Trends in wholesale utility prices and planned increases in fuel duty might be a catalyst for used EV sales, according to Debbie McKay, commercial director at MotoNovo Finance.
McKay said: “The cost of running a car is a natural part of the affordability assessment in our lending decisions. Given the dramatic changes in utility prices, it has come under even closer scrutiny over the last 18 months. Now we can see the potential for a shift towards EVs, with significant rises in petrol and diesel costs due to fuel duty increases and a fall in the cost of electricity.”
Just six months ago, gas prices stood at around £265 per megawatt-hour. By the start of the year, it has fallen to £70, and prices for gas supplied in March are down at around £46. The Bank of England is expecting these falls to feed through into the economy and drive down inflation.
The fall in gas prices has been shared by oil, leading to average petrol prices falling to their lowest level since Russia’s invasion of Ukraine last year to an average of 148.89p per litre at the end of January. However, depending on actions taken by the Chancellor of the Exchequer, an increase in fuel duty may be on the cards in the month ahead.
Last March, the Chancellor of the Exchequer, then Rishi Sunak, cut UK fuel duty rates by 5p for 12 months to help motorists manage rising fuel costs alongside other household costs affected by inflation. The fuel duty reduction is expected to expire on 23 March 2023.
On top of this, petrol and diesel prices might increase by around 12p a litre, a price move identified in the Office for Budget Responsibility’s economic and fiscal outlook document published last November.
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This has prompted MotoNovo’s McKay to add: “The potential for a notable hike in petrol and diesel prices, a potential fall in electricity prices and a realignment in used EV values could spur more people to make the switch to electric in the coming months.
“Whether now is the time for the Government to increase fuel duty as planned is something we can expect the Chancellor to address in the Spring Budget. However, increases seem inevitable sooner or later, and this could favour EVs.”
Chancellor Jeremy Hunt will present the government’s Spring Budget on 15 March 2023.