Car industry warns pay-per-mile tax will ‘wipe out’ ECG benefits

UK automotive bosses have warned that a pay-per-mile tax on electric vehicles risks causing “severe damage” to the country’s EV landscape.

Ahead of Chancellor Rachel Reeves’ Autumn Budget, the Society of Motor Manufacturers and Traders (SMMT) said that any new policy which hit drivers in the pocket would suppress demand and undo positive steps taken to boost EV uptake.

Ms Reeves is widely expected to announce a consultation into a pay-per-mile tax on EVs in her Budget statement on Wednesday November 26, as the Government bids to counteract falling fuel duty revenue.

The SMMT said that while government incentives such as the Electric Car Grant were a welcome boost, their benefits would be “wiped out” by a pay-per-mile scheme.

In a pre-Budget statement, the body which represents the country’s automotive industry said the sector had welcomed recent government commitments, including the ECG, changes to the ZEV mandate, a £2.5 billion innovation investment and new trade deals with the US and India.

However, it cautioned: “Measures trailed ahead of the Autumn Budget risk negating this support, inflicting severe damage.

“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.

“No mitigation measures, including additional grant funding, could offset the message this measure would send consumers. Given the industry has already had to spend £8.5 billion on EV discounts in pursuit of targets, measures that further weaken demand will only shrink the market and deter investors.

SMMT chief executive Mike Hawes commented: “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.”

At the same time as announcing pay-per-mile plans, Reeves is also expected to confirm another £1.3 billion for the Electric Car Grant in a bid to encourage drivers to switch to a new EV.