Why isn’t the government pushing for more electric vehicles (EVs)?

In 2021, we saw the use of electric vehicles in the UK increase considerably, but we also saw EV grants slashed twice. So, if the government is serious about hitting its target to lower emissions, aren’t they pushing for more EVs? Business Leader investigated.

How big is the electric vehicle (EV) market in the UK?

According to the latest statistics, EV car sales increased by 76.3% in 2021, whilst there are an estimated 400,000 electric cars on the road in the UK and over 750,000 plug-in hybrids (PHEVs) as of January 2022. As of December 2021, an estimated 2% of cars in the UK are electric or hybrid.

Whilst this might not seem like a lot, when we look at the number of new car registrations in 2021, this is more indicative of the way car sales are going. There were 190,727 registrations of battery electric vehicles (BEVs) in 2021 – 11.6% of all new car sales – while plug-in hybrid electric vehicles (PHEVs) made up 7% or 114,554 cars, meaning 18.5% of all new cars registered in 2021 can be plugged in.

With the government banning the sale of new petrol and diesel vehicles by 2030, there is a strong likelihood that the sales of electric vehicles will continue to increase. By the end of 2022, it’s projected that electric cars will outsell diesel and mild hybrid diesel, whilst some business leaders even believe the current appetite for EVs means the government’s 2030 target is realistic.

However, the government slashed electric vehicle grants for the second time in a year in December 2021, reducing the grant amount available from £2500 to £1500. In addition to this, the upper price limit for eligible car models fell from £35,000 to £32,000, down from £50,000 in March 2021, whilst grants on large and small vans were also reduced from £6,000 to £5,000 and £3,000 to £2,500 respectively.

By lowering grants, consumers will have to pay more to purchase an electric vehicle. So, if the government is serious about hitting its 2030 target, why have they done this?

Is there a suitable charging infrastructure in place for EVs?

One of the reasons regularly cited for limiting the popularity of electric vehicles is the charging infrastructure. So, perhaps the government wants to slight the growth of EV sales until this has improved.

Oliver Shaw, CEO at Kalibrate, provides an overview of the UK’s current charging infrastructure.

He comments: “Against the backdrop of environmentally conscious consumers and reduced commuting, a drop in traditional vehicles and rise in EVs comes as no surprise. The appetite for EVs may be growing but the lack of infrastructure to support widespread adoption will be a roadblock in the journey if not addressed fast.

“While organisations like Waze are supporting the EV uptick and car manufacturers are also investing heavily, Toyota recently unveiled 11 new EV models, EV infrastructure remains inadequate for the current growth in ownership.”

“The Competition and Markets Authority (CMA) has warned that Britain could require 10 times as many EV charging-points come 2030. That means charging points need to be rolled out at much greater pace, and this must be done through a steadfast data strategy that can uncover regional variations and show which locations need further investment.

“Only with a significant amount of EV charge points will there be greater awareness to help address concerns that nearly half (48%) of UK EV drivers remain worried about running out of charge.”

Dr Jonathan Owens, an expert in logistics at the University of Salford Business School, provides additional insight into the situation.

He comments: “There are around just under 25,000 public charging points within the UK, which sounds good when compared to around 8,000 fuel stations. However, these traditional fuel stations are perhaps more strategically placed around the country and provide a more complete and sustained offering to the community it serves.

“Whilst there has been a noticeable year-on-year increase for UK charging points and it is generally agreed infrastructure is improving, the preferred charging point by the current EV user when they are mobile is one that can charge a car to 80% in 10 to 15 minutes. Currently, there are around 4,500 of these and predominantly they are on motorway services.

“Since 2015, the number of public chargers has grown around 44%, with the rapid charger showing an increase of 67% according to official government figures, which is encouraging. However, Covid dented the progress of building the infrastructure, so we have fallen behind.

“It is evident public confidence in the EV product has significantly improved as the 2030 deadline is moving closer. Infrastructure, especially focussing on the rapid charging as battery and range increases, is central.”

Will slashing vehicle grants increase the availability of EVs?

When announcing the slashing of electric vehicle grants, Transport Minister Trudy Harrison made no reference to the current charging infrastructure but said the move would enable more people to benefit from government grants.

She said: “The market is charging ahead in the switch to electric vehicles. This, together with the increasing choice of new vehicles and growing demand from customers, means that we are re-focusing our vehicle grants on the more affordable vehicles and reducing grant rates to allow more people to benefit, and enable taxpayers’ money to go further.”

Clearly, the government believes that slashing grants and reducing the price limit for eligible car models will encourage people to buy cheaper EV models. However, cheaper-priced models were just as readily available under the previous grant scheme. In fact, under the old scheme, consumers would have saved more on a cheaper model during a time when inflation is at a 10-year high.

As a result of the government’s changes, the number of electric car models qualifying to receive the grant has actually dropped from 27 to 17.

Fiona Howarth, CEO of Octopus Electric Vehicles, also says grants are essential for overcoming the purchase cost of EVs.

She comments: “The top reason putting people off going electric today is cost. On the surface, the list price can be over £5,000 more than the fossil-fuelled equivalent, however, over their lifetime EVs often work out cheaper.

“Many drivers don’t realise they can save up to £1,000 on fuel and 30-40% every month on the car with an EV salary sacrifice scheme at work. We are seeing manufacturing costs come down year on year, but for now, grants are the simplest way to overcome this upfront cost hurdle.

“In the UK, transport accounts for over a third of carbon emissions, and the switch to EVs is the quickest way to make a big impact in the race to net zero. There is a massive opportunity for the countries that move early on electric transport, building their future auto industry and delivering local jobs. Keeping strong grant incentives now will help kick EV uptake into top gear.”

So, if grants can help to overcome costs, why is the government halting the EV push? Perhaps fuel duty is the answer.

Mike Brown, Director of Strategic Partnerships at the University of Salford, explains: “EV technology is maturing year on year. The challenge we now face is the creation of a network of both public and residential EV charging points on major road networks and in urban and rural areas.

“Progress has been slowed with delays in the government Electrical Vehicle Infrastructure Strategy and there are also concerns related to the fall in HM revenue from fuel duty as more users switch to EVs. Despite these challenges we need to accelerate the move to EVs, including HGVs, to meet our Climate Change commitments, a process that can be achieved through academic and industry collaboration.”

People switching to electric cars has meant that almost £30bn in annual income to the treasury has been lost, so by keeping petrol and diesel cars on the roads for a little longer, the government might be hoping to earn a bit more on fuel duty from now until 2030.