Appetite for new electric cars slumps as Tesla signals more price cuts to drum up demand
- Auto Trader says it has seen a 65% decline in demand for new EVs this year
- It has called on government to introduce incentives to help consumers afford expensive electric models
- Elon Musk overnight hinted at more Tesla price cuts in the US to boost sales
Buyer interest in new electric cars has slumped by nearly two-thirds since the start of last year, new figures released this morning suggest.
Online vehicle marketplace Auto Trader said it recorded a 65 per cent drop in inquiries for electric cars last month compared with January 2022.
The company’s Road to 2030 report blamed the decline in demand for electric vehicles (EV) on a multitude of factors, including their premium price tags, the cost-of-living crisis, higher interest rates for borrowing and increase in energy prices.
The report follows Elon Musk’s suggestion that he will slash the price of Teslas in the US for a staggering sixth time this year in a bid to rejuvenate demand for the company’s battery vehicles.
Buyer interest in new electric cars has slumped by nearly two-thirds since the start of last year, new figures suggest
The price of Model Y vehicles is to be cut by £2,400 to around £37,743, and the Model 3 vehicle by £1,600 to £32,100.
After a series of cuts, the models are a respective 29 per cent and 15 per cent cheaper in the US, its largest market, than at the start of the year.
In response, shares dropped 4 per cent in New York during after-hours trading, adding to its 18 per cent decline in the past six months.
Tesla has already slashed UK prices of its new cars various times in 2023, which in turn has hammered the value of second-hand models in recent months.
Auto Trader’s report published on Thursday said the new EV market is being hampered by a lack of affordable choices, with very few models available priced between £20,000 and £30,000.
The analysis also stated that new EVs are an average of 37 per cent more expensive than petrol and diesel cars.
The Society of Motor Manufacturers and Traders (SMMT) reported earlier this month that 76,233 new battery electric car have been bought in Britain in the first quarter of this year, up 18.8 per cent on 2022 levels.
However, Auto Trader has urged the Government to offer better incentives for making the switch from conventionally-fuelled cars.
The report follows Elon Musk’s suggestion that he will slash the price of Teslas in the US for a staggering sixth time this year in a bid to rejuvenate demand for the company’s battery vehicles
It called for a reduction on VAT for public charging so it is the same rate as home charging.
VAT on domestic electricity is 5 per cent whereas motorists using on-street chargers pay 20 per cent.
Yet, the calls for more government support comes just a year after ministers scrapped the Plug-in Car Grant as well as grants towards the cost of installing charging points at homes.
Ian Plummer, commercial director of Auto Trader, said: ‘These are difficult times for the UK’s road to 2030 ambitions and we are in danger of veering off track.
‘If the Government is serious about achieving its ambitions, it needs to do more.
‘For example, it cannot be right that those who don’t have option of charging at home are forced to pay substantially more to charge their vehicles.
‘While the extra £380 million announced in March to improve charging infrastructure will help, the goal of mass adoption is at risk unless we use the tax system inventively to spur on EV purchases and accelerate demand.’
Auto Trader blamed the decline in demand on the cost-of-living crisis, higher interest rates for borrowing and the increase in energy prices. However, with electric cars costing 37% more than an equivalent petrol or diesel model, the fact is many Britons are priced out of ownership
We need more affordable EVs…and quick, says RAC
The RAC says that many motorists are being priced out of EV ownership, which is resulting in them keeping their older – more polluting – petrol and diesel cars longer.
By doing so, it threatens the Government’s targets to cut air pollution levels in the coming years before the ban on sales of new petrol and diesel cars in 2030.
Ministers are currently consulting with industry about the introduction of a Zero Emission Vehicle (ZEV) mandate from next year, which will require manufacturers to sell an increasing share of electric cars annually in the run up to the ban on sales of all new motors with internal combustion engines.
From 2024, it has outlined that 22 per cent of all sales by each mainstream car maker must be zero emissions at the tailpipe, and by 2030 this sales share will need to rise to 80 per cent.
Failure to meet these objectives would land manufacturers with fines of up to £15,000 per vehicle over the targets set out in the mandate.
The Zero Emission Vehicle (ZEV) mandate outlines annual targets for increase sales of electric cars. It starts in 2024 with 22% of all manufacturer sales in the UK needing to be electric
The Government hopes that by introducing penalties it will force the hand of vehicle makers to bring more affordable cars to market that more drivers can afford.
‘It’s clear that new, more affordable electric models like VW’s ID 2all can’t come onto the new car market soon enough,’ the RAC’s Rod Dennis said.
‘As things stand, the demand from drivers for EVs is there but without greater financial assistance there’s a risk many will simply hold onto their older vehicles for longer.
‘The fact around a third more electric cars in the UK are registered to businesses than to private individuals, with growth of the former outpacing the latter, shows just how much of an incentive the low company car tax rate has proved to be.
‘It’s a shame the Government isn’t looking at introducing a grant to help stimulate the cheaper end of the EV market to help drivers who don’t have company cars get into EVs.’
Is this finally an electric car most people can afford? Volkswagen has previewed its forthcoming ID.2 supermini aimed at lowering the price bracket for EVs – but it’s still going to be relatively pricey for a small vehicle
The VW ID.2all concept was unveiled in Germany last month to preview what the new ID.2 will look like. The manufacturer claims it will cost no more than €25,000 – that’s £22,000 – when it hits showrooms in 2026
Gerry Keaney, chief executive at the British Vehicle Rental and Leasing Association, added: ‘Retail and used buyers face testing barriers that are putting them off switching to EVs, with not enough support in place to ensure their first experience of owning an electric vehicle is a positive one.
‘We know what those barriers are. Confusing communications, plus concerns over charging and cost of ownership risk thousands of drivers delaying their transition.
‘Intervention is required to protect the long-term success of the market and enable a smooth transition to electric vehicles.’
A Government spokesperson responded to Auto Trader’s report, stating: ‘Electric vehicles continue to offer opportunities for savings through cheaper charging and maintenance costs, and we have put £2bn into helping people make the switch.
‘Recent industry figures showed continued growth in new electric car registrations, and more EVs are entering the used car market – giving people more choice for accessing affordable EVs.’