Introducing electric vehicle excise duty (eVED) in 2028 could cost the UK economy up to £4.8bn under a worst-case scenario, exceeding the £4.3bn the policy is expected to generate by 2031, according to research from BEAMA.
The trade association said the forecast is based on evidence showing that if EV sales fall by more than 50%, similar to the impact seen in New Zealand following the introduction of a pay-per-kilometre tax, and are not replaced by petrol or diesel vehicles, the Treasury could face significant losses.
Even in a scenario where EV demand is replaced entirely by petrol and diesel vehicles, BEAMA estimates the economy would still face a £890m cost in the first year, including £630m in lost VAT receipts and £260m in compliance costs for leasing firms.
Matt Adams, head of electrical transport systems at BEAMA, said: “Introducing the pay-per-mile policy early is a fiscal own goal.
“It will slow EV uptake, reduce EV charging investments, and cost the UK economy more than the treasury stands to raise with the taxation.
“A delay to 2030 would provide essential stability at a critical point in the EV transition.
“Manufacturers in the EV supply chain need a clear message from Government to continue investment into local communities and the wider UK economy.”
The warning has been backed by a coalition including EVA England, ChargeUK and the REA, which has written to the Treasury urging a delay to the policy.
Vicky Edmonds, chief executive officer at EVA England, said: “eVED must be delayed until the Government can prove the proposals work for drivers.
“The current proposals risk leaving EV owners out of pocket and eroding confidence amongst those thinking about making the switch to electric, particularly lower and middle-income households and those without access to private charging.”
Mark Constable, head of transport policy at REA, added: “The three pence per mile taxation mechanism will create significant aggravation for drivers.
“The process is simply not fit for purpose, is certainly not scalable, and also opens the system to fraud and unfairness.
“Consumers shouldn’t tolerate this form of taxation.”
Jarrod Birch, head of policy and public affairs at ChargeUK, said: “The three pence per mile tax is another contradiction at the heart of government’s EV policy which will impact those who cannot charge at home the hardest.
“EVs are experiencing a surge of interest as an alternative to rollercoaster petrol prices.
“Government should be doubling down on the transition by making buying and charging an EV affordable for all.”
