The UK Government is being warned the introduction of a pence-per-mile tax on electric vehicles (EVs) from 2028 could trigger a collapse in demand similar to that seen in New Zealand.
Registrations of EVs fell by more than 50% in the country after the introduction of a new road-user charge and the reduction of incentives.
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Research by Beama (formerly the British Electrotechnical and Allied Manufacturers’ Association) suggests that a similar reaction to the Government’s planned electric vehicle excise duty (eVED), due to take effect in 2028, could cost the UK economy up to £4.8 billion in 2028, and potentially more in 2029.
This would exceed the total revenue the new tax policy is forecast to raise by 2031 (around £4.3bn).
The forecast relies on EV sales not being replaced by petrol or diesel cars, but even if eVED prompts all potential EV purchases to be replaced with petrol- and diesel-powered cars, the Beama research suggests it would still cost the UK economy £890 million in lost tax receipts and compliance costs, in the first year alone.
Matt Adams, head of electrical transport systems at Beama, said: “Introducing the pay-per-mile policy early is a fiscal own goal.
“It will slow EV uptake, reduce EV charging investments, and cost the UK economy more than the treasury stands to raise with the taxation.
“A delay to 2030 would provide essential stability at a critical point in the EV transition.
“Manufacturers in the EV supply chain need a clear message from Government to continue investment into local communities and the wider UK economy.”
Beama, EVA England, ChargeUK and Rea, the association for renewable energy and clean technology, have joined forces to highlight problems with the current policy.
The coalition – representing EV charging providers, manufacturers, leasing firms, driver groups, investors and insurers – argues that introducing the tax in 2028 will damage consumer confidence, suppress demand and create unworkable conditions for leasing companies and fleet operators.
Mark Constable, head of transport policy at REA, said: “The process is simply not fit for purpose, is certainly not scalable, and also opens the system to fraud and unfairness. Consumers shouldn’t tolerate this form of taxation.”
The coalition has written to Daniel Tomlinson MP, Exchequer Secretary to the Treasury to highlight how the introduction of this tax in 2028 will also delay planned investments in the charging sector.
Beama’s analysis comes after the British Vehicle Rental and Leasing Association (BVRLA) suggested that the proposed pay-per-mile tax could cost the UK fleet sector £260m a year.
The cost, based on BVRLA member data, includes £75m in direct administration costs and £185m in lost productivity from vehicles taken off the road for mileage checks.
It equates to approximately 10% of total revenues expected to be raised by the scheme, with some BVRLA members estimating that operational impacts will inflate the true cost to 40-45p for every £1 collected.
The estimates exclude one-off implementation costs, the cost of mileage readings at approved centres, and the tax itself (3p per mile for full electric vehicles and 1.5ppm for plug-in hybrids).
