The price of slow progress: EV market dynamics in 2024 and beyond

As our industry navigates the transition to EVs, we're witnessing a complex interplay between regulatory pressures, market forces and consumer behaviour. Carwow’s latest analysis reveals both challenges and opportunities in the current landscape, particularly regarding pricing strategies and market adoption.

Market reality: the discount dilemma

While record volumes of battery electric vehicle (BEV) registrations have brought welcome news over recent months, there are clear signs that much of the growth - at least as far as retail sales go - is being driven by a widespread increase in discounting. Indeed, the Society of Motor Manufacturers and Traders (SMMT) estimates that brands are on course to spend at least £2 billion on discounting BEVs in 2024.

Our analysis shows that the average RRP for a new BEV on Carwow is £53,531 in comparison to £41,692 for ICE vehicles - a 28% gap. Naturally, that leads to larger discounting, with new BEVs on Carwow currently listing average discounts of 8.43% translating to £4,512 discount per vehicle (based on the average RRP). That’s in contrast to an average discount of £3,276 for ICEs versus their average RRP, 37% below their BEV counterparts. When trended over the last two years, BEV discounts have increased by 84% whereas ICE discounts have remained static and actually declined slightly. 

The ZEV mandate has been a catalyst for aggressive pricing strategies for all but the smallest OEMs to avoid financial penalties. Former trade union leader, Lord Tony Woodley, in a recent speech to Parliament, said: “For every non-EV sold up to the target number, the OEM will be fined £15,000. Presently, the industry is falling far short of its quota by around 4% which equals £1.4bn in fines on top of the brands who are already subsidising each EV by about £6,000 each to get the sales. This means extra costs of £2 billion on top of the £1.4bn in fines,”

The sustainability question

Based on everything we’re seeing and hearing, our sense is that discounting will become more significant in 2025. This is because EU targets - similar to the ZEV ones - will be more stringent next year and likely to drive further discounting. Similarly, the ZEV target will move from 22% this year to 28% in 2025, so we expect discounting to follow the same trend here in the UK. 

This level of discounting raises serious questions about long-term market sustainability. For the most part, consumers are interested in EVs - our Driver Power survey data shows that over 1 in 3 (37%) of consumers are considering an EV as their next car (the highest it's been since 2022). But when pushed for which fuel type they think they will actually choose for their next vehicle, just 8% expect to choose an EV. Retail sales are weak because the prices continue to be unattractive. As long as EVs are significantly more expensive than ICEs, they will continue to struggle to break into the mass market. This cuts to the heart of our current challenge: balancing the need for market growth with business viability.

One of the best ways to avoid discounting is to price them competitively, reducing the RRPs - just like Volkwagen’s latest move on their ID range and Vauxhall’s new Frontera EV, which is being launched with ICE price parity. Once the price gap between EVs and ICEs are dramatically narrowed, the demand will more naturally follow.

International competition and market evolution

Since it appears unlikely the UK will impose the same tariffs on Chinese brands as the EU has, it’s made us an even more attractive market for new entrants, and so we expect them to double down on the UK and accelerate their presence here. With production cost advantages of between 20-30%, Chinese brands are well-positioned to maintain their aggressive pricing strategies. This dynamic is reshaping market competition and forcing the established legacy brands to adapt and innovate. You can read more on the rise of new entrants in the next section of this report. 

Consumer preferences and market leaders

With the 2024 ZEV mandate looming, some brands are better placed than others. Our data provides valuable insights into consumer preferences, with the most configured new BEVs on Carwow demonstrating clear market leaders:

With four out of these top five brands operating fixed price models - running national campaigns with large headline PCP offers driven by the OEM (not the retailer) - it suggests even OEMs operating under a fixed price model are having to adjust pricing in a tough EV market. From a consumer's perspective, they’re responding positively to brands who have seemingly found the right balance between product, price and brand perception.

Looking forward

While current discounting levels may be unsustainable, they're symptomatic of a market in transition. As we move toward 2025's more demanding targets, the industry must find sustainable ways to drive adoption while maintaining business viability. This will require collaboration between manufacturers, dealers and policymakers to create a market environment that supports both commercial success and environmental goals. 

The solution likely lies in a combination of government support, industry innovation and market education. Our Carwow Group Motoring Manifesto launched in June this year - echoes recent parliamentary discussions - outlining ten incentives and improvements for the UK Government to address and implement to improve both the appeal and affordability of EVs:

1. Reduce VAT to 5% on all EV charging 

2. Improve personal safety at EV charge points 

3. Funding for home based charging 

4. Investment in EV infrastructure to improve user experience

5. ‘Green’ incentives for private new and used EV purchases 

6. Allow public service buildings with car parks to financially benefit from having EV chargers installed 

7. Affordable car insurance costs for EVs

8. Clean Air Zones 

9. Introduce National Try an EV Day 

10. All new supermarkets and retail outlet developments must install EV chargers

Get more industry insight in our latest Carwow Insider here.