Labour has been warned to make urgent car tax cuts in a bid to stop discouraging electric car adoption. The warning from industry experts comes ahead of the April deadline when the proposed changes will take effect.
The car market contracted by 2.5 per cent in January and many fear the upcoming tax changes will further dampen electric vehicle adoption in the UK.
The latest figures from the Society of Motor Manufacturers and Traders found that electric vehicles captured 21.3 per cent of new registrations last month, falling short of the 22 per cent target for 2024.
Now industry experts have warned that April’s Vehicle Excise Duty changes, which will add thousands in taxes to most new electric vehicles, risk undermining the Government’s ambitious EV transition goals.
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Car tax hikes will see electric vehicles charged VED for the first time
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The slowdown has impacted both fleet and private buyers, with overall registrations dropping to 139,345 units against a backdrop of weak economic confidence. Battery electric vehicle registrations grew by 41.6 per cent compared to January 2024, maintaining recent growth trends.
Fleet and business users dominated EV uptake, accounting for 78.9 per cent of electric vehicle registrations. Traditional petrol car registrations saw a significant decline of 15.3 per cent, representing just over half of the market at 50.3 per cent.
Diesel vehicles continued their downward trend with a 7.7 per cent drop, claiming just 6.2 per cent of the market share.
Both hybrid electric vehicles and plug-in hybrids recorded growth, reaching market shares of 13.2 per cent and nine per cent respectively.
From April, electric vehicles costing over £40,000, equivalent to approximately 70 per cent of new EVs, will lose their exemption from the expensive car road tax supplement. The change will add a whopping £410 to their annual VED rate for the first five years, resulting in a total additional cost of £2,050.
However, experts have warned this will affect both new and used electric vehicles, regardless of the purchase price, if the original cost exceeds £40,000.
With just three per cent of EVs currently on sale in the UK priced under £30,000, the majority of electric vehicles will be subject to new charges.
Industry experts warned that private and used vehicle uptake of EVs is not yet ready for additional cost barriers. Data from the Carwow Group showed that only 19 per cent of UK motorists would be “very likely” to buy a plug-in hybrid or fully electric vehicle.
Auto Express editor Paul Barker said: “It is clear to see from the latest EV registration figures that uptake of EVs is not where the government wants it to be – particularly amongst private buyers.
“There are already far too many reasons why drivers don’t want to make the switch, and this luxury tax is simply another one.”
Purchase cost remains the main barrier for 57 per cent of drivers, while 26 per cent cite running costs as their primary concern.
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Mike Hawes, SMMT Chief Executive, said: “Affordability remains a major barrier to uptake, hence the need for compelling measures to boost demand, and not just from manufacturers.
“The application, therefore, of the ‘Expensive Car Supplement’ to VED on electric vehicles is the wrong measure at the wrong time. Rather than penalising EV buyers, we should be taking every step to encourage more drivers to make the switch, helping meet government, industry and societal climate change goals.”
