. Picture: SMMT.

February's decline in sales was driven by a 7.4 per cent drop in demand from private consumers. Sales of diesel and petrol models were down 27.1 per cent and 7.3 per cent year on year.

But it was better news for zero-emission-capable cars, with sales of battery electrics up more than threefold on February last year to 2,508 cars in the month, and plug-in hybrids up 50 per cent to 2,058.

Despite the rising numbers, their market share of 5.8 per cent of sales remains low, the industry body said.

Pole position

The Volkswagen Golf was the most popular model last month - at 3,457 sales - and the Ford Fiseta was in pole position in the year-to-date rankings at 9,210.

SMMT chief executive Mike Hawes said: "Another month of decline for the new car market is especially concerning at a time when fleet renewal is so important in the fight against climate change.

"Next week's Budget is the Chancellor's opportunity to reverse this trend by restoring confidence to the market and showing that government is serious about delivering on its environmental ambitions.

"Industry has invested in the technology, with a huge influx of new zero and ultra-low emission models coming to market in 2020, and we now need government to match this with a comprehensive package of incentives and infrastructure spending to accelerate demand.

"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."

Seán Kemple, director of sales at Close Brothers Motor Finance, said: “Compared to last year’s slight upturn, 2020 hasn’t seen the same solid start to the year... Diesel demand continues to plummet, and petrol is also losing steam as buyers are being deterred in the face of a blanket ban."

He also welcomed alternative fuelled vehicles (AFVs) holding an increasing share of the market, and echoed Hawes' call for government action. “Crucially, the Budget holds the key to the next boost for the motor industry. For AFVs to be the future, the government, manufacturers, dealers, and consumers must all work together to achieve the zero emissions goal.”