Watchdog lowers forecast for sales of electric cars

Growth in take-up of electric vehicles had slowed, the Office for Budget Responsibility said (John Walton/PA)
Growth in take-up of electric vehicles had slowed, the Office for Budget Responsibility said (John Walton/PA)

The Office for Budget Responsibility (OBR) has lowered its forecast for the sale of electric cars.

In its report for the autumn statement, the OBR said it was reducing its forecast for electric vehicles’ share of new car sales in 2027 to 38%, compared with the 67% it projected in March.

It added that growth in take-up had slowed, with electric vehicles accounting for 16.5% of new car sales in 2022/23 – this was more than one percentage point below the OBR’s March 2023 forecast of 17.7%.

The fiscal watchdog said generally higher upfront costs of electric cars would “likely still be disincentivising many consumers”, adding this particularly related to purchases using car finance as interest rates were significantly higher than anticipated in 2022.

The OBR said the availability of public charging points “seems to be a concern for many drivers” and warned that the cost advantage of electric vehicles charged away from home was “significantly less and can become negative”.

It also noted that petrol and diesel prices had declined from a spike in 2022, adding that the Government’s announcement of a five-year delay on the ban of new internal combustion engine vehicle sales, from 2030 to 2035, may result in some consumers delaying a switch to electric cars.

Ian Plummer, commercial director at Auto Trader, said: “The OBR’s warnings that electric vehicle adoption is slowing simply underlines the urgency of making them more affordable.

“With the ban on new petrol and diesel sales delayed, drivers need more incentives to make the switch – they need more affordable cars, and confidence in charging points and running costs.

Autumn statement 2023
Chancellor Jeremy Hunt delivered his autumn statement in the House of Commons (House of Commons/UK Parliament/PA)

“The Chancellor has started the job today by cutting red tape and planning restrictions on electric charging points and boosting business investment, which should bring down costs. But there is more he could do, for example by cutting VAT on public charging points to level the playing field with those charging at home.”

The OBR said the main policy driver for electric vehicle uptake was the Zero Emission Vehicle (ZEV) mandate, taking effect in January 2024, which sets a minimum share of cars and vans sold by each manufacturer to be zero emission.

In his autumn statement on Wednesday, Chancellor Jeremy Hunt announced £2 billion of future investment into zero-emission vehicle production in the UK.

Mr Hunt said that the support would be available for the five years to 2030 for zero-emission vehicle manufacturing.

The Chancellor added that the announcement had been “warmly welcomed by Nissan and Toyota”, which both had significant car production operations in Sunderland and Derby respectively.