Government losing £1K for every new EV sold

New road pricing schemes and tolls look increasingly likely to cover loss of revenue

Government losing £1K for every new EV sold

Every new electric vehicle (EV) purchase in the UK costs the Exchequer roughly £1,000 in lost fuel duty and vehicle tax in its first year, The Sunday Times reports.

If sales reach their predicted level of 175,000 during 2021, the Treasury will miss out on nearly £200 million in lost fuel taxes and VED.

Concern has been raised that it could prompt the introduction of new road pricing schemes and tolls to cover the loss of revenue, as the UK moves closer to a ban on sales of new petrol and diesel cars from 2030.

RAC Foundation figures reveal switching from a petrol car to a new electric alternative saves motorists an average of £592 a year in excise and VAT, plus £305 in first-year VED (Vehicle Excise Duty) or ‘showroom tax’.

Related: Electric vehicles “here to stay”, garages told

The difference increases to £800 and £338 respectively when swapping diesel for the more environmentally friendly option.

Gerry Keaney, chief executive of the British Vehicle Rental and Leasing Association (BVRLA), said: “Many road-users can now see the benefits of a well-designed, carefully implemented national system that can help pay for the huge cost of upgrading the UK’s road network and zero-emission vehicle infrastructure.

“Such a scheme should be used to replace the current motoring tax regime, which is too complex and inefficient.”

EV motorists do not have to pay VED nor the £325 surcharge for newly registered vehicles costing more than £40,000.

Related: Jaguar to become ‘electric only’ brand by 2025

Plus, those buying green vehicles can apply for a £3,000 grant to help with the costs.

However the prospect of new road tolls may put people of buying an EV.

Steve Gooding, director of the RAC Foundation, said: “In the face of a big decline in revenue, the chancellor could decide to turn off the money taps and start to tax EV drivers rather than subsidise them.

“For those buying battery-powered cars on the premise of cheap motoring, that will be a huge shock.”

Related: Ford to go ‘all-electric’ by 2030

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