Electric vehicle discounts strain the market as sales miss government targets

The UK car market crossed a symbolic milestone last year, with more than two million new vehicles registered for the first time since the pandemic. On the surface, the figures suggest a sector regaining momentum after years of disruption. Nearly half a million of those vehicles were electric, reflecting steady growth in zero emission models and continued consumer interest in cleaner transport. However, industry leaders warn that the headline numbers hide mounting financial strain beneath the surface.

According to data from the Society of Motor Manufacturers and Traders, electric vehicle sales have been propped up by heavy discounting, a strategy that cannot continue indefinitely. Manufacturers and dealers have relied on price cuts and incentives to stimulate demand, absorbing significant costs in the process. While this has helped keep sales moving, industry figures argue it is eroding margins and creating long term risks for the sector.

Why discounts are becoming a concern

The warning from the industry reflects a growing imbalance between policy ambition and market reality. Electric vehicles remain more expensive to produce than traditional petrol and diesel cars, largely due to battery costs and supply chain pressures. To make prices more attractive, manufacturers have increasingly offered discounts, effectively subsidising sales themselves rather than passing costs on to consumers.

Mike Hawes described last year’s performance as a reasonably solid result given tough economic and geopolitical conditions. However, he cautioned that relying on discounts to drive electric car adoption is not sustainable. If companies continue to cut prices aggressively, it could undermine investment in new models, technology, and UK manufacturing capacity.

The gap between targets and demand

Despite growth in electric car registrations, sales are still falling short of government expectations. Official targets require a much faster shift away from petrol and diesel vehicles, but consumer demand is not rising quickly enough to keep pace. Cost remains a major barrier for many buyers, particularly as household budgets are squeezed by high interest rates and living costs.

Charging infrastructure also plays a role. While progress has been made, uneven availability of public chargers continues to deter some drivers from switching to electric vehicles. For those without access to home charging, the transition can feel inconvenient and uncertain, further slowing adoption.

Economic headwinds and industry resilience

The wider economic environment has made the challenge more complex. Manufacturers are dealing with volatile energy prices, global supply chain risks, and geopolitical uncertainty, all of which add to production costs. At the same time, they are being asked to invest heavily in electrification to meet future regulations.

The fact that overall car registrations exceeded two million suggests resilience in consumer demand for vehicles in general. Yet the electric segment faces unique pressures that conventional models do not. Without additional incentives or infrastructure investment, industry leaders fear the pace of transition will remain uneven.

What needs to change next

Industry groups argue that meeting climate and transport goals will require stronger collaboration between government and manufacturers. This could include targeted consumer incentives, faster rollout of charging networks, and policies that reduce uncertainty for buyers. Without such measures, the burden of pushing electric vehicles into the mainstream may continue to fall disproportionately on manufacturers.

As the UK moves deeper into its electric transition, the debate over who should bear the cost is likely to intensify. The latest warning suggests that while progress is being made, the current model of discount driven growth may not be viable in the long run, raising questions about how to align ambition with economic reality.