Industry makes case for sector support ahead of Spring Budget

The forthcoming Spring Budget is a chance for Government to launch measures to boost UK automotive industry focused largely on jumpstarting market demand for EVs.

Campaign group FairCharge is urging the Chancellor to make charging costs fairer in a bid to boost electric vehicle adoption in Wednesday's Budget by dropping the outdated, higher rates of VAT on public electric car charging.

Electric vehicle drivers who can charge at home pay just 5% VAT on their energy bill, but 38% of those without driveways are forced to use public chargers and pay the full VAT rate of 20%. It said the price difference between home and public charging is now significant and acting as a barrier to EV adoption.

Auto Trader which has joined the campaign has calculated that drivers charging off peak at-home could save £865 annually compared to internal combustion engine vehicles, but that a driver using public rapid chargers would pay £264 more over a year.

An open letter, delivered to Chancellor Jeremy Hunt by FairCharge, has been signed by energy provider E.ON, ChargeUK, Jaguar Land Rover, Stellantis, Polestar, Greenpeace, Transport & Environment, The Campaign for Better Transport and Auto Trader which last year cited the expense of public charging as a key barrier to 32% of motorists owning an electric vehicle.

Certain charge point operators including E.ON have committed that any VAT cut would also provide an important benefit to EV drivers and could be passed on to motorists almost immediately.

Quentin Willson, FairCharge founder, said: “If the Government is serious about wider EV adoption, they must revisit this out-of-date VAT legislation - written in the early 1990s before the arrival of electric cars - and make it fit for purpose. The cost to The Treasury would be very small compared to the hundreds of billions spent supporting fuel duty, but the benefit to EV drivers without private parking and to urban air quality would be significant and remove this unnecessary barrier to EV adoption”

Dev Chana, managing director, E.ON Drive Infrastructure added: “Taxing EV drivers four times as much for using public chargers is effectively a tax on people who don’t have a driveway A fairer system which charges the same rate of VAT wherever and whenever you charge your electric car would be a real consumer win during this cost-of-living crisis and would also help speed up EV adoption by taking away an unnecessary and unfair cost.”

Ian Plummer, commercial director at Auto Trader: “It is simply unfair that EV owners without driveways should have to pay more for the privilege of improving air quality. Its time for the Treasury to address this injustice and give electric vehicles the best chance of widespread adoption, rather than remaining the preserve of the wealthy.”

Incentivising consumers and increasing consumer confidence during the transition to electric through price incentives and improving electric charging infrastructure was also cited as one of the National Franchised Dealers Association (NFDA) key priorities.

“NFDA urges HM Treasury to support the automotive sector’s efforts to achieving the Government’s net-zero targets which the UK will need to unlock decades of growth in cleaner road transport,” commented Sue Robinson, chief executive of the NFDA which represents car and commercial retailers across the UK.

The NFDA submitted its budget proposal to the Chancellor ahead of the 24 January submission deadline for consideration in preparation of the Spring Budget 2024.

The submission covered an array of areas affecting the automotive industry. Two further factors from NFDA’s submission are prioritising investment and growth in the UK automotive sector and addressing the skills shortages that the industry is currently facing along with reforming the apprenticeship levy.

“The upcoming Spring Budget in March looks likely to be the last major fiscal event before a general election is called this year," said Robinson. "This provides a vital opportunity for the Government to listen to the concerns of automotive retailers and outline its vision for the future of the sector.”

Last month, car maker Fiat renewed its call on the Government to reinstate its electric car grant to achieve its 2030 target of 80% electric vehicle (EV) sales. The Italian manufacturer of the popular Fiat 500e and recently launched Fiat 600e has extended its own £3,000 grant for customers, to show its commitment to the Government’s targets.

Fiat UK managing director Damien Dally said: “More needs to be done. Consumers need further support to have a reason to make the switch to electric. The good news is the UK has now passed the one million electric vehicles landmark. However, the electric car market in this country is in real jeopardy. Private sales, as opposed to business and fleets, are softening and that’s a trend that needs a collective effort to reverse.

“With the Spring Budget just around the corner, we are urging the Government to reintroduce incentives for consumers or face stifling, or even undoing, all the good work achieved to date and risking endangering net zero climate targets. We’re doing our bit, but there’s only so far we can go.”

The cost of running a car is becoming unaffordable, sparking concern amongst motorists, according to new research from Close Brothers Motor Finance. It said that despite optimism that the Government’s decision to delay the petrol and diesel ban to 2035 would give motorists more time to switch to electric, soaring energy bills and the initial outlay are continuing to act as barriers. A fifth (22%) of motorists said they’ve decided against buying an electric vehicle due to costs, and only 12% plan to purchase one in the next year.

From a manufacturing perspective, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said that despite the positive start to the year for UK car production boded well, there could be no room for complacency, given economic headwinds and geopolitical tensions.

“There must be a relentless commitment to competitiveness, building on the significant recent investments into the sector. The forthcoming Budget is a chance for Government to do just that by introducing measures to boost UK automotive manufacturing, focused on energy, investment competitiveness and market demand.”

Last week, it said a three-point plan of tax reform would recharge the EV market and accelerate the UK’s progress towards net zero after new research showed that rising numbers of would-be EV drivers are now likely to delay their switch to a battery electric car following last September’s decision to delay the UK’s end of sale of new petrol and diesel cars and vans, from 2030 to 2035.

The Spring Budget also presented a pivotal moment for addressing the pressing concerns facing petrol retailers across the UK.

Gordon Balmer, executive director of the Petrol Retailers' Association, said fuel duty had long been a key concern, providing relief to motorists amidst escalating living costs. “Temporary cuts and freezes have been welcome, offering relief amidst economic uncertainty. However, the prospect of reversing these measures poses a threat, potentially aggravating the financial strain on consumers already grappling with volatile global energy prices.”

“The recent announcement from the Conservative Party about the standard business rate multiplier has raised concerns within the petrol retailing sector. With an impending increase on the horizon, petrol retailers are experiencing increased financial pressures. The proposed rise in business rates poses will only add to the growing list of costs increases that petrol retailers have had to shoulder in recent years."