Tesla is set to be the major loser as new electric car rules are announced for the UK
The announcement of a mileage-based tax for electric vehicles, while necessary, will have unintended consequences for the sector, says Mamta Valechha, consumer discretionary analyst at Quilter Cheviot.
“As electric vehicle sales increased and internal combustion engine cars fell, it made sense from a revenue-raising point of view to replace the lost fuel duty and road tax.
“However, as the Office for Budget Responsibility notes, this new charge will dampen demand for EVs at a time when sales need to increase to meet government targets,” Valecha said.
She notes that the tax changes will definitely make it less appealing for anyone who is considering buying an EV or convincing one to make the switch. However, the Government’s zero-emission vehicle (ZEV) mandate requires EVs to make up 80% of sales by 2030, with the proportion increasing each year up until then, Valecha said.
“Hitting that target will now become incredibly challenging, given the OBR forecasts 440,000 fewer electric car sales to the end of the decade. As such, manufacturers will have to respond by lowering prices, which will have a knock-on effect across the supply chain.”
“The impact is likely to be small for now, but given pressure to transition to EVs, it could easily stall progress. The biggest loser in this will likely be the companies that are pure EV sellers, such as Tesla, although its UK exposure is less than 2% of revenues. Legacy car providers will have a smaller impact, but this does little to incentivise them to make the switch and look to boost EV production.”
