UK New Car Market Sees 22nd Month of Growth Amid Electrification Surge

The UK government has announced it is temporarily reintroducing the Plug-in Car Grant (PiCG) due to the continuing delays in manufacturing supply chains, including the conflict in Ukraine and the global semiconductor shortage.

The UK new car market has continued its growth streak for the 22nd consecutive month, buoyed by a surge in battery electric vehicle (EV) sales and the growing popularity of plug-in hybrids.

In May, 147,000 cars were registered, marking a 1.7% increase from the same month last year, according to the Society of Motor Manufacturers and Traders (SMMT). This represents the best May since 2021, although figures remain 20% below pre-pandemic levels in May 2019.

The shift towards new energy technologies has significantly impacted the market, with all forms of electrified vehicles showing notable growth. Battery electric car sales rose by over 6% to 26,000, capturing 17.6% of the total market, despite an 8% drop in sales at Tesla, the UK’s leading electric car brand. Plug-in hybrid sales surged by 31%, accounting for 8% of the market, while hybrid sales increased by 10%, representing a 13% market share.

However, the overall decline in diesel sales and a slight fall in petrol car sales, which still constitute 55% of the market, has continued. The latest figures also reveal that sales of electric cars to private motorists have decreased by 2% year on year. Retail buyers make up less than a fifth of zero-emission sales, with the majority of EVs going to fleet sales for large corporations, rental car firms, utility companies, government agencies, and small businesses, which benefit from company car tax breaks and salary sacrifice schemes not available to the general public.

Jamie Hamilton, automotive partner and head of electric vehicles at Deloitte, emphasized the need for more public charging infrastructure to encourage consumers to switch to electric vehicles. “Currently, electric vehicles don’t appear to make sense for consumers, unless they can charge their cars at home overnight. As a result, there does need to be a push on creating more publicly available charging stations,” he said.

Lisa Watson, director of sales at Close Brothers Motor Finance, noted that private buyers might be delaying decisions in anticipation of new incentives post-general election or the arrival of cheaper electric cars later in the year. “Consumers still remain hesitant to switch to electric vehicles, as inadequate infrastructure and the cost of switching continue to hold back widespread adoption,” she added.

SMMT Chief Executive Mike Hawes has called for a temporary halving of VAT on electric car purchases and a 75% cut in VAT on energy at public recharging points to support the mass adoption of zero-emission vehicles. He argued that without these measures, government quotas forcing manufacturers to hit 22% electric sales this year could lead to unsustainable discounting.

Colin Walker, head of transport at the Energy and Climate Intelligence Unit, highlighted the competitive nature of the market, stating that legacy carmakers like BMW, Mercedes, Kia, and Hyundai are likely to meet their quotas, which will continue to improve choice and reduce costs for British drivers. “This intense competition will continue to improve choice and bring down costs for British drivers. Rather than the war on motorists, this is a war for motorists,” Walker said.

The debate continues on how best to facilitate the transition to zero-emission vehicles, with various stakeholders advocating for a balance of incentives and regulations to drive the market forward.