Changes to EV incentives could harm take-up, warns motor finance firm

EV drivers face paying more from next year to stay on the road after incentives change - but more than two-fifths of them don't know what's coming. That's what research by Close Brothers Motor Finance has found, and the Car Dealer Power award-winning firm[1] is warning that the changes could have a major impact on demand for electric vehicles. At the moment, EV owners don't have to pay vehicle excise duty (VED) or the Expensive Car Supplement - an additional levy on cars with a list price of more than GBP40,000.

However, both those benefits will be axed next year unless the new government opts for a U-turn.

The owner of any EV that exceeds the GBP40,000 threshold will have to pay another GBP410 a year via the supplement. Meanwhile, owners of EVs registered on or after April 1, 2025 will also have to pay the lowest rate of tax - GBP10 - for the first year then the standard VED rate of GBP190 from the following year.

As of April 1, 2025, owners of EVs registered between April 2017 and March 2025 will be liable for the same annual VED charge as petrol and diesel cars, which this year is GBP190. Any EV registered between March 2001 and March 2017 will be liable for the equivalent of this year's GBP20 annual VED charge.

A poll of 500 EV drivers by Close Brothers Motor Finance found that more than half of them (54%) had bought electric vehicles to cut costs and save money. Seventeen per cent said they'd been swayed by incentives such as the government grant - a GBP1,500 subsidy towards the cost of a new EV. However, the grant was dropped out of the blue in 2022[2].

The research found that a third (33%) of the drivers wouldn't have bought an EV if they'd known about the upcoming changes and almost a quarter (23%) were unsure if they'd have bought an electric car in the first place. Meanwhile, 42% of the EV drivers were unaware of the impending removal of the benefits.

Lisa Watson, director of sales at Close Brothers Motor Finance, said: 'Changes to electric vehicle exemptions set to come into force in 2025 make for negative reading for both current and prospective owners. 'The current zero emission vehicle mandate, which requires 22% of new cars manufactured this year to be electric, is already proving a challenge.

'The removal of available incentives could further dampen demand, which could cause further headaches for manufacturers.' She added: 'Many will feel the impacts of the changes. For example, the average price of a new EV is significantly higher than the Expensive Car Supplement threshold.

'The cost-of-living crisis, coupled with the fact that a majority of EV owners purchased their car to reduce costs, means the upcoming changes leave less reason for motorists to consider making the switch.'

References

1. ^ Car Dealer Power award-winning firm (cardealermagazine.co.uk)
2. ^ dropped out of the blue in 2022 (cardealermagazine.co.uk)