Road tax on EVs in 2025 could ‘further dampen’ demand

A number of benefits currently in place for electric vehicle (EV) drivers are set to be taken away in 2025, which could have a significant impact on EV demand.

That’s the view of Close Brothers Motor Fnance, which surveyed 500 EV drivers.

Reducing costs and saving money is one of the biggest considerations for drivers looking to switch to an EV, with more than half (54%) of drivers listing this as their primary reason for making the switch in the first place.

Just over a quarter (28%) of EV owners also stated that they had purchased their vehicle because of local charges, and 17% bought theirs because of an incentive such as a government grant.

At present, EV owners benefit from being exempt from paying Vehicle Excise Duty (commonly known as road tax) and the Expensive Car Supplement, which is an additional tax applied to cars with a list price of over £40,000.

However, in 2025, both of these benefits will be taken away unless the new government looks to change or reinstate the benefits.

Close Brothers Motor Finance’s research revealed that a third of EV drivers were not aware of changes to VED, and of those, a third (33%) would not have bought their vehicle had they known – this number could be higher as a further 20% were unsure. Nearly a quarter (23%) were not previously aware of changes to the expensive car supplement, with over a quarter of those (27%) stating they wouldn’t have purchased their vehicle if they had prior knowledge.

More than two-fifths of drivers (42) admitted they were not aware of changes to the current benefits previously mentioned, and one-in-seven drivers (14%) believe that there is no longer an incentive for owning an electric vehicle.

Lisa Watson, director of sales at Close Brothers Motor Finance, said: “Changes to electric vehicle exemptions set to come into force in 2025 makes 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.

“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.