By Paul Homewood
The Office for Budget Responsibility (OBR) has lowered its forecast for electric car sales following the Autumn Statement as major manufacturers plan to invest heavily in EVs.
The OBR announced that it was reducing its forecast for electric vehicles’ share of new car sales in 2027 to just 38 per cent, a huge drop compared to the 67 per cent it projected in March.
It stated that the growth of electric car sales had slowed with drivers avoiding new EVs, as many delay buying a new car because of cost pressures.
In September, the Prime Minister announced that the deadline to ban the sale of new petrol and diesel cars would be delayed from 2030 to 2035.
The OBR suggested that this could be a reason for people delaying their decision to buy a new car, as well as expensive upfront costs.
Electric vehicles accounted for 16.5 per cent of new car sales in 2022/23, although this was more than one percentage point below the OBR’s March 2023 forecast of 17.7 per cent.
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The OBR generally base their forecasts on the Government’s own data and assumptions. This would suggest that this forecast for EV sales is actually the latter’s assessment as well.
For what it is worth, I don’t believe EV sales will get anywhere near even 38%. The business/fleet market is already probably near saturation point, and there is very little interest amongst private motorists.
This raises the question of where it leaves motor manufacturers under the government’s zero emission vehicle mandate, which says that 52% of new car sales in 2027 must be zero emission. If manufacturers fail to hit the target, they must pay a penalty of £15000 per car, although they can carry forward deficits.
If they even manage to sell 38% EVs, there will still be a shortfall of about 280,000 cars. At £15k a time, the penalties would add up to £4.2 billion in 2027.
A penalty of this magnitude would kill off the UK motor industry. That would leave them with two choices:
1) Try and recoup the penalty on the selling price of ICEs, which would add about £3000 for every car sold.
2) Produce and sell fewer ICEs, in order to boost the ratio of EVs.
In reality, I suspect they will end up doing both. By putting up prices, they will automatically reduce demand.
In short, if we do not obey the government and buy ICEs instead of EVs, we will have to pay an extortionate tax instead.
I don’t remember voting for this!
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November 24, 2023 at 08:24AM
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