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Why the pay-per-mile tax could unintentionally stifle ICE car sales
Monday, Dec 22, 2025 12:00 AM
Opinion frame fPrior ZEV By further reducing demand for EVs, the government is restricting consumers from choosing cheap ICE mobility

The inadvertent early release of the Autumn Budget details by the Office for Budget Responsibility (OBR) - which compelled its boss to resign - was apparently not the only error the UK's fiscal watchdog made at the time.

When the OBR predicted that the upcoming pay-per-mile tax on EVs would reduce demand for them by 440,000 between now and 2031, it initially said the existing Electric Car Grant, plus raising the threshold of the Expensive Car Supplement (of £2370, spread over five years) from £40,000 to £50,000 for EVs, would offset that number by only 130,000.

But within a few hours, it amended that to 320,000.

Quite the difference. Can you really see either measure persuading a third of a million people to buy a type of car that they otherwise wouldn't? I'm not sure I can.

What I can see arising from the 'luxury car tax' threshold increase is manufacturers putting up the list prices of some EVs they've been keeping under the bar.

Even if the countermeasures are as successful as the OBR (eventually) predicted in attracting buyers for EVs, the industry is still looking at reduced demand for them, over a time when the proportion of new EV registrations legally has to rise from 28% this year to 80% in 2030.

The new pay-per-mile tax, then, won't affect EVs alone, because their success or otherwise directly impacts the sales of combustion-engined cars. If manufacturers don't sell enough EVs, they won't be allowed to sell as many ICE cars, unless they (or you) want to pay a £15,000 fine for every single car over the allotted limit.

Indeed, the OBR noted that "to meet the [zero-emission vehicle] mandate, manufacturers would therefore need to respond through lowering [EV] prices or reducing sales of non-EV vehicles". Given that batteries are expensive and profit margins are already thin, I don't suppose that lowering EV prices is either a particularly palatable or viable option for manufacturers. In fact, some cars will get dearer.

Which means that limiting sales of ICE cars will be the only way that some manufacturers will be able to comply with the ZEV mandate, so the OBR thinks and so legislators must know. But that means fewer cars will be sold overall and the UK's already-ageing car fleet, now over 10 years old on average, will age further still.

I don't think that fewer cars being sold is intrinsically a bad thing. After all, if fewer toasters were sold each year, I would find that quite encouraging. It would suggest that toasters were lasting longer-unless there were a big change in toaster use, of course. And while fewer toasters being replaced would be bad news for retailers of home appliances, it would be rather better news for the planet and for consumers.

But the reality with cars is rather different. This isn't about reliability or choice. If ICE car sales do end up being artificially stifled, it won't be because cars are all lasting longer, it will be because legislation is designed to make it that way. Getting people out of cars by making them expensive is part of a plan.

I don't suppose it's one that will work. The car - any car, including an old one - is so routinely better than the alternative, if there even is one, that we will find a way. We will muddle through and get to where we need to be, carrying all the things we need to be carrying, regardless of the objects that some lanyardista who doesn't understand people puts in our way.

But wouldn't it be nice to be told by someone that, yes, we understand the freedom of flexibility of the car, that we think it should be applauded and not punished, and this is how we're going to support you getting on with your motoring life? I would predict good things at ballot boxes for anyone who did so.

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