The UK car industry has urged the government to rethink plans to impose a pay-per-mile tax on EVs or risk recent growth in the sector being "wiped out".
The new tax, set to be detailed tomorrow (26 November) in chancellor Rachel Reeves's Autumn Budget, is described by the Society of Motor Manufacturers (SMMT) as a measure that contradicts recent efforts to boost EV uptake, with the potential to "inflict severe damage" on the UK automotive industry.
The SMMT welcomed some of the government's recent pro-automotive initiatives, including the implementation of a new £2.5 billion innovation fund; the securing of preferential treatment for automotive products in trade deals with the US and India; changes to the zero-emission vehicle (ZEV) mandate framework; and the recent introduction of the new Electric Car Grant (ECG).
These steps, the body said, are "evidence of government's recognition of the importance of the sector to both economic prosperity and decarbonisation". However, it cautioned that some of the elements of the Budget "risk negating this support".
Chief among those proposed measures is the mooted introduction of a new pay-per-mile tax for EVs, which the SMMT has previously called "entirely the wrong measure at the wrong time".
Under this new scheme, the government is set to introduce a levy of 3p per mile driven in an EV – a move aimed at recuperating lost revenue from the duty imposed on petrol and diesel, as motorists transition away from ICE vehicles.
That's in addition to the £195 that EV owners must now pay in vehicle excise duty (VED, or 'road tax') each year, meaning an EV driver who covers 8000 miles per year would be liable to pay £435 in annual charges that didn't exist last year.
The pay-per-mile scheme is planned to be introduced in 2028, pending a public consultation process.
The SMMT said that "singling out electric cars" for the new tax would discourage prospective EV buyers from making the switch, thereby making the ZEV mandate's "ever-tougher sales targets even more costly and challenging to achieve".
Under the terms of the mandate, car makers must achieve an EV sales mix of 28% in 2025, rising in increments to 80% by 2030, on the way to going exclusively electric in 2035. In the 10 months to the end of October, EVs had a market share of 25.4%.
"No mitigation measures, including additional grant funding, could offset the message this measure would send consumers," the SMMT said, noting that car makers have already spent a combined £8.5bn discounting EVs to hit their targets so far.
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