Electric car growth forecast slashed by OBR as prices stay high

Official forecasts for electric car take-up have been slashed by almost half as high prices put the brakes on sales growth.

Sales of new battery-powered cars were expected to grow steadily until they accounted for 67pc of the market by 2027, under a prediction issued in March.

But that figure has now been revised down to just 38pc by the Office for Budget Responsibility (OBR), which said the take-up of electric vehicles (EVs) has been slowing.

The watchdog blamed stubbornly-high costs and the Prime Minister’s decision to push back the ban on sales of new petrol and diesel cars by five years, to 2035. The OBR said the lower expected EV sales were expected to result in £700m per year higher fuel duty receipts.

It comes after UK car manufacturers also revised down their own predictions.

Experts have said another factor in EV take-up will be the prevalence of charging infrastructure, which the Government on Wednesday said it would boost by easing planning rules.

Ian Plummer, commercial director at online car marketplace 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.

“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 it had changed the way it forecast electric car sales in March after actual sales repeatedly exceeded its expectations in previous years.

However, it said the EV category for new car sales almost immediately failed to hit its revised prediction of 17.7pc in the 2022/23 financial year, coming in at 16.5pc instead.

It has now revised down the expected share of EV sales in 2023 from 25pc to 18pc and 2027’s share from 67pc to 38pc.

The OBR suggested EV sales growth may be cooling both because the rate at which EV prices were falling has slowed and because the difference between running an electric and petrol car had narrowed since petrol prices fell from last year’s highs.

It noted that EVs remained expensive to buy up front and “the availability of public charging points seems to be a concern for many drivers”.

The OBR also said Mr Sunak’s decision in September to delay the ban on new petrol car sales from 2030 to 2035 may also “result in some consumers delaying a switch”.

A Whitehall source pointed to industry figures that showed EV sales had increased by 51pc in the second quarter of 2023 compared with a year earlier.

James Court, chief executive of Electric Vehicle Association England, said ministers should focus on making electric vehicles attractive for fleet operators, as this would increase the number of cars slowly filtering through to the second-hand market.

He added: “It is when you start to get more second, third and fourth-hand cars changing hands that you will really start to see more people driving them.”

But he added there “probably had been some impact from the five year delay [to the petrol car ban] because it has created more negativity and uncertainty”.

Fuel duty has been frozen at 57.95p per litre since March 2011 and is currently set to rise next spring.