Electric vehicle purchases surge before introduction of mileage-based tax

UK Electric Vehicle Sales Surge Despite Upcoming Tax Changes

Electric vehicle (EV) sales in the United Kingdom have experienced their most rapid growth in three years, even as the government prepares to introduce a pay-per-mile tax under Labour’s proposed policies.

According to Benchmark Minerals Intelligence, EV sales—including both battery-powered and hybrid models—rose by 26% last year, reaching a record 499,000 vehicles sold. This marks the fastest annual increase since 2022.

Charles Lester of Benchmark attributes this growth to government incentives such as the EV grant scheme and the zero emission vehicle (ZEV) mandate. These measures have encouraged manufacturers to meet electric vehicle sales targets to avoid penalties.

“The ZEV mandate has played a significant role,” Lester explained. “Additionally, in the latter part of 2025, battery electric vehicles became eligible for subsidies, further boosting demand.”

Lester anticipates that these incentives will continue to drive EV sales into 2026.

Tax Concerns and Continued Incentives

Despite concerns that a 3p-per-mile tax on EVs—announced by Rachel Reeves and set to take effect in 2028—could deter buyers, the Office for Budget Responsibility (OBR) estimates the tax could result in 440,000 fewer EV sales over the next five years. However, Lester notes that there has not yet been any noticeable impact on sales, and expects that ongoing incentives will continue to support the market in the near term.

One such measure is a grant program introduced by Transport Secretary Heidi Alexander in July, offering discounts of up to £3,750 on models like the Nissan Leaf.

Lester points to evidence that this scheme contributed to a rise in sales during the final quarter of 2025, with 183,000 EVs sold compared to 160,000 in the same period the previous year.

The government maintains that it is “accelerating the EV transition” through grants and additional support.

The OBR suggests that the negative effects of the new tax could be balanced by other incentives, including grants, adjustments to road tax, and expanded support for EV charging infrastructure.

Meanwhile, reports indicate that ministers are quietly developing plans to reduce charging costs in response to concerns about the impact of the new tax on drivers.

European and Chinese Market Dynamics

The UK’s EV sales boom occurred alongside a 33% increase across Europe, where Chinese automakers continued to expand their presence despite facing tariffs.

Benchmark reports that Chinese brands such as BYD and Jaecoo increased their European market share from 7% to 12% last year.

There is growing concern about the competitive threat posed by these companies, as the EU claims they benefit from “unfair” support from the Chinese government, including low-interest loans, direct subsidies, and mandates for vehicle adoption and charging infrastructure.

Competitive Pricing and Global Expansion

Chinese manufacturers like BYD have managed to offer lower prices than established European brands such as Volkswagen, BMW, and Renault. Experts also note that the quality of Chinese EVs has improved significantly over the past decade.

These companies are aggressively expanding their global reach, driven by intense competition and price wars in their domestic market.

China and North America: Contrasting Trends

China continues to lead the world in EV adoption, with about half of all new cars sold in the second half of 2025 being electric, according to Lester. EV sales in China rose by 17% last year, though growth in 2026 may slow due to the introduction of a new sales tax on electric vehicles.

In contrast, North America was the only major region to experience a decline in EV sales. The rollback of subsidies and emissions standards under Donald Trump significantly reduced market momentum in the United States.

Last year, only 1.8 million EVs were sold in North America, representing a 4% decrease from 2024.

Major American automakers such as Ford and General Motors have recently written off tens of billions of dollars in their EV divisions, scaling back production plans as demand slows.