Car industry sounds warning as electric car sales stall

The UK car industry has warned its efforts to support the transition to electric vehicles cannot be sustained indefinitely as it faces the prospect of fines for missing climate-linked sales targets.

The Society of Motor Manufacturers and Traders (SMMT) said that a government mandate, which requires its members to sell a minimum percentage of zero-emission vehicles each year, was proving to be problematic as the share of electric vehicle (EV) sales in the UK had stalled below 18%.

The rule for 2024 requires manufacturers to ensure that at least 22% of new cars sold are zero emission, rising to 80% by 2030 and 100% by 2035.

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Carmakers face a fine of £15,000 for each non zero-emission vehicle sold that exceeds the annual percentage target.

The SMMT said, in an open letter to chancellor Rachel Reeves signed by manufacturers, that the industry was “committed to net zero” but argued that it was footing the bulk of the costs at a time of record low demand for new cars in the tough economy.

It said that EV sales were being driven primarily by fleets rather than consumers and were only rising due to “unprecedented discounts”.

The body estimated the price cuts to be worth £2bn collectively by the end of the year, on top of massive investment to date.

While warning that neither could be sustained, the SMMT said it remained clear that government incentives, such as a halving in VAT on new EVs and a 5% rate on non-domestic battery charging, were needed to help drive sales.

The price drops, the body indicated, were only having a limited effect on both a sceptical public and the battle against climate change as the transport sector remained the country’s biggest carbon polluter.

Worries for drivers include price, affordability given the continuing squeeze on living standards, vehicle ranges and the availability of public charging points.

Ms Reeves has warned of tough choices in the budget given Labour’s claims of a £22bn “black hole” in the public finances left by the Conservatives.

She has placed an emphasis on support for economic growth but ministers have faced accusations that a dire message on the outlook has added to weak consumer confidence.

The SMMT’s letter said: “We appreciate the severe constraints on the public purse. But deliver this support to consumers and the benefits are myriad: a thriving market, enhanced consumer choice and affordability, investment attractiveness, high value job creation, cleaner air, quieter streets and economic growth.

“We know your government is committed to a vibrant and competitive UK automotive industry. With the right measures, the right consumer support, we can fix the foundations of this transition and with it deliver the biggest technology transition ever attempted, and the economic growth and environmental improvements that should be non-negotiable.”

The SMMT issued its plea as figures covering the new ’74 plate month of September showed a 1% increase on the same month a year ago, with 275,239 vehicles sold in total.

While there was a record 56,362 battery electric models sold, it pushed the market share over the year to date up only slightly to 17.8% from 17.2% – still below the zero emission vehicle mandate of 22%.

The SMMT believed the figure would only rise to around 18.5% by the year’s end.

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Mike Hawes, the body’s chief executive, said: “September’s record EV performance is good news, but look under the bonnet and there are serious concerns as the market is not growing quickly enough to meet mandated targets.

“Despite manufacturers spending billions on both product and market support – support that the industry cannot sustain indefinitely – market weakness is putting environmental ambitions at risk and jeopardising future investment.

“While we appreciate the pressures on the public purse, the chancellor must use the forthcoming budget to introduce bold measures on consumer support and infrastructure to get the transition back on track, and with it the economic growth and environmental benefits we all crave.”

A Treasury spokesperson said: “We do not comment on speculation around tax changes outside of fiscal events.”