Car makers have hit out at the UK government’s new pay-per-mile tax for electric and plug-in hybrid cars, warning that the consequent suppression of demand won't be negated by additional measures to boost EV sales.
The new mileage-based eVED tax, announced by chancellor Rachel Reeves in her Autumn Budget speech on 26 November, is “the wrong measure at the wrong time”, said Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT).
Hawes voiced concern among the industry lobby group’s members that the replacement for fuel duty, due in April 2028, will make the job of hitting the UK's ZEV mandate targets even harder.
“The pressure to deliver the world’s most ambitious zero-emission-vehicle sales targets is intense,” Hawes said. "This new tax will undermine demand."
The Office for Budget Responsibility (OBR) has forecast that some 440,000 EV sales will be lost over the next five years, as potential buyers will be put off by the extra annual cost of around £255.
Reeves' announcement that the government's Electric Car Grant (ECG) – which gives buyers up to £3750 off eligible EVs - will be topped up by another £1.3 billion was welcomed by car makers.
However, they noted that this and other measures (such as more investment in chargers) are forecasted by the OBR to boost EV sales by only 130,000 over the next five years.
“This Budget sends a confusing message at a critical moment in the EV transition,” said Ford UK boss Lisa Brankin. “The extra investment is positive but cannot offset the impact of a poorly timed pay-per-mile charge on EVs and hybrids.”
The Volkswagen Group expressed a similar sentiment, praising changes such as the lifting of the threshold of the 'luxury car tax' from £40,000 to £50,000 but voicing fears over the implementation of the eVED. “Per-mile charging risks deterring customers from making the switch to e-mobility,” a spokesperson said.
Renaut limited its reaction to highlighting the success of the ECG and praising its extension. “'Our sales trajectory since the Electric Car Grant's introduction clearly shows that it is making a real difference,” said Renault UK MD Adam Wood. “Today's news that the ECG has been extended is another welcome boost.”
Car makers have long campaigned for more help hitting their ZEV mandate targets, which increase every year from 28% of sales to 80% by 2030. Many worry, however, that incentives designed to make EVs more appealing are being deleted just as targets become harder to hit.
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