The Government should scrap VAT on the purchase of electric cars if it is serious about meeting its air pollution targets, according to the AA.
The motoring group highlights a variety of options drivers say might convince them to switch to a battery-powered car, with removal of 20 per cent VAT on purchases of EVs being the most supported solution to quicken the transition away from petrol and diesel motors.
Edmund King, AA president, says ministers should follow in the footsteps of their Norwegian counterparts.
The Scandinavian country has already scrapped all one-off purchase taxes on new fully-electric cars, which King says is ‘the best way to accelerate their growth and give consumers confidence’.
Government needs to go ‘all-in’ for electric vehicles: The AA is calling on Chancellor Rishi Sunak to scrap VAT for battery cars to boost sales
Some 14,719 UK licence holders were polled by the AA last month about which EV policies could make them more open to ditching their cars with emitting internal combustion engines.
Two thirds said scrapping VAT from the purchase price would be the most influential policy.
More importantly, the removal of VAT garnered the most support from motorists from low-income households, with 59 per cent said the exclusion of the 20 per cent tax was the best option to make EV ownership more affordable.
Support for scrapping VAT has been growing, says the AA, with three fifths of drivers advocating the incentive in 2019 when the motoring group surveyed opinion on electric car ownership.
It says there is mounting evidence that this is the most effective option for ministers if they want to meet 2050 ‘Net Zero’ targets, with previous studies by the AA finding that the initial purchase price of an electric car is still the most significant barrier to ownership.
Almost two thirds of drivers also said they would want to see at least 25,000 public ‘rapid’ charge points installed in the UK – capable of charging a battery to 80 per cent capacity in less than 30 minutes – before they made the switch to an EV, while more than half said they wanted to see the Government launch a scrappage scheme similar to the one in 2008.
Policies drivers say would influence them to drive electric
1. Remove VAT on the purchase of an EV car (including PCP deals etc) – 66%
2. Increase the number of rapid charging connectors (80% charge within 30 minutes) from 10,400 to over 25,000 – 64%
3. A scrappage scheme like the Government sponsored scheme in 2008 – 57%
4. Free parking for all EVs in all council owned car parks – 49%
5. Remove VAT on leasing costs for EVs – 47%
Source: AA survey of 14,719 members
Edmund King, AA president, said: ‘If the Prime Minister is to meet the nation’s decarbonisation and Net Zero targets, then the Government needs to go all-in for electric vehicles.
‘Many drivers still feel priced out of the electric car market, so more has to be done to encourage their uptake.
‘Scrapping VAT, as happened in Norway, is the best way to accelerate their growth and give consumers confidence.’
In fact, among the existing incentives for EV buyers in Norway is an exemption from any non-recurring vehicle fees, including purchase taxes and VAT at 25 per cent.
This makes electric car prices almost on par with conventional motors with internal combustion engines in the country.
And it has had an incredible impact on demand, with 54 per cent of all cars registered in Norway in 2020 being electric.
That’s quite the contrast to the UK, where the Government’s tactic is to lessen the incentives for electric cars as demand increases – such as the reduction to the Plug-in Vehicle Grant in April, reducing the subsidy from £3,000 to £2,500 and slicing eligibility criteria to EVs costing less than £35,000. Previously the bar was set at £50,000.
‘As the UK’s number one motoring organisation for electric cars, we know urgent action is needed to help decarbonise the UK Car Parc, Mr King added.
‘Removing VAT on EVs at the Budget will not only give the motor trade a jump start, but should help power up the electric car revolution.’
King concluded: ‘Giving the EV market a jump start will not just boost UK car manufacturing, but will also help reduce CO2 across the country and create new high skilled, high paid jobs in battery innovation.
‘As the UK looks to “level up”, we urge the Prime Minister and the Chancellor to act positively.’
Buyers of electric cars in Norway currently do not have to pay VAT at 25% and also avoid all other non-recurring purchase taxes, such as registration and vehicle delivery. This has seen EV sales soar in recent years
Combined, battery electric (BEVs) and plug-in hybrid vehicles (PHEVs) accounted for 17.2 per cent of new vehicles hitting the road (31,981 cars in total) in the first half of 2021.
BEVs accounted for more than one in 10 registrations (10.7 per cent) – more than diesel cars, according to new figures from the Society of Motor Manufacturers and Traders revealed today.
PHEV uptake, however, continued to grow faster than BEVs for the third month running, following reductions to the Plug-in Vehicle Grant (PiVG) from April that has made pure-electric models more more expensive to purchase.
The continued growth in demand for electric vehicles comes in the wake of Nissan’s announcement last week that it is to build a battery gigafactory in the North East.
It will supply batteries to its Sunderland car plant, where a new plug-in crossover is due to be produced.
SMMT figures show that of the 19,842 BEVs sold in June, almost three in 10 (28 per cent) were Tesla’s Model 3.
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