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EV share rises despite contracting UK market

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The UK new car market fell by -2.5% to 139,345 units in January, according to data released today by the Society of Motor Manufacturers and Traders (SMMT), as weak consumer confidence and tough economic conditions combined to deliver the fourth consecutive month of decline.

Registrations by both fleet and private buyers were down in the month, by -3.7% and -0.5% respectively. Business registrations rose by 2.4% although, as a very small portion of the market, this translated to just 55 additional units.

Reflecting a continuation of ongoing trends, petrol car registrations dropped by -15.3% to comprise just over half (50.3%) the market, with diesel down -7.7% to claim a 6.2% share. Both hybrid electric vehicles (HEVs) and plug-in hybrids (PHEVs) recorded volume growth and saw their market shares rise to 13.2% and 9.0% respectively. Battery electric vehicle (BEV) registrations, meanwhile, continued recent growth trends, with volumes up by 41.6% year on year to take a 21.3% market share.

Despite the increase in the month, BEV market share still remains short of the 22% target set by government for last year, and even further behind the 28% requirement for 2025. The SMMT noted that this gap between demand and ambition is why the review of the Vehicle Emissions Trading Scheme and its flexibilities is essential and must deliver meaningful changes urgently, else there will likely be significant negative consequences for the market, industry and, potentially, the consumer.

Significant manufacturer investment both in new products and, last year, more than £4.5 billion worth of discounts, helped many drivers make the switch, but more consumers are still reticent, looking for greater encouragement from government and elsewhere.

Private retail buyers still lack a meaningful fiscal incentive to buy an EV and, moreover, the application of the Vehicle Excise Duty ‘Expensive Car Supplement’ (ECS) to BEVs in just two months comes at the worst time for the industry. It means EV models costing more than £40,000 – the majority on the market, given higher production costs – will incur a £3,110 tax bill over the first six years of ownership – compared with zero at present. 

The change will impact both the new and used car markets, undermining the goal of a mass market transition. As a result, the industry is calling for tax plans to be revised to ensure the system is fair and avoids dissuading those who want to buy an EV.

Mike Hawes, SMMT Chief Executive, said, “January’s figures show EV demand is growing – but not fast enough to deliver on current ambitions.

“Affordability remains a major barrier to uptake, hence the need for compelling measures to boost demand, and not just from manufacturers. The application, therefore, of the ‘Expensive Car Supplement’ to VED on electric vehicles is the wrong measure at the wrong time. Rather than penalising EV buyers, we should be taking every step to encourage more drivers to make the switch, helping meet government, industry and societal climate change goals.”

The threshold for the ECS – dubbed the ‘luxury car tax’ when launched – has remained unchanged at £40,000 since it was set eight years ago, when the overall market was 30% larger than today and BEVs barely featured. With more than twice as many BEVs registered this January than in the whole of 2017, the SMMT suggests that raising the eligibility threshold for EVs – or exempting them from the ECS entirely – would send the message that EVs are essentials, not luxuries, and ensure vehicle taxation remains fair and appropriate for today’s market conditions.

The latest market outlook anticipates the new car market declining slightly in 2025 by -0.2% to 1.95 million units, with BEV uptake rising by 20.9% to 462,000 – a 23.7% market share, but still short of the mandated 28% target for the year. The gap is anticipated to widen in 2026, when BEVs are expected to comprise 28.3% against a target of 33%. The growing disparity between market demand and regulated targets further underscores the need for substantive market incentives that match ambition.

Commenting on today’s new car figures from the SMMT, Ian Plummer, Commercial Director at Auto Trader, said: “January marked a somewhat lacklustre start to 2025 for the new car market, as registrations fell for the fourth consecutive month.

“A look under the bonnet however does offer some optimism for the industry, with visits to our new car platform accelerating over 20% following the festive slowdown as buyers begin searching for their next new car in earnest ahead of the calendar’s busiest car buying period.  

“We can also see the big uplift in electric car enquiries made on our platform late last year already play through into the market. The significant surge in EV sales last month will come as some relief to manufacturers facing another steep increase in ZEV mandate targets this year. If it’s to meet the required 28% of all new car sales, there’ll be no let-up in pressure to maintain electric vehicle demand, likely resulting in very competitive offers to entice buyers over the coming months.  

“Coupled with uncertainties surrounding the economy, compounded by concerning rhetoric from the US, 2025 will offer its fair share of challenges, particularly established brands which face fierce competition from a growing array of new Chinese entrants. For consumers however, the combination of major offers and new players vying for their attention could make 2025 a very attractive time to buy a new electric.” 

James Hosking, Managing Director of AA Cars, noted: “As the calendar flipped to January, growth in the UK’s new car market took a dip.

“Total registrations for 2024 were up by 2.6%, but in January new car registrations fell to 137,000 units — down 2.7% from 140,786 the previous month — due to slower demand from both fleet and private buyers.

“Car-buying decisions have been impacted by economic factors, such as higher interest rates and persistent inflation, and some consumers remain cautious about making big-ticket purchases. However, improving economic conditions are expected to boost confidence in the new car market.

“Consumer interest in greener vehicles is on the rise. Our data reveals that over half of buyers in the market for a car this year are considering a more environmentally friendly option, whether a hybrid or fully electric vehicle. 

“The price of the 20 most-searched-for EVs and hybrids on our platform dropped by 10% in Q4 2024 compared to the previous year, which suggests affordability is improving. However, it remains a potential barrier for some, with traditional petrol models still accounting for a significant share of private demand.

“Continued support and investment will be crucial in helping manufacturers meet the Government’s Zero Emission Vehicle (ZEV) mandate, which outlines that BEVs must make up 28% of all sales in 2025.

“Overcoming economic hurdles and strengthening consumer confidence in EVs will be key to sustaining growth in 2025, as the market navigates a mix of pressures and possibilities.”