UK vies with Germany to be European EV champion

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The UK is vying with Germany to be Europe’s largest market for electric vehicles during 2024, after carmakers spent an estimated £4.5bn in discounts to spur the switch away from internal combustion cars.

EVs accounted for 19.6 per cent of new cars sold in the UK last year, according to figures from the Society of Motor Manufacturers and Traders. This is higher than the 16.5 per cent seen during 2023 but still far below the 22 per cent target required by the UK’s electric vehicle quota scheme.

The total number of EVs sold in the UK rose by 21 per cent to a record 382,000 in the year, which is higher than the 347,048 sold in Germany between January and November. EV sales in Germany fell 26 per cent last year after subsidies were cut. An annual sales figure is due to be released later this month.

“We’ll be vying for the top spot,” said SMMT boss Mike Hawes. “It’s going to be a touch and go between the two markets.”

The share of EV sales in the UK hit 31 per cent in December, which is often a quiet month for car transactions where last-minute deliveries of EVs can inflate their market position.

Despite the strong sales increase, Hawes cautioned that retail demand for EVs remained sluggish, with only one in 10 private consumers choosing an electric model. That has forced many carmakers to offer incentives to convince consumers to buy EVs, as they scramble to meet the government’s “zero emission vehicle mandate”. 

The current scheme requires a certain percentage of each carmakers’ annual sales to be zero emission vehicles, with the percentage annually rising from 22 per cent in 2024 to 28 per cent this year, reaching 80 per cent in 2030. Companies face fines of £15,000 for each missed vehicle. 

“I’d like to give a very positive narrative that this was a record year of zero emission vehicle sales. But when you set a target and you don’t meet it, then that’s seen as a failure,” Hawes said.

While the SMMT calculated that carmakers would need to spend £1.8bn to buy credits to avoid fines for the past year, the Department for Transport said it was “confident” that flexibility in the current scheme meant that none of them would face financial penalties for the year 2024.

The ZEV mandate — which was drawn up by the previous Conservative government when sales were expected to rise sharply — has come under significant criticism from the industry, which has warned that pushing too fast will cost jobs. 

Labour ministers are now considering watering down the rules to make it easier for carmakers to meet the targets, and last month launched a consultation on the scheme.

The consultation will consider which hybrid cars can be sold alongside zero emission models between 2030 and 2035, as well as expanding a scheme where carmakers can buy credits from rivals to meet the targets.

Even carmakers that are on track to hit the targets warn that more incentives are needed to help the industry meet the ever-rising targets later in the decade.  

Although anyone buying an EV through a company car scheme can receive generous tax treatment, mainstream consumer purchase incentives were wound down several years ago, something that carmakers say has made it harder to sell models that are often still more expensive outright than petrol equivalents.

Kia, which is on track to hit its targets for 2024 and 2025, warned that it might still require more assistance later on.

“The transition from 33 per cent in 2026 to 80 per cent in 2030 is a big leap,” said UK head Paul Philpott.

The brand, an affiliate of South Korea’s Hyundai Motor, reported record sales driven by demand for its hybrids as well as fully electric models.

“An incentive right now would act as a really positive catalyst to build that momentum more quickly and make the achievement of the target in future years that much more straightforward.”

The DfT said it had “invested over £2.3bn to support industry and consumers make the switch, rolled out more than 72,000 public chargers, and launched a consultation to invite the sector to shape how we achieve the transition to ZEVs”.