Measures are already being rolled out to address well-known barriers such as range anxiety, rapidly falling residual values of EVs and a challenging second-hand market. In addition, the EV industry is also experiencing a global slowdown, which is dampening investor sentiment and discouraging some drivers from making the switch.
How is the UK driving EV adoption?
The UK Government’s current approach to expanding EV uptake is to place responsibility on manufacturers through its ZEV mandate. This has drawn criticism from the automotive industry and its supply chain, with several companies recently reducing their EV production ambitions or indicating that they would sell fewer ICE vehicles to ensure they meet their targets for 2025. Furthermore, some Original Equipment Manufacturer (OEMs) have announced closures of UK facilities, citing government mandates to ensure a proportion of sales of electric or ZEVs.
Countries such as Germany and Norway have shown that EV adoption can be boosted with subsidy support. However, recent UK governments have tapered subsidies for EV purchases as the market has matured and more affordable models became available. Given the Chancellor’s emphasis on the need for fiscal restraint, reinstating grants for the purchase of new EVs will not be a viable option. The Government has indicated there may be some financial support available, through vehicle financing for example, but this remains to be clarified.
The new Government will need to balance support measures with a challenging fiscal context and a much wider programme of net zero policies. There are measures it can pursue that may require lower government capital spend, such as improving technical vehicle information standards to support the second-hand market, or encouraging greater consideration of EV infrastructure in planning decisions.
The EV transition is at a crossroads. Government must encourage the market and the public not to be distracted by short-term market disruptions and to keep eyes on the (long) road ahead.
Barriers to EV adoption
The barriers to EV adoption are well-known but have remained stubbornly persistent as the market has matured, at least in terms of public perception. Labour’s proposal to bring the internal combustion engine (ICE) vehicle ban forward once again to 2030 from 2035 faces the same challenges as when it was originally set by Boris Johnson in 2020:
Affordability of Electric Vehicles (EVs)
The high up-front cost of EVs continues to be a major barrier to uptake. It is true that the cost of an EV vehicle has fallen in recent years, eg, the average price of some models from Tesla dropped by up to a fifth in 2023 compared to 2022, and other manufacturers have shifted their focus to produce more affordable models. However, despite such trends, only 17% of EVs sold are classed in the affordable ‘B’ segment, compared to 37% for ICE vehicles Consumer surveys continue to show high up-front purchase costs to be a major barrier, despite the lower ongoing fuel and maintenance costs offered by EVs.
Infrastructure limitations
Investment in EV charging infrastructure has increased substantially in the past five years. According to ZapMap, an EV chargepoint mapping service, the number of chargepoints in the UK increased by 38% over 2023 to 2024. Despite such increases in provision, driver surveys indicate the public still continue to perceive a lack of reliable and user friendly EV charging infrastructure. Drivers still have ‘range anxiety’ or ‘charging anxiety’, though the data suggests satisfaction is increasing. Part of the challenge is ongoing regional disparity and a perception of charging ‘blackspots’, particularly in rural or hard-to-reach areas. The cost of securing grid connections in these areas remains part of the challenge to alleviating such blackspots. High connection costs and low utilisation mean there is insufficient return on investment in these remote areas for chargepoint operators. The energy sector regulator, Ofgem, has been working with network operators to help unlock capacity in these areas, but cities and populous areas will remain the most commercially viable locations for EV chargepoint operators (CPOs).
Early adopters of EVs are disproportionately those with access to off-street parking and therefore they are likely to have a private overnight charger at home. It’s estimated that there are over eight million people who don’t have access to off-street parking in the UK and therefore would not be able to install their own at-home EV charger. The lack of public charging infrastructure will therefore become an increasingly significant barrier to those without access to off-street parking who begin to consider the switch to EVs. These drivers will rely more on on-street chargers or rapid charging hubs. Therefore, both the availability and affordability of these chargepoints will influence their decision to go electric. The price of publicly available chargepoints is unregulated and, in general, it’s significantly more expensive to charge using these (particularly at rapid or ultra-rapid chargepoints) than at private off-street chargers. This is compounded by the current VAT regime favouring those with off-street charging.
