Car makers slam pay-per-mile EV tax as 'poorly timed'

Car makers have hit out at the UK government’s new pay-per-mile tax for electric and plug-in hybrid cars, warning that additional promised support won't offset the predicted decline in 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. “The Budget falls short of the boost many had hoped for,” said Andrew Bergbaum, global automotive lead for consultantcy Alix Partners, singling out the new eVED tax. “It risks tempering momentum in EV sales at a time when the UK market remains fragile and the industry is striving to meet net-zero targets.” Under the plan, EV drivers will be charged 3p per mile in eVED and PHEV drivers 1.5p per mile. The differential could be seen to boost PHEVs at the expense of EVs, “potentially shifting consumer behaviour in the months ahead”, according to Bergbaum. PHEV sales have jumped 37% in the UK this year, more than EV sales, to capture 11% of the market as Chinese brands including BYD, MG and Jaecoo introduced cheaper models. The structure of the new eVED system needs to carefully thought through, warned motorsport's global governing body, the FIA. “We urge the UK government to commit to a transparent, evidence-based process with full engagement of motorists and mobility organisations,” an spokesperson said. “A mileage-based tax for electric vehicles introduced without transparency risks undermining the UK's wider decarbonisation goals.” The government has promised a public consultation about how the scheme will operate but so far has only said there will be “no requirement to report where and when miles are driven or install trackers in cars”. Delvin Lane, CEO of charging provider Instavolt, expressed concern that those without a home charger will be “disproportionately impacted” by the new eVED, given that they already pay 20% VAT on roadside chargers, compared with 5% at home. The government said it would open a consultation on how to increase cross-pavement charging facilities for those who street-park outside their house, as well as looking at ways to reduce the cost of public EV charging with a report promised by autumn 2026. The government said the new pay-per-mile tax would boost VED receipts by around £1.5 billion a year from 2028-29, helping to partly fill a shortfall created by the drop in fuel duty as more drivers move to EVs. Some of the money will be used to fund road repairs, the government has promised. The SMMT has welcomed the government’s decision to delay until 2030 the proposed scrapping of the employee car ownership scheme (ECOS), which is a tax-efficient way to allow car companies and related businesses to reward employees with new models at a much lower amount than an equivalent company car scheme. The deferral “will be welcomed by workers across the sector”, Hawes said.

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Car makers slam pay-per-mile EV tax as 'poorly timed'

Chancellor Rachel Reeves has been warned that UK's new eVED tax is “the wrong measure at the wrong time”

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Car makers slam pay-per-mile EV tax as 'poorly timed'

Chancellor Rachel Reeves has been warned that UK's new eVED tax is “the wrong measure at the wrong time”

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