The UK’s automotive industry is pushing back against a proposed pay-per-mile tax on electric vehicles (EVs), arguing that such a policy would undermine efforts to accelerate EV adoption. Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT), delivered a sharp critique of the potential tax during the organization’s annual dinner, addressing Business and Trade Secretary Peter Kyle directly.
The Timing Matters
Hawes emphasized that introducing a mileage-based tax now would be counterproductive. Manufacturers are already under pressure to meet increasingly ambitious EV sales targets, and a new tax could discourage consumers from switching to electric cars. The core message was clear: incentivize EV purchases, don’t punish them. Hawes argued that increased EV sales would ultimately lead to higher tax revenues and job creation.
Incentives vs. Road Pricing
The government has recently introduced the zero-emission vehicle grant, a move Hawes acknowledges as “exactly the right thing to do,” despite imperfections. However, he warns that the proposed road pricing plan—a 12p per mile charge intended to offset lost fuel duty revenue—needs justification.
“The road pricing announcement had better come with a receipt, because they’re going to want to return it.”
This is because the policy could reverse recent progress in EV interest, spurred by government grants and competitive deals from manufacturers. The SMMT suggests that if the government wants to collect more tax revenue, the best approach is to encourage EV sales, not tax them into obsolescence.
The Bigger Picture
The debate over EV taxation highlights a broader issue: how to maintain government revenue as fuel consumption declines. Fuel duty currently contributes significantly to the UK’s tax base. As EVs become more common, this revenue stream will shrink, forcing policymakers to find alternatives.
The proposed pay-per-mile tax is one potential solution, but industry leaders fear it will backfire. The move risks alienating consumers and slowing down the transition to electric mobility at a critical juncture. It raises the question of whether the UK government is truly committed to supporting EVs or simply seeking ways to recoup lost revenue at the expense of environmental progress.
The automotive industry’s response underscores the delicate balance between fiscal policy and environmental goals. If implemented, this tax could reshape the EV landscape in the UK and set a precedent for future transportation taxation models.
