UK Electric Vehicle Sales Surge Amid Discounts and Industry Challenges
In November 2023, electric vehicles (EVs) accounted for one in four cars sold in the UK, marking a significant surge in sales as reported by the Society of Motor Manufacturers and Traders (SMMT). This increase in registrations represented the 11th consecutive month of growth in the electric car market, yet it was heavily influenced by substantial discounting strategies implemented by manufacturers. Industry estimates suggest that carmakers offered about £4 billion in discounts on EVs as they raced to meet stringent sales targets set by the government.
Manufacturers are under pressure to align with these targets; however, there are concerns regarding the feasibility of achieving these goals due to ongoing market dynamics. Some companies may face fines for falling short of sales requirements, but flexibilities within the regulations allow them to acquire sales credits from other manufacturers or draw from future year quotas—potentially easing immediate financial repercussions. SMMT’s chief executive, Mike Hawes, acknowledged that while manufacturers are investing unprecedented amounts in EV technology, the sustainability of such incentives remains in question, emphasizing that the automotive industry cannot fulfill the UK’s ambitious EV goals without broader support.
Despite the growth in electric vehicle sales, overall car sales in the UK are on a downward trajectory. While fleet sales to businesses constitute the majority of new car demand, this segment also experienced a decline. Sales figures indicated that more traditional vehicle categories are struggling: new petrol car sales plummeted by over 17%, diesel vehicles saw a decrease of more than 10%, and hybrid and plug-in hybrid sales dropped by around 3% and 1% respectively.
The UK government has pledged to consult with car manufacturers to review the EV sales targets, maintaining that the targets will remain intact but will explore possible flexibilities. Currently, EVs are required to constitute 22% of all vehicle sales by 2024, while they are expected to reach approximately 19% by the end of the year, which indicates a shortfall. In light of this, manufacturers may turn to industry peers with surplus EV sales credits, many of whom are based overseas, particularly in China, leading to accusations of subsidizing international competitors.
In addition to sales pressures, companies like Ford and Stellantis have announced workforce reductions, attributing some of the job losses to challenges linked to EV targets. However, external factors such as Brexit uncertainties and previous factory closures have also contributed to their operational difficulties.
On a positive note, several UK manufacturers are making strides in the EV market. Brands like Jaguar Land Rover have made significant commitments toward becoming electric-only, while Vauxhall reported that electric vehicles constituted 36% of its sales, with other companies like Peugeot, Renault, MG, and Skoda also surpassing government EV performance targets.
To combat the evolving challenges in the industry, the Department for Transport is investing £2.3 billion to enhance support for the automotive sector and encourage electric vehicle adoption. The government remains firm on its commitment to phase out new internal combustion engine cars by 2030, as aligned with Labour’s manifesto.