Overview
Dealers gave a mixed response to the Budget, which introduces a future pay-per-mile road charge for electrified vehicles while adding funds to EV purchase support. The National Franchised Dealers Association (NFDA) welcomed some reliefs but warned that new running costs and a lack of a comprehensive fiscal plan could hinder the EV transition.
Key measures announced
- EV road charge (from April 2028): 3p/mile for fully electric vehicles; 1.5p/mile for plug-in hybrids, indexed to inflation annually.
- Electric Car Grant: Additional £1.3 billion to support purchases and provide more predictable incentives.
- Fuel duty: Freeze maintained at 5 pence per litre.
- Employee Car Ownership Scheme (ECOS): Removal delayed to April 2030.
- Motability scheme: VAT exemptions cut; removal of premium brands including BMW, Mercedes, Audi, Alfa Romeo and Lexus from the programme.
- Expensive Car Supplement (ECS): Threshold raised from £40,000 to £50,000 from 1 April 2026, seen as especially helpful for BEVs.
Industry reaction
NFDA’s Sue Robinson called the package a “mixed bag,” citing optimism from the fuel duty freeze and ECS change, but warning that a pay-per-mile tax and the absence of a clear plan to replace declining fuel and VED revenues could slow dealer investment and strain the sector during the EV transition.
Dealers emphasized that customers weigh total cost of ownership: extra grant funding and a higher ECS threshold may support purchases now, but the per-mile charge adds a new running cost later in the decade, and Motability changes remove some premium choices.
Timetable at a glance
- 1 April 2026: ECS threshold increases to £50,000.
- April 2028: EV and PHEV pay-per-mile charging begins (inflation-linked).
- April 2030: Removal of ECOS scheduled.
What it means for dealers
- Sales mix and pricing: Extra grant funding may stabilise order banks; the ECS change could reduce price friction on higher-value BEVs.
- Customer guidance: Showrooms must explain moving incentives and future running costs across several years.
- Motability impact: Brand removals and VAT changes may shift model availability and push customers toward alternative marques.
- Fleet channels: ECOS delay offers fleets and salary-sacrifice providers more time to adjust benefit structures.
Open questions and next steps
- How the pay-per-mile system will be administered, monitored, and reviewed annually for inflation.
- Allocation and duration of the additional £1.3bn grant funding, and which vehicle segments will qualify.
- Implementation details and timelines for Motability changes, including treatment of pending orders.
Overall, the Budget signals an intent to broaden the road tax base while sustaining targeted EV support, but dealers want clearer, longer-term policy to maintain investment and buyer confidence through the transition.
