Reeves to introduce new driving tax: report
Chancellor Rachel Reeves is set to introduce a new pay-per-mile tax in her November Budget. Under the proposed plans, drivers of electric cars will be charged 3p per mile on top of other road taxes, The Telegraph reports.
The scheme, set to kick in from 2028 after a consultation, will mean the average driver faces paying an extra £250 a year.
The Treasury will make the move amid falling fuel duty revenue as people move from petrol to electric cars. Up to six million people are set to be driving EVs by the time the tax comes in.
Ministers are expected to frame the move as one of fairness, as drivers of petrol cars currently pay £600 a year on average in fuel duty.
Car sales in limbo
Following significant growth in September supported by the new registration plate, UK new car registrations saw a more modest uptick in October, with a 0.5% year-on-year rise to 144,948 units.
Battery Electric Vehicle (BEV) registrations continued their upward trajectory last month despite the headwinds facing the auto sector, with a 23.6% year-on-year rise.
This was a less significant uptick than the 29.1% increase seen last month, but BEVs accounted for 25.4% of market share in October, up from 23.3% in September. However, this remains below the 28% Zero Emissions Vehicles (ZEV) Mandate target, which continues to be a key regulatory challenge for automakers.
Alternative powertrain technologies are continuing to entice consumers, with Plug-in Hybrid Electric Vehicle (PHEV) and Hybrid sales growing by 27.2% and 2.2% respectively year-on-year. This underscores the continuing shift in consumer habits and preferences towards greener and cleaner transport, with both petrol (-11.6%) and diesel (-22.9%) sales falling year-on-year in October.
Despite an encouraging recovery in September with a 13.7% year-on-year rise following falling registrations in both July and August, October’s slowdown in growth was unsurprising, given the range of headwinds facing the market and the recent well-documented cyber-attack on Land Rover Jaguar.
“With UK economic growth prospects continuing to appear relatively subdued, the regulatory environment remaining complex, uncertainty lingering ahead of the Autumn Budget and the pause in interest rate cuts expected to impact consumer confidence, there are marked challenges ahead for the automotive industry,” says Maria Bengtsson, EY UK & Ireland Mobility Leader.
“However, UK automotive companies have shown resilience throughout this year despite a range of challenges and headwinds, with innovation and scenario planning continuing to be as important as ever.”
Following strong growth in September, retail sales increased again in October with a 2% year-on-year uptick.
“Retail sales are a crucial source of support for the automotive sector given retail is the more profitable sales channel. In contrast, fleet sales fell year-on-year in October, with a modest 1.5% decline,” said Bengtsson.
“Going forward, the UK auto industry’s recovery from the recent cyber-attack and the ability of automakers to persuade consumers to purchase vehicles despite an uncertain economic backdrop will be critical.”
Appealing price propositions and incentives such as the UK’s recently introduced grants for EVs priced under £37,000 will have a crucial role in ensuring consistent growth in new car registrations going forward, she said.
“There could also be an opportunity at the Autumn Budget for the Government to pledge further spending towards improving charging infrastructure and reducing costs associated with the electric vehicle transition for businesses and consumers alike, such as reducing or abolishing Vehicle Excise Duty for BEVs or cutting VAT for public charging.
“However, given the lack of fiscal headroom, the levers available for the Chancellor to pull beyond existing measures may be limited.”
