UK automotive industry leaders are warning that proposed pay-per-mile taxes on electric vehicles could devastate the country’s EV market.
The Society of Motor Manufacturers and Traders issued the warning ahead of Chancellor Rachel Reeves’ Autumn Budget. The trade body said any new policy that increases costs for drivers would suppress demand and reverse progress made in boosting EV adoption.
Reeves is widely expected to announce a consultation into pay-per-mile EV taxes during her Budget statement on Wednesday November 26.
The move comes as the Government seeks to offset declining fuel duty revenue – a direct result of more drivers switching to electric vehicles.
Industry Warns of Market Damage
The SMMT acknowledged that government incentives like the Electric Car Grant provide valuable support. But the organization said those benefits would be “wiped out” by implementing a pay-per-mile scheme.
The automotive industry has already spent £8.5 billion on EV discounts while pursuing government-mandated sales targets.
The trade body welcomed recent government commitments in its pre-Budget statement. These include the Electric Car Grant, changes to the Zero Emission Vehicle mandate, £2.5 billion in innovation investment, and new trade deals with the US and India.
However, the SMMT cautioned that Budget measures could undermine this support.
“Singling out electric cars for a new pay-per-mile tax would suppress demand, discouraging consumers and making ever-tougher sales targets even more costly and challenging to achieve.”
The organization emphasized that no mitigation measures – including additional grant funding – could offset the negative message such taxes would send to consumers.
Call for Demand Stimulation
SMMT chief executive Mike Hawes said the Budget represents an opportunity to align fiscal policy with sector growth.
“The Budget this week is a chance to align fiscal measures to growth and the future success of the sector. Rather than road pricing for EVs, we need to see measures that stimulate consumer demand, so we can deliver the tax revenues, jobs, investment, productivity and growth that is in everyone’s interests.”
Despite the pay-per-mile proposal, Reeves is also expected to announce an additional £1.3 billion for the Electric Car Grant.
The funding aims to encourage more drivers to make the switch to electric vehicles – creating a mixed message as the Government simultaneously considers new taxes on EV ownership.
