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Electric Vehicle Market Grows Amidst Challenges in the UK
The electric vehicle (EV) market in the UK is experiencing significant growth, with a 28.4% increase in registrations in January 2025. Combining plug-in hybrid (PHEV) and battery-electric (BEV) results, a total of 42,232 units were sold. However, this growth comes amidst several challenges that are shaping the current market environment.
BEVs, in particular, are facing economic pressures, subsidy cliffs, charging gaps outside urban areas, battery damage costs, and supply-chain risks. Despite the growth in BEV registrations, with a 41.6% increase in January 2025, they secured a share of only 21.3% in the market, falling below the 22% Zero Emission Vehicle (ZEV) mandate threshold for 2024.
The UK's new-car market experienced a decline in registrations in January 2025, with 139,345 units sold, a decrease of 2.5% compared to the same period in 2024. Petrol registrations declined by 15.3%, with 70,075 units sold, while diesel registrations also decreased, with 8,625 units sold, a 7.7% market share.
The application of the Expensive Car Supplement (ECS) to VED on electric vehicles could impact their desirability due to affordability concerns. For BEVs that cost more than £40,000, drivers will have to pay the ECS, which could mean an additional £410 on top of the VED duty for five years.
The SMMT is calling on the UK Government to raise the eligibility threshold for all-electric models or exempt them entirely from the ECS to send the message that EVs are essential, not luxuries. The government’s ZEV Mandate requires a 28% BEV market share by 2025, but recent figures fall short partly due to unclear policy on grants and the impact of taxes like the ECS for pricier BEVs.
Despite these challenges, the UK government is taking steps to boost BEV uptake. Company fleets have switched heavily to BEVs due to favorable benefit-in-kind tax rates, which reduce costs and support ESG targets. The government is also investing in charging infrastructure, expanding it through investments in fast chargers at retail and service locations.
The UK is seeing record venture capital investments in EV battery technology, supported by government initiatives like the Faraday Battery Challenge. This investment is aimed at addressing battery supply and innovation challenges going forward.
In summary, the current UK BEV market is facing several challenges, including economic pressures, subsidy cliffs, charging gaps, battery damage costs, and supply-chain risks. However, market incentives such as tax breaks, Electric Car Grants (though currently unclear), investment in charging infrastructure, and government-backed battery innovation programs are being implemented to boost BEV uptake. The future success of the BEV market depends on clarifying and extending these incentives, expanding charging, and managing battery costs.
The SMMT forecasts a slight decline of 0.2% in registrations across the full year 2025, with around 1.95 million units to be delivered to customers. Registrations of full hybrids (HEVs) improved by 2.9% in January, with 18,413 units sold, securing a 13.2% share of the market. PHEVs saw a 5.5% growth in January, with 12,598 units sold, and PHEVs had a 9% market share in January, up 0.6pp year on year. The market for electrified vehicles (HEVs, BEVs, and PHEVs) improved 19.4% in January. The decline in new-car registrations in the UK continued a run of drops that started in October 2024.
[1] Source: SMMT [2] Source: Car Dealer Magazine [3] Source: Auto Express [4] Source: Fleet News [5] Source: Business Green
- The growth in the electric vehicle market, despite challenges such as economic pressures, subsidy cliffs, charging gaps, battery damage costs, and supply-chain risks, is largely influenced by government-backed initiatives like tax breaks, Electric Car Grants, investment in charging infrastructure, and programs focused on battery innovation.
- Despite the decline in new-car registrations in the UK and unclear policy on grants, the application of favorable benefit-in-kind tax rates and investments in charging infrastructure have enabled company fleets to heavily switch to electric vehicles, supporting Environmental, Social, and Governance (ESG) targets.
- The UK government's ZEV Mandate requires a 28% share of battery-electric vehicles (BEVs) in the market by 2025, but recent figures fall short partly due to the impact of taxes like the Expensive Car Supplement (ECS) on pricier BEVs, potentially making them less appealing due to affordability concerns.
