Good, Bad, and Ugly Ideas for Cost-Effectively Boosting EV Demand

[This is the fifth in a series of blogs which summarises New AutoMotive’s response to Government’s consultation on Phasing out sales of new petrol and diesel cars from 2030 and supporting the ZEV transition. You can find a summary of our consultation response elsewhere on the New AutoMotive website, as well as the earlier blogs, and the later ones when we get round to them.]

What kind of financial support should cash-strapped UK taxpayers give to an industry that has enjoyed above average returns for the last 3 years and whose discounting has recently returned to pre-pandemic levels?

It’s tricky, isn’t it? Here’s our effort at a guide for the perplexed.

VAT cuts are bonkers

There have been persistent calls for a  temporary cut in VAT. This may have some limited effect, but there is a strong likelihood that it will be swallowed up in unnecessary rebuilding of  manufacturer and dealer margins, and so would have limited impact on consumer demand.

VAT cuts are also regressive: to the extent that they offer any consumer benefit, they offer the greatest benefit for higher cost purchases. And they’re inefficient - because they will encourage private buyers who were going to purchase anyway  (there were 75,000 of these in 2024), to use the saving upgrade to buy more expensive models.

Loan guarantees are risky

Media briefly reported at the end of January that Government was considering guaranteeing vehicle loans for some buyers.

However, these offer the same scope for the benefit to be swallowed up by manufacturers and dealers with no actual improvement in the terms on which loans are offered to consumers - which are already extremely competitive (MG, for example, already offers a range of PCP arrangements at 0% APR).

And they create a moral hazard for dealerships who will be incentivised by a sale to offer loans to higher risk customers without being on the hook for the higher risk of default. As guarantor, Government will need to reclaim vehicles from the driveways of consumers who, for reasons entirely outside their control, have fallen into arrears. Is this going to be a good look for Ministers, whose chauffeur comes with the job? Bad debt is already a very real challenge for other publicly-run schemes.

Home charger grants are boring but cheap, safe and effective

Instead we would support downstream support that helps to efficiently unlock demand without providing corporate welfare for the motor manufacturing industry, especially by reducing the barriers to charging.

A time-limited broadening of the EV home charger grant to once more include owner-occupiers purchasing used vehicles. Why used? Because lower and middle earners who need most support don’t buy new vehicles, and because some manufacturers bundle a chargepoint with new vehicle sales. Government support here would simply move an existing private sector cost onto the public balance sheet.

Charge point installation is a small part of the overall cost of switching, but comprehensive research by SKIM found that free charge point installation was the third most appealing incentive for consumers considering the switch (the top two, of battery warranties, and charging at half the price of fuel, are already in place for most consumers).

This would arrive free from the “trade-up” risks in grants for vehicles. Home charge points are a commodity product. It would support UK employment, not just in installation, as many firms, including MyEnergi, Indra, Simpson and others manufacture in the UK. It would also support UK decarbonisation by allowing more consumers to shift demand to periods when the grid is under less strain.

Approximately 200,000 used EVs were sold in 2024. If half of the buyers were to take advantage of - say - £350 grants, this would support the switch for 100,000 consumers at a cost of £35m, a small fraction of the £950m which Government is reportedly looking to free up from the Rapid Charging Fund, which has never been spent. . Alternatively Government could spend that same amount on a VAT cut for one-tenth the number of new EV sales, or on one-hundredth the number of defaults against Government-guaranteed car loans.

The best demand measures in life are free

The most effective way to boost demand is to reach the 30% of the population who lack offstreet parking and currently have much weaker incentives to switch. Research we carried out for Electric Vehicles UK found that whilst around 90% of consumers with off-street parking save money by switching, only around 60% who do not will gain. Ironically, whilst savings increase with mileage for those with access to home charging, supporting the UK’s decarbonisation goals, the savings are eroded with higher mileage for those without, undermining the same goals.

We will need many more of this latter group of consumers to switch in the course of the current Parliament, to meet increasing ZEV mandate targets, but as yet we have seen little in the way of any plan from Government for making the switchover attractive for this group of consumers. 

Three free-for-the-taxpayer policy steps in this area will raise the ceiling on EV demand and broaden the pool of buyers.

• Lowering the cost of public charging:

• Redistributing standing charges, which are calculated by reference to peak power loads that are delivered less than 5% of the time, to other users.

• Reducing regressive VAT on public charging. Whilst many higher earners do not have off-street parking, few lower earners have driveways. Our report Vehicle taxation: the next 25 years showed how the costs of a VAT cut could readily be funded in a fiscally neutral way by modest increases in Vehicle Excise Duty.

• Extend or redeploy the Renewable Transport Fuel Obligation to support renewable electricity in chargepoint provision. Evidence from the Netherlands suggests that this could cut the cost of public charging by up to 50%.

• Make it easier for people with on street parking to charge cheaply from their domestic supply:

• Broadening the range of circumstances in which home chargepoints qualify for permitted development. As soundless and small technologies, there should be no issue with being on the front of houses and less than 2.5m from the public highway, or even overhanging it by a small amount.

• Simplified permitting for cross pavement solution installers in the same way as has been agreed for charge point operators. Otherwise the costs of section 50 permits are inevitably passed on to consumers, extending payback periods to the point where many consumers will opt to extend ICE vehicle ownership.

• Support the production and sharing of standard licence agreements so that they can be swiftly adopted by all local authorities, rather than each LA carrying out the process from scratch.

• Make it easier for people to charge when they live in multi-occupancy blocks and use their workplaces:

• Ending the exemption of covered car parks from Part S of the Building Regulations, which has not only resulted in needless under-provision of chargers, it has also lent support to a misperception that Government agrees with the mythology of EV chargers presenting a fire risk.

• Developing a right to plug for householders in multi-occupancy blocks with shared car parking. The UK has the worst legislative provision out of the 6 largest European markets.

Combined, these zero cost policy measures will lift the ceiling on the potential population of EV buyers from a current 80% to a figure very close to 100%, making current and future targets significantly easier to meet.

All without costing the taxpayer a penny.

Alternatively, the VAT cut will cost £250m just to finance existing private buyers of EVs, without creating any new demand at all. That’s the salaries of 7,000 new nurses or police officers,  whilst fixing 100,000 potholes. How sensible does that sound?