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New cars sales grew 18% in 2023 in the best year for registrations since the pandemic – but EV demand fell below forecast

New car sales have bounced back to their highest level since the pandemic, with some 1.9million models entering the road in 2023, official registration figures show...READ THE FULL STORY HERE▶

The Society of Motor Manufacturers and Traders (SMMT)  – the trade body representing car makers – has confirmed that the new car market in the UK grew by almost 18 per cent year-on-year against a difficult economic backdrop.

But while the data shows that the number of electric vehicle (EV) registrations in 2023 exceeded the previous two years combined, the numbers mask the fact sales dipped below forecasts and consumer appetite for battery cars has dwindled.

The statistics show that only one in 11 private buyers in the UK purchasing new cars last year chose an EV, which could spell trouble for manufacturers as binding targets to increase battery model sales – else face hefty fines – have been introduced into law this week.

Some 1.9million new cars entered the UK's roads in 2023 - the highest volume since the pandemic, officially figures confirmed this morning

Some 1.9million new cars entered the UK’s roads in 2023 – the highest volume since the pandemic, officially figures confirmed this morning

The number of new cars registered in the UK grew by around 17.9 per cent last year, the new figures published on Friday show.

Mike Hawes, chief executive of the SMMT, described the increase as ‘a very positive result’, particularly considering the ‘relatively negative economic backdrop’.

The rise from 2022 was driven entirely by businesses investing in large fleets (up 38.7 per cent year-on-year), with demand from private consumers remaining stable at around 818,000 units.

Mr Hawes said the lack of growth in private registrations was ‘no surprise’ given increases in the cost of living and soaring interest rates in 2023.

And despite the year-on-year rise in registrations, the overall new car market fell 17.7 per cent short of pre-pandemic sales levels seen in 2019.

The SMMT - the trade body representing car makers - will confirm that the new car market in grew by almost 18% year-on-year in 2023 against a difficult economic backdrop

The SMMT – the trade body representing car makers – will confirm that the new car market in grew by almost 18% year-on-year in 2023 against a difficult economic backdrop

While buoyed by the growth in the sector over the previous 12 months, the motor industry boss does not believe demand for new cars will return to the same levels seen before the coronavirus crisis.

Hawes says this is partly due to changing working patterns, which has resulted in less commuting.

Exact sales figures are due to be published at 9am, though the SMMT has already confirmed that EV registrations hit record levels last year, amounting to 315,000 units.

However, having forecast for EVs to make up 20 per cent of the 2023 new car market in the summer of 2022 and then downgrading this to 18 per cent at the beginning of last year, the SMMT says that zero emission models only accounted for 16.5 per cent of the sales share.

This drop could be financially painful for vehicle makers following the introduction of binding targets for EV sales this year.

Earlier this week, the Department for Transport confirmed that the Government’s Zero Emission Vehicle (ZEV) Mandate has been made law.

This sets out annually rising thresholds for the share of EVs sales between 2024 and 2035, when all new petrol and diesel car sales are expected to be banned.

New laws have come into force from 4 January 2024 that mean car makers need to sell an increasing number of electric vehicles (EV) from this year until the ban on sales of new petrol and diesel motors in 2035.

Dubbed by minsters as ‘the world’s most ambitious regulatory framework for the transition to electric vehicles’, the Zero Emission Vehicle (ZEV) Mandate has officially been enacted and will demand of manufacturers to annually increase their share of battery car sales.

The law means 22% of each mainstream brand’s car registrations in 2024 must be electric, scaling up to 28% for next year and to 80% by the end of the decade – before rising to 100% from 2035.

Failure to meet the ZEV mandate sales targets can result in huge fines for auto makers of £15,000 per model below the required threshold.

> Here are the full details of the ZEV Mandate being written into law 

From this year, more than one in five (22 per cent) of all new motors sold by mainstream car brands need to produce zero tailpipe emissions, which essentially means EVs.

This threshold will rise each year, scaling up to 28 per cent by 2025 and reaching 80 per cent by 2030.

Failure to meet these targets will see makers fined £15,000 per vehicle below the threshold annually, though they will be able to buy ZEV credits from other makers who exclusively – or predominantly – sell battery-powered cars, such as Tesla and Polestar.

