New EV Tax Already Dampening Demand, Study Finds

A proposed pay-per-mile tax on electric vehicles (EVs) is already impacting consumer demand for battery-powered cars, according to research. Thirty-one percent of motorists surveyed indicated that the impending electric vehicle excise duty (eVED) has led them to reconsider purchasing an EV today, despite the tax not being implemented until April 2028.

Chancellor Rachel Reeves announced the eVED plans, which will charge owners of fully electric cars 3 pence per mile. Plug-in hybrid drivers will face a reduced rate of 1.5 pence per mile on top of conventional fuel duty. The government aims for this policy to recoup lost fuel duty revenue as the UK transitions to zero-emission vehicles. However, experts caution that the tax could hinder this transition and prompt existing EV owners to revert to combustion engine vehicles.

The survey of 2,000 drivers by Confused.com revealed that only 38% of current EV owners stated they would 'definitely keep' their vehicles once the tax is enacted. Approximately 7% expressed they are 'unlikely' to keep their EVs, leaving about 55% undecided and waiting to see the full impact of the tax system. The research also noted that 5% of EV owners have previously switched back to petrol, diesel, or hybrid cars, citing charging inconvenience as a primary reason.

For drivers covering 10,000 miles annually, the eVED is projected to add £300 to their yearly motoring costs. Analysis by the British Vehicle Rental and Leasing Association (BVRLA) suggests the tax will disproportionately affect lower-income individuals and those in areas with limited public transport, potentially creating a "postcode penalty." BVRLA chief executive Toby Poston stated that while the policy might seem equitable on paper, it will ultimately burden drivers least able to avoid it.

Despite these concerns, EV advocates argue that EVs will remain more cost-effective. They point out that petrol and diesel car owners also pay VAT on fuel, with approximately 60% of the cost at the pump going to the Treasury. Reports from Auto Trader and Zapmap indicate that EV owners are currently saving around £980 annually on charging costs compared to fuel bills for conventional cars. The average EV has also become cheaper to purchase than the average petrol car in recent months, due to discounts and government grants.

However, purchase cost remains a significant barrier for many drivers, with over two-thirds finding EVs too expensive. A lack of charging points and range anxiety are also key deterrents, with over a third of drivers citing charging infrastructure and 28% mentioning insufficient range as reasons for not switching.

The average timeframe for UK drivers to transition to EVs is now estimated at five years. While the 2030 ban on new petrol and diesel cars is expected to accelerate purchasing decisions for some, nearly a third of motorists indicated that lower EV pricing would be the primary incentive for them to buy an electric car. With 73% of drivers currently owning petrol cars, a full transition to EVs is still considered a distant prospect.