Electric car sales will face a huge hit from the Government’s pay-per-mile tax, according to official forecasts.
The Office for Budget Responsibility (OBR) said that 440,000 fewer electric vehicles (EVs) would be sold as a result of the policy change, prompting retailers to accuse the Government of “driving with the handbrake on”.
The drop will eclipse an expected sales boost from a string of other measures such as tax breaks and subsidies for EV owners. Under changes announced in the Budget, EV owners will face a 3p-per-mile charge from 2028 as the Treasury seeks to replace lost revenues from fuel duty.
The charge is expected to cost the average EV motorist who drives 8,500 miles a year £255. Those driving plug-in hybrids will pay 1.5p per mile. The AA estimates that there are around 1.4 million fully electric cars on the roads.
The projected hit to EV sales comes despite the Government’s ambitious net zero targets, which include banning the sale of new petrol and diesel cars by 2030.
The 440,000 reduction in sales, forecast between now and 2031, is more than all the 381,970 electric cars sold in Britain last year.
The drop will be offset by raising the threshold at which EV owners pay the “luxury car tax” from £40,000 to £50,000, as well as extending the electric car grant, which subsidises purchases with up to £3,750.
The measures will boost EV sales by 320,000, but the impact of pay-per-mile charging means the Budget’s total impact will be a 120,000 drop.
The OBR was forced to correct its forecasts after issuing a gloomier prediction that the subsidies would boost sales by just 130,000.
“The Chancellor is driving with the handbrake on,” said Ian Plummer, chief commercial officer at Autotrader. “The Office for Budget Responsibility estimates that there will be 440,000 fewer electric cars on the road thanks to the introduction of pay-per-mile charging from 2028. Now, I've advocated for plug in hybrids for quite some. Why Plug-In Hybrids Might be Worse for the Environment Than Petrol-Powered Cars
“In the OBR’s own words, this new charge is likely to reduce demand for electric cars as it increases their lifetime cost. Does she [Rachel Reeves, the Chancellor] want people to buy electric cars or not?”
Government mandates require 52pc of new cars to be electric in 2028, rising to 80pc in 2030. The pay-per-mile charge, which is expected to be consulted on, will be equivalent to around half of what petrol drivers pay in fuel duty.
The OBR forecasts that the number of electric cars on the road will not overtake petrol cars for a decade. Vans and lorries are due to be exempt from the pay-per-mile charge. Story by
