The Labour government's recently introduced pay-per-mile car tax for electric vehicles has spectacularly backfired, with official statistics revealing a dramatic plunge in EV sales following the policy's implementation. This represents a significant setback for the administration's environmental transport ambitions.
Electric Vehicle Market Faces Unexpected Downturn
According to the latest government data, electric vehicles accounted for one in four new car sales throughout 2025, demonstrating substantial market penetration before the controversial tax changes took effect. However, the introduction of the new pay-per-mile charging system, which imposes a 3p rate specifically for electric vehicles, has created a powerful disincentive for motorists considering the switch from traditional petrol and diesel vehicles.
Industry Leaders Issue Stern Warning
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), delivered a stark assessment of the situation. "The Electric Car Grant is helping, but manufacturers are still having to provide billions in EV discounts, with an unparalleled £5billion spent last year alone. This is patently unsustainable," he stated.
Hawes further emphasised: "Furthermore, the impact of Government and industry investment will be diminished by a new disincentive - the proposed eVED tax. With EV demand below the levels targeted by the ZEV mandate last year, and this year's target even steeper, a review of the transition must be brought forward."
Manufacturers Bear Heavy Financial Burden
Detailed analysis from the SMMT reveals that car manufacturers invested over £5 billion during the past twelve months to subsidise electric vehicle prices through various discount schemes. This substantial financial commitment translates to approximately £11,000 for every new electric vehicle registered in the UK market, placing considerable strain on automotive industry finances.
Contrasting Market Trends Emerge
Despite the current downturn, recent historical data illustrates the electric vehicle market's previous robust growth trajectory. According to comprehensive figures from JATO Dynamics covering November 2025, full battery electric vehicles demonstrated the strongest market growth during that period, achieving a remarkable 37% year-on-year increase across European markets.
During that same month, electric vehicles captured a 23.5% market share, representing a significant 5.9 percentage point increase compared with November 2024. Meanwhile, traditional internal combustion engine vehicles, encompassing both petrol and diesel models, experienced a 20% decline compared with the corresponding period in 2024, though they still accounted for 30.6% of all registrations with 329,064 units registered.
Policy Review Demanded
Industry experts are now urgently calling for a comprehensive review of the government's electric vehicle transition strategy, emphasising the need to balance environmental ambitions with practical market realities. The current disconnect between policy objectives and consumer behaviour has created an unsustainable situation that requires immediate governmental attention and potential policy adjustment.
