Car makers, already under pressure to sell more EVs, have expressed concern that sales could be further throttled back by new rules to include EVs in the so-called expensive car supplement (ECS) from 1 April this year.
Under the changes, electric cars will become liable for the same road tax as regular combustion-engine cars, albeit at a reduced rate. However, the big change affects EVs costing over £40,000, which triggers the additional ECS tax to give a total bill of £3100 over the first six years of a car's life.
The idea of the expensive car supplement, when first imposed by the Conservative government in 2017, was to squeeze a bit more money out of those judged to be able to afford it.
However, the £40,000 threshold hasn’t changed since then and the car industry is now appealing to the current Labour government to raise it.
Car makers argue that the higher build cost of electric cars, because of expensive battery materials, has pushed many more EVs than combustion models beyond the threshold and that the government is imposing taxes on EVs at a time when it should instead be helping out buyers.
“We’d like to see a review of this new taxation, with a raised threshold, so that UK drivers have fewer barriers in order to make the switch to electric cars,” Eurig Druce, managing director of Stellantis in the UK, told Autocar.
Ford has also criticised the move. “Introducing VED for EVs from April risks slowing adoption at a crucial time for the industry,” the company said in a statement to Autocar.
While £40,000 is undeniably still a lot of money, the motor industry argues that the car market has changed hugely since the tax was first imposed.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “The threshold for the ECS – dubbed the ‘luxury car tax’ when launched – has remained unchanged at £40,000 since it was set eight years ago, when the overall market was 30% larger than today and BEVs barely featured.”
In fact, £40,000 is actually below the current average price of an electric car, which is put at £48,559, according to data from analyst Jato Dynamics. That compares with £30,544 for the average combustion car and £32,052 for hybrids. Only the plug-in hybrid drivetrain, with its skew towards big premium SUVs, is more expensive on average, at £54,133.
The entire market has shifted upwards since 2017. Back then, a Porsche Macan – arguably many people’s idea of an entry luxury car – could be bought from £45,945. Now a new one costs from £56,000, with the electric model starting at £68,500.
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