Executive View: Taxing times ahead for EV sales

Recent developments in government policy are raising concerns that could stall the momentum of the transition to electric vehicles, writes Fraser Brown of automotive consultancy MotorVise, who'll be sharing more insights at Automotive Management Live 2024 on November 13 - register to attend, free.

I’ve long championed the switch to zero-emission cars because it’s not just a technological shift but a critical step toward combating global warming and ensuring a more sustainable future.

However, recent findings by Close Brothers Motor Finance reveal a troubling gap between public perception and policy reality, threatening to undermine the progress already underway.

Their research shows that more than 40% of current EV drivers are unaware of the significant tax changes coming into effect next year - a statistic that is a serious warning sign.

The incentives that have driven early adoption, such as exemption from Vehicle Excise Duty (VED) and the Expensive Car Supplement, are to be removed from April 1, 2025.

Cost savings

The broader implications of these changes can’t be ignored. At present, EVs are seen as a financially savvy choice, with more than half of EV owners surveyed citing cost savings as their main motivation for buying.

The removal of these incentives could reverse this perception. The £410 annual supplement for vehicles priced over £40,000 and introduction of VED rates are additional costs that could dissuade potential buyers, especially at a time when the cost of living remains a significant concern for many.

It will require owners of EVs registered on or after April 1, 2025, to pay £10 for the first 12 months followed by the standard £190 rate the following year. Owners of EVs registered between April 2017 and March 2025 also face a £190 charge while those registered between March 2001 and March 2017 attract a £20 fee.

In addition, this is happening at a time when the Society of Motor Manufacturers and Traders have already downgraded its forecast for electric vehicle sales this year. In April, it estimated battery cars would account for 19.8% of sales during 2024, but earlier this month, it reduced that figure to 18.5%.

The argument for the VED changes may reflect the need for revenue generation and a desire to treat all vehicle owners equally.

Role of incentives

However, this fails to consider the critical role that incentives play in accelerating the adoption of new technology, particularly one as crucial as electric vehicles. The switch to EVs is not just about personal savings; it’s about reducing our collective carbon footprint and tackling the climate crisis head-on.

What’s particularly alarming about these findings is that nearly a third of those surveyed admitted they might not have bought an EV had they known of the impending tax changes.

This hesitancy underscores a lack of communication and transparency from the government. If we are to achieve the ambitious goals set out for reducing emissions, it’s imperative that potential EV buyers are fully informed and that the benefits of going electric are fully explained.

There is still time to address these issues. The government needs to consider the long-term benefits of continued support for electric vehicles. A U-turn on these tax changes would help maintain the momentum that has been building over the past decade.

With the right incentives, clear communication, and a commitment to sustainability, the UK can lead the global transition to clean, electric transport. However, this vision requires unwavering support from both the public and policymakers.

The decisions being made now by government will determine the future of our roads and environment for generations to come. We must ensure they prioritise both the requirements of consumers and the urgent need to address climate change.

Fraser Brown is the founder of MotorVise