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In January 2025, the UK new-car market experienced a minor decline, with registrations dropping by 2.5% compared to the same period in 2024, according to data provided by the Society of Motor Manufacturers and Traders (SMMT). Despite this dip, the market for electrified vehicles (HEVs, BEVs, and PHEVs) improved by 19.4%, with a total of 139,345 units registered.
Battery-electric vehicles (BEVs) showed a significant increase, growing 41.6% in January, accounting for a 21.3% share of the new-car market. A total of 29,634 BEVs were registered, an improvement of 8,699 units compared to the same period in 2024. Plug-in hybrids (PHEVs) also saw a 5.5% growth, with 12,598 units registered.
However, the growth of BEVs in the UK market is not without challenges. Economic uncertainty, infrastructure gaps, supply-chain vulnerabilities, and high maintenance costs, particularly costly battery damages, pose significant barriers to their desirability and broader market penetration.
Economic pressures and cost pressures, such as interest rate volatility and cost-of-living increases, can delay consumers' large purchases like BEVs. However, tax incentives partly offset this effect.
Charging infrastructure gaps, particularly in rural regions and apartments, can hinder adoption and consumer confidence. The UK EV battery production relies heavily on imported raw materials, exposing the market to geopolitical risks and transport disruptions. Additionally, over 10% of UK EVs may suffer significant battery damage requiring expensive replacements (often above £15,000), posing financial challenges for owners and insurers alike.
Subsidy reductions, such as the scheduled ending or reduction of purchase grants, create uncertainty and may weaken sales growth unless replaced by new support mechanisms such as tax breaks or road-pricing reforms.
The UK government plans to implement vehicle excise duty (VED) for all new all-electric models from April 2025. In the first year of registration, VED for new all-electric models will cost drivers £10 (€12). After the first year, drivers will pay the standard annual rate of £195. For BEVs that cost more than £40,000, drivers will have to pay the Expensive Car Supplement (ECS) in addition to VED, which could mean an additional £410 on top of the VED duty for five years. Although BEVs benefit from lower benefit-in-kind taxation for company cars and other incentives, VED and Expensive Car Supplement charges increase the overall cost of ownership, particularly for higher-priced models, potentially dampening consumer enthusiasm or fleet adoption.
Despite these challenges, the government's Zero Emission Vehicle (ZEV) mandate, which aims to have 28% of new car sales as zero-emission vehicles by 2025, indicates a commitment to promoting the adoption of BEVs. Effective continuation of incentives, infrastructure investment, and supply-chain stability are crucial to overcoming these challenges and achieving the ZEV mandate.
Registrations of internal combustion engine (ICE) powered models (petrol and diesel) made up 56.5% of the market in January, down from 64.5% a year ago. HEVs took a 13.2% share of the market in January, up by 0.7 percentage points compared to January 2024. The SMMT expects the UK market to decline slightly by 0.2% across the full year, with around 1.95 million units delivered to customers.
In summary, while BEVs enjoy policy support and growing infrastructure in the UK, economic pressures, charging unevenness, costly battery repairs, and rising tax burdens on expensive BEVs together create significant barriers to their desirability and broader market penetration. Effective continuation of incentives, infrastructure investment, and supply-chain stability are crucial to overcoming these challenges and achieving the government's Zero Emission Vehicle (ZEV) mandate.
- The growth of electric-vehicles, specifically battery-electric vehicles (BEVs), in the UK market is influenced by factors such as government incentives, charging infrastructure development, and the Zero Emission Vehicle (ZEV) mandate.
- Despite these favorable factors, challenges like economic uncertainty, infrastructure gaps, high maintenance costs associated with battery damages, and increasing tax burdens on expensive EVs pose barriers to their desirability and broader market penetration.
- In the transportation industry, the finance sector plays a role in influencing consumer purchasing decisions, with economic pressures, interest rate volatility, cost-of-living increases, and subsidy reductions impacting the popularity of electric-vehicles, particularly high-end models like BEVs.
