The UK new car market roared back in 2023, recording its best year since the pandemic and reaching 1.903 million units, a 17.9% increase from the previous year, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT). This growth was driven primarily by fleet investment, which surged 38.7%, while private consumer demand remained stable at 817,673 units.
Fleet Takes the Lead, EVs Make Strides
With supply chain constraints easing, fleets were eager to make up for lost time, snapping up new cars at a rapid pace. This helped fuel a 28.8% jump in the value of new car sales, exceeding £70 billion. However, private consumers remained cautious due to cost-of-living pressures and high interest rates.
Despite the overall market not fully recovering to pre-pandemic levels, there were significant strides in the transition towards electric vehicles (EVs). Battery electric vehicles (BEVs) saw record volumes, reaching 314,687 units, with hybrid electric vehicles (HEVs) and plug-in hybrids (PHEVs) also experiencing healthy growth.
BEVs: A Bright Spot, But Challenges Remain
While BEVs accounted for one in six new cars registered in 2023, the majority were purchased by businesses and fleets benefiting from tax incentives. In contrast, only one in 11 private buyers opted for a BEV. This highlights the need for consumer incentives to bridge the gap, especially after the Plug-in Car Grant ended in June 2022.
Industry Calls for VAT Cut to Boost Consumer EV Uptake
The SMMT is urging the government to halve VAT on new BEVs for three years to encourage private buyers. This temporary cut would provide significant savings and put BEVs on a more equal footing with their petrol and diesel counterparts for consumers.
Potential Impact of VAT Cut: More EVs, Reduced Emissions
The SMMT estimates that a VAT cut could incentivize an additional 270,000 new car buyers to go electric, putting 1.9 million new EVs on the road by the end of 2026. This would not only boost the EV market but also significantly reduce road vehicle emissions by over five million tonnes cumulatively over the next three years.
Looking Ahead: Green Recovery Remains the Goal
The UK automotive industry is facing a crucial juncture. With ambitious targets for EV adoption, the government’s support is essential to ensure a smooth and accelerated transition. Implementing consumer incentives like a temporary VAT cut could be a game-changer, paving the way for a greener future for the UK’s new car market.
Key Takeaways:
- UK new car market rebounds with best year since pandemic, driven by fleet investment.
- BEVs reach record volumes, but consumer uptake lags behind fleets.
- SMMT calls for government to halve VAT on new BEVs to boost private demand.
- Potential VAT cut could put millions more EVs on the road and significantly reduce emissions.
- Green recovery hinges on government support for consumer EV incentives.
