Plan Insurance Blog

Why Are Electric Vehicle Sales Plummeting?

There is a big drop in electric vehicle sales. There are several possible reasons, but over the past year, there has been a more than 11% cent decrease in the purchase of zero-emission vehicles by private buyers.

This decline has been attributed to several factors. These include government policies, the cost of EVs, reduction in financial incentives, and concern over the availability of public recharging infrastructure.

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Motoring associations have clear answers

The Society of Motor Manufacturers and Traders (SMMT) has an answer to why consumers are hesitant to make a full switch to electric vehicles. They believe it is due to uncertain messaging from the government on banning petrol and diesel cars. Without a clear deadline for when petrol and diesel cars will be extinct, many motorists stay with what they know and avoid jumping too early.

Ministers and the motor industry have previously celebrated the increasing sales of EVs as a clear sign that the UK is ready to switch from ‘early adopter’ to a mass market embrace of EVs. Recent figures tell a different story.

Private ownership of electric cars has reduced from more than one-third of the EV market to less than one-fourth within a span of a year. Although there was a 32 per cent increase in BEV sales during the first half of the year, amounting to 152,000 cars and accounting for one-sixth of all new registrations, a closer look at the data reveals a stark decrease in private purchases.

Fleet purchases are dominating the market

The majority of the new EV registrations in this period – over 75 per cent – were associated with fleets and business owners. These groups are able to benefit from company car tax breaks, the benefits-in-kind regime, and salary-sacrifice schemes, resulting in significantly lower taxes for running an electric car. On the other hand, private retail-buying motorists registered just 37,000 new electric cars, making up only 24.2 per cent of all EVs, a noticeable drop from the previous year.

This decline in private EV ownership is occurring alongside a cost of living crisis and the end of the “plug-in car grant”, which once offered up to £5,000 off a new electric car. The lack of support for private buyers and concerns over the affordability and availability of charging infrastructure is threatening the transition to zero-emission vehicles.

The call for incentives and charging infrastructure

Industry leaders are calling for government intervention to level the playing field for private buyers and fleet owners. Proposals include reducing VAT on electric cars, improving public recharging points, and reversing the decision to charge electric car owners vehicle excise duty.

The market has shown signs of recovery from the impacts of the COVID-19 pandemic and subsequent part shortages, but the future of EV adoption heavily relies on addressing the current barriers to entry for private consumers.

The insurance problem

Beyond government policies and initial purchasing costs, potential EV buyers are also facing challenges related to insurance. The cost of insuring electric cars is higher due to the expensive parts and the lack of available specialists for repairs. The increased weight of EVs puts additional strain on their suspension and braking components, leading to similar failure rates to traditional vehicles.

Stories of soaring insurance premiums are becoming more common, with some EV owners experiencing significant increases in their annual rates. The cost of replacing batteries, which can amount to half of the car’s purchase price, adds to the insurance companies’ apprehension. This is a problem that has to be fixed. The decision to purchase an EV needs to be based on a compelling logic in order to facilitate the mass market transition is needed.

The future of EVs

Despite these challenges, the push towards electric vehicles is still moving. This is spurred on by the implementation of stricter emission mandates and the promise of new, more affordable models in the near future. Manufacturers and industry experts are working towards solutions, aiming to reduce the cost of EV ownership and ensure an easier transition for potential buyers.

The future of electric cars in the UK and worldwide depends on addressing these issues head-on, creating an environment where consumers feel confident and supported in their decision to go electric.

As we have discussed before on the Plan Blog, there is a chicken-and-egg challenge with EV infrastructure. Fossil fuel drivers don’t want to transition to EVs without a sturdy charging infrastructure, but the government won’t spend millions to build one until there is sufficient demand from drivers. The cost of living crisis has also made consumers tighten their belts. They are now less likely to take a financial risk such as embracing EVs before they have to. The next 12 months will certainly be interesting in the electric vehicle space.

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