Electric car sales saw a significant jump in February as drivers try to avoid a new tax on high-value vehicles. According to the Society of Motor Manufacturers and Traders (SMMT), sales of electric vehicles (EVs) increased by 41.7% last month. This surge comes as motorists rush to beat a new tax of £2,000, scheduled to take effect next month.
Mike Hawes, the SMMT’s chief executive, warned that the Chancellor’s changes could “perversely dissuade EV purchases.” However, he noted that the impending tax is also driving significant demand.
The “expensive car supplement,” which applies to cars with list prices exceeding £40,000, adds a £2,125 tax to the owner’s bill over five years. Previously, EVs were exempt from this tax. However, when the rules change in April, most EV customers will be forced to pay because EVs generally cost more than petrol and diesel cars. According to Jato Dynamics, an industry data firm, the average EV currently costs £48,600 before discounts.
The SMMT forecasts a further rise in EV uptake in the coming weeks “as buyers take their last chance” to avoid the tax. The organization added that EVs are disproportionately affected because higher production costs mean the average EV price exceeds the tax threshold, which has remained unchanged since its introduction in 2017. The introduction of this measure also risks disincentivizing the used market, as well as the new, thus impeding a faster and fairer transition.
Despite the EV surge, overall car sales fell for the fifth consecutive month. Electric cars accounted for 25% of all cars sold in February, with a total of 21,244 EVs sold, up from 14,991 a year earlier. Sales of hybrids were also strong, as plug-in sales increased by 19% and standard hybrids sales were up 8% . In contrast, petrol sales decreased by 17% to 39,865.
The overall number of cars sold dropped by 1% to 84,054. February is typically a slower month for sales, which the SMMT attributes partly to license plate changes taking effect in March. However, the lobby group also highlighted an alarming 4% reduction in purchases by fleet operators, which had once “driven previous market growth.”
Separate data from the group reveals that the UK’s car industry is experiencing a slowdown in production. Jamie Hamilton, a car market expert at Deloitte, observed, “A slowing in vehicle production and weaker consumer demand in the UK and Europe has led to another dip in vehicle sales in February. This will further compound pressures for manufacturers.”
