EV discounting only route to offset stock logjam on sluggish private sales

Private EV uptake remains sluggish leaving business buyers dominating the all-electric car market, according to April figures from the UK manufacturing industry whose downgraded forecasts will mean it misses the Government's zero-emissions targets for this year.

Even so, electrified vehicles continued to drive market growth, according to data published by the Society of Motor Manufacturers and Traders (SMMT). Plug-in hybrids (PHEVs) recorded the strongest growth, rising by 22.1% to account for 7.8% of the market, followed by hybrid electric vehicles (HEVs), up 16.7% with a 13.1% share of demand.

Uptake of battery electric vehicle (BEV) registrations, with their attractive tax breaks for business buyers rose 10.7%, pushed up market share to 16.9%, significantly up on last April’s 15.4%.

Despite that growth, the SMMT said urgent action is still needed to incentivise mainstream consumer demand, pointing out that fewer than one in six new BEVs were bought by private buyers in April with uptake volumes falling by -21.9%.

It said that incentives similar to those enjoyed by business buyers would accelerate an overall market shift and proposes a temporarily halving of VAT on new BEV purchases to help more than a quarter of a million drivers to switch over the next three years as would altering the threshold for the ‘expensive car’ supplement to Vehicle Excise Duty – due to apply to EVs from April 2025. There is also a clear need for confidence-building measures to accelerate chargepoint rollout.

With 2 million new cars now expected to be registered this year – a 4.2% rise on last year, and a 0.5% increase on January’s outlook, BEV volumes have been revised downwards by -5.2%, with anticipated market share now 19.8%, significantly below the Government's zero emission target of 22% per manufacturer under the Vehicle Emissions Trading Scheme.

Commenting on the SMMT new car registrations data for April, Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), said the fact that private demand has languished in recent months - in a year that shows signs of returning to pre-pandemic levels - EV uptake needs to be addressed.

"The year to date electric vehicle market share remains only 0.3% higher when compared to the same point last year.," she said."With the Government disappointingly ruling out introducing price incentives for electric vehicles last month, NFDA calls on the Government to have an urgent rethink, particularly as many OEMs seek to meet ZEV mandate targets for this year and with private demand having declined in recent months.”

Richard Peberdy, UK head of automotive for KPMG, noted that while some consumer car purchases are covered under fleet data in the shape of salary sacrifice leasing, consumer new car sales will continue to be impacted by pressure on household budgets and the higher cost of finance and insurance.

> NEW CAR REGISTRATION STATS

He added that manufacturing discounting in an effort to try and create more consumer growth - at a time when they are launching a significant number of new models - allied to possible interest rate falls in the second half of the year could revive consumer confidence in the short to medium term. “The implications of the Zero Emission Mandate will also be an increasing concern as the year goes on, should electric vehicle market share not increase,” he said.

Ian Plummer, commercial director of Auto Trader, the UK’s largest automotive marketplace, added that pricing will be critical to EV uptake with average EV prices typically 35% dearer than traditionally fuelled petrol and diesel models.

“The discounts we’ve seen manufacturers offer to incentivise consumers into new electric cars seem to be working, with BEV registrations up on 2023. That said, we'll need to see even more price action to achieve mass electric adoption,” he said.

Manufacturer discounting is likely to prevail as they fight to shift stock that is already beginning to age, according to Caroline Litchfield, partner and head of manufacturing & supply chain at law firm Brabners.

“It’s concerning to see that private EV uptake remains sluggish – an issue that is already impacting leading OEMs’ bottom lines. A number of European OEMs have reported a notable slump in their performance in the UK despite strong sales on the continent, resulting in growing calls for the Government to soften the targets outlined by the ZEV mandate.”

Overall, UK new car registrations grew for the 21st consecutive month in April, rising by a modest 1.0% to reach 134,274 units, representing the market’s best April since 2021, although uptake was still -16.6% below the pre-pandemic level in what is traditionally a low volume month following the March plate change.

Continuing the trend seen throughout the year, growth was driven entirely by fleets, where registrations rose by 18.5% to reach 81,207 units – more than six in 10 of all new cars registered in April. Private buyer uptake fell by -17.7% to 50,458 units, while business registrations declined by -16.1%, to 2,609.

NFDA's Robinson noted that Q2 of 2024 builds on the momentum shown in the previous quarter and April marks a twenty first consecutive month of growth in the new car market.

Lisa Watson, director of sales at Close Brothers Motor Finance, commenting, said: “Despite significant headwinds including the fluctuating price of fuel and rising insurance premiums, the new registration figures for April reflect a robust consumer demand for vehicles as we gear up for summer."