Key Points:
- Pay-Per-Mile Tax in UK could reduce EV sales by 440,000 units by 2031, despite subsidies.
- New tax adds uncertainty for EV charging infrastructure and retail investments.
- Industry warns increased costs may slow adoption and expansion of EV networks.
Electric vehicle sales in the UK are projected to fall sharply following the planned introduction of a pay-per-mile tax, according to new forecasts from the Office for Budget Responsibility (OBR). The analysis indicates that 440,000 fewer electric cars will be sold between now and 2031, a decline large enough to outweigh expected gains from subsidies and tax relief designed to support adoption. Businesses within the automotive and charging sectors say the shift adds new uncertainty to a market already navigating rising costs, infrastructure demands, and long-term investment pressures.
The Pay-Per-Mile Tax would begin in 2028, with EV owners paying 3p per mile and plug-in hybrid drivers paying 1.5p per mile. Based on average driving patterns, the typical electric-vehicle motorist would face roughly £255 in additional annual operating costs. The drop in demand forecast by the OBR exceeds the total number of electric cars sold in Britain last year, underscoring how sensitive purchasing decisions remain to long-term running costs. The OBR noted that while other measures—such as increasing the luxury-car-tax threshold and extending existing grants—may boost sales by around 320,000 units, those gains would not be enough to offset the expected decline caused by the mileage-based Pay-Per-Mile Tax.
Concerns From Retailers and Charging Operators
Retailers and charging-infrastructure companies have raised concerns that the combination of rising operating costs and new Pay-Per-Mile Tax obligations may slow the momentum of the EV transition. Charging-point operators have also warned that an upcoming change to business-rate rules for parking bays equipped with chargers could raise expenses significantly, putting as much as £8bn in planned infrastructure investment at risk. Operators expect the new rate structure to increase bills for heavy-use drivers and potentially delay planned network expansion, especially for companies still in early stages of profitability.
Industry groups say that early-phase EV charging networks rely heavily on predictable long-term investment timelines. They argue that sudden cost increases due to Pay-Per-Mile Tax applied to parking bays—on top of normal grid and maintenance costs—could make expansion more difficult. Some companies also note that the new business-rate model includes backdated charges to 2023, creating larger upfront financial pressures that may be passed along to drivers. Operators have described the costs as a potential challenge for growth and have asked for adjustments to maintain momentum in network development.
Market Outlook and Industry Impact
Although electric-vehicle sales have been growing, with fully electric cars representing more than a quarter of new registrations in recent months, analysts say adoption remains below long-term expectations. Government sales mandates require more than half of newly sold cars to be electric by 2028, and industry planners have been preparing for that shift by expanding charging infrastructure, updating supply chains, and adjusting retail models. The new mileage-based Pay-Per-Mile Tax introduces a variable cost that businesses believe consumers will weigh heavily when deciding whether to switch from petrol or diesel vehicles.
The OBR’s updated forecasts indicate that electric vehicles will not surpass petrol cars in total numbers on the road for roughly another decade. Businesses focused on fleet management, charging-network deployment, and retail distribution are expected to monitor the shifts closely as they assess demand patterns and investment horizons. Analysts say companies may need to re-evaluate pricing strategies, infrastructure pacing, and long-term capital planning if the projected downturn in sales materialises.
Charging-Infrastructure Economics Under Pressure
Charging networks, which often operate at a loss due to high installation and expansion costs, have voiced particular concern about how new Pay-Per-Mile Tax obligations may affect their financial models. The application of business rates to EV parking bays could generate tens of millions in new annual costs, according to early estimates, and industry groups say the real figure may be significantly higher. They warn that the added expenses could slow new installations, influence pricing at public charging points, and redirect investor interest to other markets where upfront infrastructure burdens are lower.
While the government has recently released new guidance to support home-charging access—particularly for households without driveways—business leaders say the transition to large-scale public charging still depends on stable long-term planning. Companies involved in EV retail, fleet transition, charging-point operation, and associated services are expected to watch the upcoming consultation on the Pay-Per-Mile Tax model closely as they prepare for potential adjustments in policy, demand, and cost structures across the market.