The recent decline in consumer demand for EVs has been somewhat masked by sizeable fleet registrations as a result of low company car tax rates of just 2 per cent – and the availability of salary sacrifice schemes through employers.

The industry body admitted consumer appetite remained low, with just one in 11 private car buyers opting for an EV in 2023.

Mr Hawes said the UK’s market share for those cars was ‘probably in the bottom half in Europe’, below nations such as France, Germany, Ireland and Portugal.

He attributed this to a lack of incentives in the UK.

Not helping matters was EV registrations falling significantly in the final month of last year, dropping by 34.5 per cent in December.

The SMMT attributed this to an ‘abnormal’ December 2022, which saw a substantial Tesla shipment arrive in the UK that month.

The motor trade body this morning called on the Government to bolster electric car incentives to help push sales, including halving VAT to 10 per cent on new electric car purchases for three years.

Such a move would stimulate demand by reducing price tags by around £4,000 on average, the organisation stated.

This would be roughly similar to tax incentives available for fleets purchasing new electric cars.

The policy would result in an estimated 250,000 additional battery electric new cars on the road over three years, the SMMT said.

Jonathan Goodman, Head of Polestar UK, backed the proposal on Friday morning, commenting: ‘As we move closer to the 2035 internal combustion engine (ICE) ban, it’s vital that better and smarter incentives are rolled out to encourage more drivers to join the electric vehicle revolution.

‘We support the SMMT call to halve the VAT on purchasing an electric vehicle from 20 per cent to 10 per cent. And on top of this, we hope in time to see a further cut where the VAT on public charging points is also reduced from 20 per cent, and brought more in line with home electricity use which stands at 5 per cent.”

The statistics show that only one in 11 private buyers in the UK purchasing new cars last year chose an EV, which could spell trouble for manufacturers as binding targets to increase battery model sales - else face hefty fines - have been introduced into law this week

The statistics show that only one in 11 private buyers in the UK purchasing new cars last year chose an EV, which could spell trouble for manufacturers as binding targets to increase battery model sales – else face hefty fines – have been introduced into law this week

Fresh calls for incentives come almost a year and a half after the Plug-in Car Grant was scrapped early by ministers back in June 2022.

At the time it was removed, it offered £1,500 off the purchase price of a new EV priced under £32,000.

When introduced in 2011, it subsidised the price of a new EV or plug-in hybrid vehicle by up to £5,000 without a price cap.

Mr Hawes said: ‘With vehicle supply challenges fading, the new car market is building back with the best year since the pandemic.

‘Energised by fleet investment, particularly in the latest EVs, the challenge for 2024 is to deliver a green recovery.

‘Government has challenged the UK automotive sector with the world’s boldest transition timeline and is investing to ensure we are a major maker of electric vehicles.

‘It must now help all drivers buy into this future, with consumer incentives that will make the UK the leading European market for ZEVs.’

The SMMT is forecasting that the number of new cars registered in the UK in 2024 will reach 1.97million.

Richard Peberdy, UK head of automotive for KPMG, said today’s figures painted a ‘mixed picture for the UK automotive industry as 2024 begins’. 

He commented: ‘Private car sales have somewhat weathered the cost of living and higher finance cost storm over the last year. But with more and more households being exposed to higher mortgage or rent rates, the consumer car demand situation could worsen, particularly in the first half of 2024.

‘And at a time when the Zero Emission Vehicle Mandate begins, demanding higher levels of market share for electric vehicles.

‘With more brands entering the UK market, including at lower price points, while consumer spending ability wanes – the car industry will likely continue to join other parts of the economy in increasing its focus on discounting and incentivisation.’

Industry minister Nusrat Ghani said: ‘These latest figures are a fantastic start to 2024 for our world-class automotive sector, in what promises to be a great year ahead for the UK car market building on the many investment wins delivered in 2023.

‘We’re backing our car industry to succeed for the long-term, and it’s great to see such high confidence in UK automotive and the EV market, especially as we drive forward the transition to zero-emission vehicles.’

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Kylian Walterlin

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