A Misguided Tax Policy from Government is Ruining the EV Market

The government tax on electric cars is ‘misguided and confused’. This taxation policy is depressing sales of electric cars at a time when considering businesses movement towards greener living, they should be starting to increase. Due to adverse publicity regarding emissions of harmful pollutants, sales of diesel cars are falling dramatically. A vacuum has been created in the new car market that EVs might be expected to fill. However, uptake of Alternatively Fuelled Vehicles (AFVs) is still at worryingly low levels.

So far this year, sales of AFVs have accounted for a market share of 5.5% (1/20 new cars).

A year-on-year increase, but still only a tiny minority in a 2.5m new car market. A Government tax policy will see EVs taxed at 16% for the next tax year before falling back to 2% in 2020/21. Depending on: their electric range, that confusing message, and the front end price, many would-be buyers have been deterred.

Fleet Evolution’s Managing Director, Andrew Leech, said the Government eagerly persuaded drivers to pick EVs for their next company car. Especially as it had pledged to remove all new petrol and diesel cars by 2040. But its “confused and confusing” Benefit-in-Kind tax policy was acting as a dampener on electric sales.

Many of our drivers have said they would like to choose an electric car as their next company vehicle. However, they have been thrown off by the confusing tax picture for the next three years. As well, the front end premium and higher rentals associated with EVs are off-putting.

We believe the Government should take some positive action to incentivise EVs properly. They’re trying to persuade us that electric power is the way to go, in corporate and private new car markets. That means introducing the highly advantageous 2% BIK rate for EVs sooner than later. For drivers choosing their car for the next three/four years, it’s a huge missed opportunity; an obvious disincentive to choose electric.”

BIK Rates Were Set to Fall in 2019/20

The current BIK rate of 13% for EVs that fell into the bracket for 0-50g/km of CO2 was set to rise to 16% in 2019/20; an increase that many experts can see no justification for. Under new rules, it is set to fall. It’s planned to fall to 2% in 2020/2021 for EVs with a pure electric mileage range of over 130miles.

“We welcome the 2% tax rate in 2020/21 as it is a measure that we expect to increase demand for electric cars under salary sacrifice schemes by 400%. But this will be too late for people ordering their next car now as the opportunity for lower taxes is then lost for three to four years. The question we have for Government is ‘why penalize EVs so harshly from a tax point of view this year and next, only to offer huge tax incentives a year later?’ It just makes no sense at all.

When you combine rising taxes with the comparatively high list price of electric cars, which is measured before the impact of any government grant for company car tax purposes, it doesn’t make financial sense to choose an electric car in 2018/19 rather than a petrol or diesel equivalent.

We would like to see the Government remove the contradiction of an aggressively escalating company car tax followed by a huge reduction in the tax rate, by introducing the 2% rate from the 2019 tax year and thus actively promoting the uptake of longer-range EVs much sooner.

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