Electric automobile gross sales document smallest development in two years as Rachel Reeves’ pay-per-mile tax hits demand

Sales of new electric cars slowed to their lowest point in almost 24 months, as rumours over Rachel Reeves’ controversial pay-per-mile tax on EVs delivered a blow to demand.

November registration figures from the Society of Motor Manufacturers and Traders (SMMT) show that while EV uptake rose 3.6 per cent in the month, this represents the smallest growth seen in nearly two years.

The deceleration in appetite for new battery cars was triggered by reports emerging ahead of the Budget last month that the Chancellor was due to unveil a plan to tax EVs by the mile. 

Last week, she confirmed the Treasury’s electric Vehicle Excise Duty (eVED) pay-per-mile scheme in the Autumn Budget – which will see EV drivers pay 3p per mile – to help plug the Exchequer’s fiscal hole left by declining traditional fuel duties.

The mileage-based road pricing measure comes in from April 2028 but has been slammed as a ‘confusing’ measure to launch at a time when the Government is desperate for drivers to make the switch.

The announcement of eVED thoroughly overshadowed Ms Reeves’ incentive pledge of a further £1.3billion towards the Electric Car Grant, which sees the price of some new EVs under £37,000 reduced by up to £3,750.

Industry figures have warned that the EV tax comes at the ‘wrong time’ and that drivers need to be ‘encouraged to switch’ rather than ‘punished’.

Electric vehicle market share hit 26.4 per cent in November, only just ahead of the 25.1 per cent achieved in the same month in 2024. 

This 22.7 per cent year-to-date market share still falls significantly short of the 28 per cent annual government target. 

However, the Government estimates that the percentage of EVs that actually need to be sold by the industry as a whole to meet the target is 21.7 per cent, with other measures in the Zero Emission Vehicle Mandate (ZEV) protecting manufacturers from fines.

Mike Hawes, SMMT chief executive, said the EV market remains ‘fragile’ and a confirmation of the weakest growth in sales in almost two years should be a ‘wake-up call’ to ministers that ‘sustained increase in demand for EVs cannot be taken for granted’. 

Commenting on the impact the EV pay-per-mile news has had on demand, he added: ‘We should be taking every opportunity to encourage drivers to make the switch, not punishing them for doing so, else the ambitions of government and industry will be thwarted.’  

Sue Robinson, chief exec of the National Franchised Dealers Association representing car showrooms up and down the country, said the Chancellor’s Budget announcement ‘has not reassured the industry’. 

She added: ‘It seems that the Government support for the EV transition is insufficient and the positives from the Budget have been overshadowed by an EV pay per mile tax.

‘In an increasingly difficult financial environment we are likely to see registrations continue to fluctuate and the pace of EV adoption determined by the measures announced last week.’

Nick Williams, transport managing director at Lloyds Banking Group, said: ‘A rise in electric vehicle sales is welcome, but the focus must remain on meeting the UK’s ambitious zero emissions vehicle sales targets. 

‘These are stretching and rely on a stable used vehicle market, meaning the government needs to carefully consider the potential impact of any prospective pay-per-mile charge on electric vehicles.’ 

Plug-in hybrid sales grow – but will likely sink following Reeves’ 1.5p-a-mile tax bombshell

The fastest segment growth was plug-in hybrids, up 14.8 per cent and accounting for 11.9 per cent of registrations.

But there are also concerns that PHEV demand will be dented as these cars too will be subject to road pricing from spring 2028.

PHEVs have been included in eVED because they typically have a conventional petrol engine that’s supplemented by a battery that delivers around 50 miles of electric-only range. 

The Treasury will charge PHEVs at a lower 1.5p per mile rate to reflect their more limited electric capabilities, but it will see owners hit with a double tax sting because they already pay fuel duty when they fill the petrol tank.

On the surface this seems as though PHEV owners will be paying less than EV owners but pay-per-mile experts have explained how PHEV owners will in fact be paying double tax because they will also be paying fuel duty on non-EV miles.

AA President and pay-per-mile expert Edmund King told This is Money last week: ‘The rate for plug-in hybrid is 1.5p per mile. Many PHEVs will do around 50 miles on electric and the rest on petrol.

‘Take someone doing a journey of 150 miles: you will only get the benefit of electric for 50 miles but you will pay 1.5p for 150 miles and you will pay fuel duty for 100 of those miles.

‘Many people will question whether it is worth opting for a plug-in hybrid when this comes in – yet we’ve always said they are a good stepping stone into electric.

‘The Treasury told the AA that they aren’t trying to put people off PHEVs, but one can question that.’ 

Total new car registrations fell 1.6 per cent in November to 151,154 units as private demand continues to dwindle.

The sixth fall this year was driven by a 5.5 per cent decline in overall demand from private buyers. 

Hybrid electric vehicle (HEV) uptake rose slightly by 1.3 per cent to comprise 13.1 per cent of the market, and petrol- and diesel-powered vehicles recording their third consecutive month as a minority of registrations.

The best-selling car of November was the Ford Puma, which has extended its lead at the top of the charts and is on course to be named Britain’s most popular new car of the year for a third consecutive term.

Is there any good news for EV buyers? 

Last week’s Budget brought in some carrots for EV buyers in the form of charging provision, further funding for the ECG and an increase in the Expensive Car Supplement threshold.

The Treasury has committed another £1.3billion to the Electric Car Grant and extended it to 2028-29. This adds to the £650million already put aside.

There’s been an uplift in the threshold from which EVs would be subject to the VED Expensive Car Supplement – up from £40,000 to £50,000 and an extra £200 million towards charging measures. 

There’s also a review of public charging, with the hope that VAT will be reduced from 20 per cent to five per cent (in line with home energy) to make it easier, and fairer for people without driveways to charge.

However, the industry is warning that all this will get lost in the pay-per-mile noise.

Melanie Lane, Chief Executive at EV charging provider Pod, is similarly concerned, commenting: ‘A growth slowdown in November proves that now is the wrong time to introduce taxes on EV drivers.

‘The total cost of owning an EV is lower than ICE and the intention from drivers is there – but the Government needs to give consumers and the market more confidence in order to sustain demand, yield returns on its own Electric Car Grant investment and generate growth for the UK over the long term.’