EV market slowdown
The growth of the EV sales market experienced a slowdown in 2023 and 2024 in Western Europe and the United States. Many expect this to continue into 2025 and potentially beyond. Some analysts argue this is a short-term slowdown that will correct in subsequent years. They point out that the EV market in the UK still increased. However others believe the slowdown may be indicative of a more systematic reduction in appetite for EVs, and that the growth in 2023-2024 is a result of ‘unsustainable discounting’ by manufacturers. The more pessimistic analysts forecast that in 2030 EVs may constitute as little as 44% of new vehicle sales. EV manufacturing output has also reduced as a result of the market slowdown.
Increased uncertainty regarding EV uptake forecasts has also impacted the finances of CPOs. For example, shares in PodPoint, a long-standing UK-based chargepoint operator and installer, fell in 2024. This followed below-expectations financial results, which it attributed to slower-than-expected EV uptake and charging demand.
An under-developed second-hand market
The market share of EVs in the second-hand market is only 2.5%, which is low relative to market share. Historically, disincentivises new purchases – with the result of enhancing this problem. One study estimated the average market value of a new EV to be 38% after three years, significantly lower than the 53% estimated for petrol and diesel cars. The smaller size of the second-hand market also creates a perception that selling a second-hand EV will be more challenging. Some dealers may be reluctant to purchase used EVs if they do not have confidence in their ability to sell the vehicle easily at a reasonable price.
The second-hand EV market for EVs started to look stronger in 2024, with data suggesting the market is growing. According to the Society of Motor Manufacturers & Traders (SMMT), 188,382 used battery electric vehicles (BEVs) were sold in 2024, marking a 57% surge from 2023 and 13-fold increase in market share compared to 2019. This surge in demand is fuelled by the competitive pricing of used battery electric vehicles (BEVs), which broadly matches or undercuts equivalent ICE vehicles.
Potential interventions and solutions
There are various levers available to the Labour Government to try and alleviate the barriers above. The challenge will be to select interventions that are effective while maintaining their fiscal rules.
Expanding charging infrastructure provision
The previous Government established several interventions to support the expansion of EV charging infrastructure.
The On-street Residential Charging Scheme (ORCS) was the first of these interventions, aiming to deliver on-street EV chargers for drivers who did not have access to off-street parking. £83 million has been allocated to local authorities since the scheme launched in 2017, with an estimated 21,000 new chargepoints supported.
This support was ramped up to include another two funds to encourage private sector investment in EV charging: the Local Electric Vehicle Infrastructure (LEVI) fund and the Rapid Charging Fund (RCF).
The LEVI fund allocates grant money to local authorities to increase chargepoints for drivers without off-street parking. In February 2023, the in government funding, to enable over 3,400 chargepoints. Following the pilot, the Department for Transport (DfT) announced a further £380 million funding available over the next two years.
The RCF aims to increase the number of ultra-rapid chargepoints at motorway service areas across England by funding a proportion of the grid connection costs — often the inhibitive factor for private sector investment. £950 million of funding was announced for the RCF in 2020. The fund is in its pilot phase and Government ran a consultation in 2024 regarding the full scheme.
The previous UK Government published an EV charging strategy which included a target of 300,000 public chargepoints by 2030. By the end of 2024, almost 74,000 chargepoints had been installed according to ZapMap. CPOs and other businesses continue to increase investment. The last Government’s EV charging strategy does not set mandatory targets for local authorities or businesses to install chargepoints, and the sector continues to be market-led. Labour have previously suggested placing more responsibility on local authorities, potentially including binding targets alongside existing funding programmes, but there is disagreement whether this is the most affordable or efficient way to expand provision.
Another way the government has intervened to support infrastructure build-out is to directly invest in EV charging companies to help crowd-in capital. In 2019, the Government established the Charging Infrastructure Investment Fund (CIIF) and co-invested in chargepoint operator companies, alongside private sector investors such as Masdar and Legal & General. The Government seems willing to continue with this approach: in January 2025, the National Wealth Fund (previously the UK Infrastructure Bank) announced investment in Connected Kerb, a network of public chargers, alongside Aviva, to help fund expansion of its on-street charging network.
