The latest UK budget from Chancellor Rachel Reeves has sparked a lively conversation in the automotive industry.
With a series of bold announcements affecting electric vehicles (EVs), it seems the government is not just focused on building charging infrastructure, but also on how it will be charging for infrastructure.
These changes signal a pivotal moment for the UK’s EV transition, introducing a complex blend of incentives and new costs that will reshape the landscape for consumers and retailers alike.
Navigating this evolving market requires clarity and strategic insight. Its time to explore how these new policies create both challenges and opportunities for automotive retailers. Understanding their impact is the first step toward transforming your retail operations and driving success.
Let’s take a look at the policies that were announced and the effect they will have on the automotive industry.
Pay-per-mile: A fair ask or a punishment for EV owners?
By far the biggest headline-grabbing announcement was the introduction of a new Electric Vehicle Excise Duty (eVED), set to begin in April 2028. This policy gives a whole new meaning to the term “charging infrastructure”.
This pay-per-mile system will require drivers of fully electric cars to pay 3p per mile, while plug-in hybrid (PHEV) drivers will be charged 1.5p per mile. These rates are scheduled to rise annually in line with inflation.
The logic behind this move is straightforward. As more drivers switch to EVs, the Treasury’s revenue from fuel duty (which currently raises around £25 billion annually) is set to decline. The eVED is designed to fill this fiscal gap, ensuring that road users contribute to the maintenance of the UK’s road network.
However, the Office for Budget Responsibility (OBR) has forecast that this new charge could increase the lifetime cost of owning an EV. That, in turn could potentially reduce sales by a net 24,000 vehicles per year over the next five years.
When consumer hesitancy remains a significant factor in the market, this new tax risks giving EV sceptics more ammunition. Likewise, it gives retailers another objection to contend with. Conversations will shift focus from zero road tax as a key selling point to a more nuanced discussion about long-term running costs.
Fueling the transition with grants and infrastructure
While the new tax might feel like a step back, the budget also contained significant measures to accelerate EV adoption.
The government is injecting an additional £1.3 billion into the electric car grant, extending the scheme until 2030. This grant offers buyers up to £3,750 off eligible models, and has already helped over 35,000 drivers make the switch.
Drivers who have made the switch don’t regret it. Recent surveys from EVA England and Global EV Drivers Alliance both reported that over 90% of EV drivers say they would never go back to an ICE vehicle.
Further support comes in the form of investment in the charging network. An extra £100 million has been committed to expanding charging infrastructure, building on previous funding.
Additionally, business rates relief for EV charge points will be extended for the next decade, encouraging more businesses to install charging facilities.
These measures are critical for building consumer confidence. A robust and accessible charging network is one of the biggest enablers of EV adoption.
For retailers, this continued investment provides a strong counter-argument to concerns about the new tax, demonstrating a commitment to the electric future. It empowers you to reassure customers that the ecosystem supporting their EV is only getting stronger.
Adjusting the luxury car tax
Another strategic move was the adjustment to the Expensive Car Supplement (ECS), often dubbed the “luxury car tax.”
From April 2026, the threshold for this supplement on new EVs will increase from £40,000 to £50,000. This change is expected to save motorists around £440 annually. This will be a welcome incentive for those considering premium EV models.
This policy helps to offset some of the financial impact of the new pay-per-mile charge, particularly for the growing number of high-end EVs entering the market.
The new initiative will help retailers drive sales of models in the £40,000 to £50,000 price bracket, making these vehicles more financially attractive to prospective buyers. This adjustment demonstrates a more targeted approach, encouraging adoption across different market segments.
The impact of the budget on automotive retailers
The new EV policies represent a balancing act between fiscal responsibility and net-zero ambitions. For the automotive industry, it’s a call to action.
The key to navigating this landscape is to embrace a data-driven, customer-centric approach. Now more than ever, having a complete view of your customers and vehicles is essential for success.
Imagine being able to instantly model the long-term cost of ownership for a customer, factoring in the new eVED alongside savings from the extended grant and lower running costs. This is the level of clarity that builds trust and drives sales.
This is where the power of a connected platform becomes clear. Fusion, Keyloop’s Automotive Retail Platform, connects every phase of the vehicle lifecycle. By fusing data from sales, aftersales, and inventory management, Fusion provides the 360° view needed to make informed decisions.
With a 360° customer and vehicle view, you can pair the right vehicle with the right customer, maximising lifetime value for both. By understanding a customer’s lifestyle, you provide a personalised cost-benefit analysis that addresses their specific concerns about the pay-per-mile tax.
For the modern retailer, efficiency gains become paramount . In a market with new complexities, streamlining operations is crucial. Keyloop’s solutions are designed to eliminate rekeying and automate routine tasks, giving your team more time to focus on what matters: delivering exceptional customer experiences.
Retailers who adapt quickly and strategically will be best placed to capture new opportunities and lead the next phase of EV growth. By embracing innovation and putting actionable insights at the heart of every decision, you can turn industry change into lasting competitive advantage.
