Car makers, already under pressure to sell more EVs, have expressed concern that sales could be further throttled back by new rules to include EVs in the so-called expensive car supplement (ECS) from 1 April this year.

Under the changes, electric cars will become liable for the same road tax as regular combustion-engine cars, albeit at a reduced rate. However, the big change affects EVs costing over £40,000, which triggers the additional ECS tax to give a total bill of £3100 over the first six years of a car's life.

The idea of the expensive car supplement, when first imposed by the Conservative government in 2017, was to squeeze a bit more money out of those judged to be able to afford it.

However, the £40,000 threshold hasn’t changed since then and the car industry is now appealing to the current Labour government to raise it.

Car makers argue that the higher build cost of electric cars, because of expensive battery materials, has pushed many more EVs than combustion models beyond the threshold and that the government is imposing taxes on EVs at a time when it should instead be helping out buyers.

“We’d like to see a review of this new taxation, with a raised threshold, so that UK drivers have fewer barriers in order to make the switch to electric cars,” Eurig Druce, managing director of Stellantis in the UK, told Autocar.

Ford has also criticised the move. “Introducing VED for EVs from April risks slowing adoption at a crucial time for the industry,” the company said in a statement to Autocar.

While £40,000 is undeniably still a lot of money, the motor industry argues that the car market has changed hugely since the tax was first imposed.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “The threshold for the ECS – dubbed the ‘luxury car tax’ when launched – has remained unchanged at £40,000 since it was set eight years ago, when the overall market was 30% larger than today and BEVs barely featured.”

In fact, £40,000 is actually below the current average price of an electric car, which is put at £48,559, according to data from analyst Jato Dynamics. That compares with £30,544 for the average combustion car and £32,052 for hybrids. Only the plug-in hybrid drivetrain, with its skew towards big premium SUVs, is more expensive on average, at £54,133.

The entire market has shifted upwards since 2017. Back then, a Porsche Macan – arguably many people’s idea of an entry luxury car – could be bought from £45,945. Now a new one costs from £56,000, with the electric model starting at £68,500.

Supporters of the change argue that finally including electric cars in the VED scheme is only fair given they still don’t pay fuel duty. 

All new EVs will now be liable for VED, paying a first-year rate of £10, rising to £195 from year two. New EVs costing over £40,000 also pay the ECS of an additional £425 annually (which rises from £410) from the second until the sixth year.

Car makers are already responding to ensure models close to the threshold will duck below it. For example, Stellantis brand Abarth said earlier in February that it was cutting the price of the top-level 600e Scorpionissma from £41,975 to £39,875. “We’ve made the decision to reduce the price of the car and protect our customers from this tax rise,” said Giuseppe Cava, UK managing director for Fiat and Abarth.

The additional tax is another headache for car makers, who this year must ensure sales of new EVs reach 28% of their total sales in the UK, up from 24% last year, under the ever-tightening demands of the ZEV mandate. Some flexibility is still in place to soften that target but most car makers remain reliant on discounts to entice customers, to the detriment of profits.

Car makers and the SMMT are pressuring the government to make it easier for customers to switch to EVs, especially the hard-to-reach retail buyers for whom EVs still don’t make financial sense, given the higher prices. 

“Affordability remains a major barrier to uptake, hence the need for compelling measures to boost demand, and not just from manufacturers,” said Hawes.

The SMMT wants to see the ECS raised or removed altogether for electric cars. “That would send the message that EVs are essentials, not luxuries,” he said.

Autocar sibling publication What Car? has suggested £60,000 as being a fair threshold to trigger the expensive car tax for electric cars as part of its EV Manifesto.

“Rather than penalising EV buyers, we should be taking every step to encourage more drivers to make the switch," said Hawes.