The VAT issue is an easy fix. Any disabled person buying a disability aid can currently get the item VAT free. This system could very easily be offered to the car dealers.
As BigDave says it’s far from an easy fix. In addition, a block exemption means no admin, no self declarations, no form filling etc etc. There are 600,000 Motability customers. Without a block exemption there would need to be an admin process and form filling for every customer, including self declarations that many customers would struggle with. The vast admin cost of that would make it unviable for a new competitor.
For any other organisation to be able to compete with Motability Operations they would have to be on a level playing field in all respects, including the block VAT exemption. As that would require changes to both legislation and taxation laws I don’t think we can expect anything to happen any time soon – if ever. And so the monopoly continues.