We think "natural demand" for EVs being underestimated.

Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), recently told Parliament that electric vehicles (EVs) made up 19.6% of new car sales in 2024 - but that the UK’s natural demand was closer to just 12%. In other words, more than a third of last year’s EV buyers didn’t really want one - they were enticed by manufacturer subsidies, discounts or margin sacrifices, costing the industry an estimated £4.5 billion. That, Hawes warned, is “unsustainable in anyone’s book.”

But what if the SMMT’s estimate of natural demand is off - by 20 to 30 percent? What if genuine consumer interest is higher than industry insiders assume?

Our own large-scale research, drawn from over 7,000 interviews with UK homeowners via our Homeowner Electrification Tracker Study (HETS), suggests exactly that. While Hawes doesn’t define precisely what “natural demand” means, we interpret it as the proportion of consumers who, before seriously shopping for a car or being influenced by price promotions, already express a clear intention to choose an EV within the next three years. In other words, it reflects underlying consumer preference - what people want to buy, assuming EVs are broadly competitive with petrol and diesel alternatives, but before subsidies or discounts come into play. On that basis, our data points to a considerably higher baseline level of interest than the SMMT’s 12% figure. This article breaks down our findings and explains why the SMMT may be underestimating real consumer appetite for EVs - and, by extension, overestimating the “unsustainable” cost of growing the market.

First, we ask those considering getting a new or used car in the next three years what type of vehicle they might choose – petrol / diesel, hybrid, PHEV, EV, etc. In the UK, a quarter (25%) say they are considering an EV.  We then ask these people how likely they thought they would be to go ahead and get one. While this is a self-assessed rating, behavioural research shows that follow-up likelihood questions like this can significantly improve the ability to predict actual behaviour. Forty four percent said they were "extremely likely" to get an EV, while the same proportion, 44% said they were "likely" to.  So that's around 88% of the quarter of homeowners who say they are likely (or very likely) to get an EV next, which comes to about 22% of those considering buying a car in the next 3 years. That is far higher than the SMMT’s 12% estimate. But our figure needs considerable modification.  Homeowners are typically richer and more likely to have off street-parking (and therefore more likely to benefit from cheap home charging rates). So what about homeowners with no off street parking? According to HETS, a quarter of homeowners in the UK fall into this category. For this group, the “consider an EV” fraction multiplied by the proportion who say they’re likely to get one, brings the total ‘natural’ EV demand figure for homeowners without a drive, to 11.4%: this is considerably lower than our overall homeowner estimate of 22%, but practically the same as the SMMT’s overall UK figure of 12%.  Given the fact that nearly two thirds of adults live in owner occupied homes, we can determine a weighted average demand level for EVs among homeowners, which comes out at about 19%. Again, a lot higher than the SMMT’s 12% figure.

But what about the 35% of adults who don’t live in owner-occupied homes? We need to estimate demand for this group. Since we lack direct survey data on non-homeowners, the simplest approach is a thought experiment. Suppose there were 0% interest in EVs among non-homeowners. In that case, overall demand would still be 12.35% - almost identical to the SMMT’s estimate. However, this is clearly far too conservative. Many non-homeowners will have private off street parking and will want EVs. So if we instead assume a 6% to 9% level of interest among non-homeowners - cautious estimates at either half or three-quarters the rate seen among homeowners without off-street parking (and recognising that many renters do have access to off-street parking) - then the overall demand figure rises to between 14.5% (about 20% higher than the SMMT’s estimate) or 15.5% (about 30% higher) at the higher end of assumptions.

In summary, while this still suggests that some demand may have been stimulated by manufacturer incentives (both the 14.5% and 15.5% figures are lower than the 19.6% share of actual EV sales), it also implies that the SMMT’s figure for natural demand may be understated.