Forecaster reduces 2027 electric vehicle sales forecast

author: FutureCar Staff    

The Office for Budget Responsibility (OBR) has revised its projections for electric vehicle (EV) registrations in the UK, citing factors such as higher interest rates and falling fuel prices as potential obstacles to consumer adoption of EVs.

According to the OBR's latest economic and fiscal outlook, EVs are now expected to represent 18% of sales in 2023, down from the previous estimate of 25%. The forecast for 2027 has also been significantly reduced, from 67% to 38%.

This adjustment is primarily attributed to the absence of low-cost EV options, which is expected to slow down the rapid sales growth observed in recent years. The initial surge in EV sales was largely driven by early adopters with higher incomes.

The OBR highlights the lower running costs of EVs for consumers who can charge their vehicles at home. However, it notes that the cost advantage diminishes, and can even become negative, for EVs charged away from home.

Concerns about the availability of public charging points are also seen as a potential hindrance to wider adoption of EVs. Additionally, the decline in petrol and diesel prices, though still relatively high compared to the past, has contributed to the revised projections.

The main policy driver for EV uptake in the UK is now the Zero Emission Vehicle (ZEV) mandate, which is set to take effect in January 2024. The Department for Transport (DfT) confirmed in September that the mandate will require 22% of cars and 10% of vans sold by manufacturers to be electric.

The OBR's projections align with the path of the ZEV mandate over the forecast horizon. It expects sales to closely adhere to these targets due to flexibilities that allow trading of allowances and borrowing against future allowances in the initial three years of the mandate.

However, the OBR cautions that the recent government announcement of a five-year delay on the ban of new internal combustion engine (ICE) vehicle sales, from 2030 to 2035, may cause some consumers to postpone their transition to EVs.

Furthermore, the OBR's fiscal outlook highlights the challenges in narrowing the price gap between EVs and traditional cars, especially for purchasers using car finance. Higher than anticipated interest rates contribute to this challenge.

Ian Plummer, commercial director of Auto Trader, emphasizes the need for more incentives for consumers to switch to EVs, including more affordable cars, increased charging points, and confidence in running costs, which includes related taxes.

FutureCar Staff