Developing a UK second-hand market for EVs
The second-hand market for EVs is expanding, especially for BEVs. Franchise dealers have seen higher sales in early 2025, resulting in more purchases of stock than originally predicted. Despite this rise in demand, the price of used BEVs remains lower than that of comparable ICE models, due to consumers’ continued concerns about battery health and range. Initiatives such as the battery health certificate from British Car Auctions (BCA) are designed to alleviate these concerns.
In the short term, most analysts agree the demand for used BEVs is expected to remain below previous forecasts, but many expect demand to increase in 2025 and 2026. With the push of new BEVs into the market due to the ZEV mandate, increased supply could reduce the price of BEVs and persuade more consumers to consider the switch. To further bolster the second-hand market, the Government might consider mandating the offer of extended and transferrable warranties for second-hand buyers – but these costs may could be passed onto consumers. As a result, they may not be cost-effective without some form of government support.
Fleet and company vehicles are making a significant impact on both the new and used car markets. This influence is partly driven by the purchase of new vehicles through benefit-in-kind schemes. It's estimated that more than 75% of all new BEVs are purchased via benefit-in-kind schemes. Vehicles acquired through these schemes can be repurchased for use in corporate fleets, making them particularly attractive to businesses.
Subsidies and incentives
Direct subsidisation of EV purchases has proven to be effective at increasing uptake of purchases, as was the case in the UK from 2015 to 2020. This is exemplified to the extreme in Norway, where a long-term programme of grants and tax is likely to result in 100% EV penetration in the next few years. The previous UK Government tapered-off direct grants for EV purchases as the market matured and more affordable models became available. It’s not viable for the Government to reintroduce grant funding, particularly as more affordable models are added to the market.
Other less direct forms of subsidy may be more feasible later in this Government’s tenure, assuming a growing economy allows current fiscal restraints to relax. This could include reducing VAT on commercial charging, which would help even out the cost of charging for those without access to off-street parking. This reform has been mooted for several years and is unlikely to be implemented in the short term.
A further challenge for Labour and future governments will be replacing lost income from fuel duty, as more ICE vehicles are replaced by EVs. According to the latest carbon budget from the Climate Change Committee, without an increase in fuel duty rates, falling demand for ICE vehicles could result in tax revenues being £25 billion lower in 2030 compared to 2023. There’s currently no clear policy direction to address this. Several industry analysts have argued for a per-mile charge for EVs, alongside a charge per mile for ICE vehicles to limit any perverse incentive. But road pricing is a controversial topic in the UK and has proven deeply unpopular with the public – for example, in the context of regional low emission zones. Any funding proposals the Government is willing to consider as part of the ongoing spending review are likely to receive extra scrutiny by HM Treasury to ensure they don’t exacerbate this growing fiscal hole.
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A challenging turning point
Labour’s commitment to restoring the 2030 phase-out date of petrol and diesel cars could be pivotal in accelerating the UK’s progress towards net zero, but significant challenges remain around affordability, infrastructure, and the overall market for EVs.
When Labour announced they were seeking to restore the 2030 ICE sales ban, reactions were mixed. Some in the manufacturing industry argued it was unachievable due to supply chain limitations, and claimed additional incentives would be needed to sway drivers toward EV purchases. Others were sceptical of these claims and accused the industry of a “subsidy grab”. The DfT recently launched a consultation to obtain views from industry and stakeholders regarding the delivery and implementation of the ban, including whether hybrid vehicles should be phased out by 2030 or allowed to continue to 2035. The consultation closed on 18 February, and DfT are currently analysing the feedback.
As EV uptake increases, the UK Government has adjusted the level of support it provides to the sector. Given the increased maturity of the EV market, this is a positive show of support. It’s unlikely that further direct subsidy support is forthcoming, so the Government will have to make carefully targeted interventions to support a market-led approach and give confidence to buyers. This includes continued support for infrastructure roll-out, bolstering the second-hand market, and potentially launching targeted indirect financial incentives.
Current EV market trends and government fiscal constraints complicate the path forward. However, by restoring the 2030 phase out date, the Government has cut through the decisional fog by sending a clear signal to the industry that it wants to accelerate the EV transition. This should have the result of encouraging investments in the sector.
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