Chancellor Urged to Boost Electric Car Sales with VAT Reduction

The UK achieved a significant milestone last month as the one millionth electric car was registered, marking a noteworthy accomplishment despite a notable decline in sales, according to recent data.

Prominent car manufacturers, energy firms, and environmental advocates are calling on the chancellor to rectify a tax discrepancy that is adversely affecting the sales of electric vehicles.

A letter addressed to Jeremy Hunt claims that an estimated two-fifths of electric vehicle owners are facing unfair treatment due to the Treasury’s taxation policies on public recharging points, subjecting them to the full 20 per cent VAT rate. In contrast, owners who charge their vehicles at home benefit from a significantly lower VAT rate of 5 per cent.

“The substantial price gap between home and public charging is now a significant deterrent to electric vehicle adoption,” the letter highlights.

Signatories of the letter include major industry players such as Jaguar Land Rover, Stellantis (owner of Vauxhall), energy giant E.ON, Greenpeace, and Chris Skidmore, a former Conservative MP who resigned over government energy policies.

The letter was coordinated by the FairCharge lobby group, founded by motoring journalist Quentin Willson.

Willson emphasized, “The cost to the Treasury would be minimal compared to the substantial support provided for fuel duty. Yet, the benefits for electric vehicle drivers without private parking, and for urban air quality, would be considerable, eliminating this unnecessary hurdle to electric vehicle adoption.”

Dev Chana, managing director of E.ON Drive Infrastructure, criticized the current system as effectively penalizing individuals without driveways. He argued that reforming the system would represent a significant consumer victory during the ongoing cost-of-living crisis, removing an unfair financial burden.

This demand comes amidst increased lobbying efforts by the motor industry for various reforms supporting zero-emission vehicles, urging the Treasury to match its claims of support with tangible action.

Jonathan Goodman, UK head of electric car manufacturer Polestar, stressed, “The UK is lagging behind other European countries in incentivising the transition to electric vehicles.”

In its budget submission, the Society of Motor Manufacturers and Traders supported a VAT reduction on public charging, alongside halving the VAT rate for zero-emission vehicle purchases. The group urged the chancellor to reconsider upcoming changes to vehicle excise duty, warning that they would treat electric cars as “luxury items rather than essentials.”

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, criticized the Treasury for overseeing a “counterproductive fiscal system” that discourages the adoption of cleaner transportation. The group also cautioned that the government’s decision to postpone the ban on new petrol and diesel cars had adversely impacted electric vehicle sales.

The government contends that it has already allocated over £2 billion to accelerate the adoption of zero-emission vehicles. Last year’s autumn statement pledged an additional £2 billion between 2025 and 2030 to support the manufacturing and development of zero-emission vehicles, including batteries and supply chains.