Carmakers have warned that their “attractive offers” on electric vehicles, aimed at boosting falling demand, are “unsustainable” and said the next government must step in to boost private sales.
It comes as sales of electric vehicles to the general public fell by a further 2 percent in May, despite brands offering significant discounts in showrooms.
To the frustration of the motor trade body, Tory ministers have remained steadfast in their position not to help ease the burden with new purchasing incentives and charging subsidies for electric vehicles, due to a reluctance to let taxpayers fund the market.
As such, declining appetite this year has seen a number of manufacturers fall well below the required thresholds set out in the government’s introduced zero-emission vehicle (ZEV) mandate, putting them at risk of significant fines by the end of 2024.
Automakers say current discounts offered on EVs to boost demand are ‘unsustainable’ as they – again – called on the government to step in with new incentives in the wake of slumping private sales
Official statistics from the Society of Motor Manufacturers and Traders show that 147,678 new cars across all fuel types were registered in Britain last month, an increase of 1.7 percent on the same month in 2023.
This marked the 22nd consecutive month of growth for the sector and marked the best performance in May since 2021.
That said, registrations remain about 20 percent below pre-pandemic levels of 2019.
Car sales increased in May compared to the previous two years, but are still about 20% below pre-pandemic levels
Large fleets are registering all cars – including electric cars – masking a decline in consumer demand for new engines
While these top figures indicate a booming consumer market for new models, the data shows that it is fleets that are driving the growth, accounting for almost three in five (59 percent) registrations last month.
This came against the backdrop of shrinking new car sales to private buyers, which fell 14 percent year-on-year, with just 57,453 dealer purchases.
A glimmer of hope for manufacturers is that private sales of electric vehicles have fallen less than the overall market average, which is only 2 percent over the same period.
In fact, electric car registrations rose 6.2 percent to 26,031 in May, again almost entirely driven by a surge in fleet demand, which continues to drive market growth for the greenest vehicles.
EV purchases by large fleets increased 10.7 percent as they continue to take advantage of lucrative tax breaks on EV purchases.
As demand for fleets continues to surge, electric cars accounted for 17.6 percent of all new models on UK roads last month, up from 16.9 percent a year earlier.
The SMMT says consumers are enjoying a ‘plethora of new electric models’ at heavily discounted prices, but manufacturers cannot sustain this level of support on their own
Despite this improvement, this figure is still well below the 22 percent market share needed to meet the binding targets of the ZEV mandate.
“With a choice of more than 100 EV models now available and a range of attractive offers, manufacturers are committed to driving change, but meeting targets will require more support,” the SMMT said.
The trade body has called for incentives such as temporarily halving VAT on electric vehicle purchases to encourage more buyers at a time when investment in the sector is growing.
Yet Tory ministers have been reluctant to ask British taxpayers to help cover the cost of purchasing electric vehicles.
They are also not too concerned about the decline in private sales of electric cars. This is because they are aware of a large number of motorists using salary sacrifice schemes through their workplace to obtain electric vehicles at low cost – and these vehicles are registered as fleet buyers and not as private purchases.
Instead of providing subsidies for electric vehicle sales, the government has pinned its hopes on the ZEV mandate to force automakers to lower prices and bring more affordable battery cars to market.
The current administration has raised hopes that the ZEV mandate will force manufacturers to lower prices to meet binding sales targets and avoid fines
Under the mandate’s rules, at least 22 percent of new cars sold by every major manufacturer in Britain by 2024 must have zero tailpipe emissions – which ultimately means battery-electric models.
The threshold will rise annually until it reaches 100 percent in 2035, when sales of new petrol and diesel cars and vans will be banned in Britain.
Manufacturers face a £15,000 fine for every polluting vehicle sold above the limit, but transport ministers are confident all major carmakers will avoid fines by 2024 if they take advantage of other available options, including buying ZEV credits from dedicated EV manufacturers (such as Tesla and Polestar) or commit to increasing their share of electric vehicle sales in other years between now and 2035.
Under ZEV mandate rules, major automakers must sell a 22% share of electric vehicles by 2024 – and an increasing share annually thereafter. If these targets are not met, significant fines will apply for each vehicle below the threshold
But the SMMT has warned it cannot continue selling electric cars due to heavily discounted prices and demanded more support to achieve the government’s clean air targets.
Mike Hawes, the trade body’s chief executive, said: ‘As Britain prepares for next month’s general election, the new car market remains stable while large fleets continue to grow, offsetting weakened private retail demand.
Kia Sportage tops the sales charts in May
The best-selling car in Britain last month was the Kia Sportage SUV.
It was followed by the Ford Puma and Audi A3.
The Puma remains the leader in Britain as the best-selling car of the year so far, with the Sportage, Nissan Qashqai and A3 close behind.
‘Consumers are enjoying a plethora of new electric models and some very attractive offers, but manufacturers cannot sustain this level of support indefinitely.
“Their success to date should be a sign to the next administration that a faster and fairer transition requires carrots, not just sticks.”
Auto Trader, the country’s largest online car sales platform, warned earlier this week that a lack of cheap used electric vehicles is delaying the UK’s transition to greener transport.
Commenting on the latest sales figures published on Wednesday, Ian Plummer, commercial director, said: ‘The new car market remains sluggish and retail demand has fallen as a shortage of affordable new car models means there is less choice for the consumer, even though fleet buyers form the basis of the market.
‘Rising new car prices since 2019 mean even volume brands are suffering as the middle market is eroded.
‘The share of new models for sale under €20,000 has fallen from 17 percent to just 4 percent over the past five years, underscoring the pressure on affordability.’
Jamie Hamilton, automotive partner and head of electric vehicles at Deloitte, suggested as much EVs “don’t seem to make sense for consumers unless they can charge their car at home overnight.”
He added: ‘As a result, there should be a push towards creating more publicly available charging stations.
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