Will pay-per-mile raise Reeves money or drive people away from electric vehicles?

Chancellor Rachel Reeves is expected to unveil an EV pay‑per‑mile charge at next week’s budget, with initial reports suggesting a levy of about 3p a mile from 2028; using a DfT average of 8,900 miles a year and 1.4m EVs on the road, that would yield roughly £267 per vehicle or about £375m annually. The move is framed as a necessary replacement for evaporating fuel duty receipts (fuel duty of 52.95p/litre, roughly 5p/mile, is forecast to raise £24.4bn this year but will fall after the 2030 petrol/diesel ban), but it risks political backlash, privacy concerns and could blunt EV uptake—New Zealand’s introduction of a similar road‑user charge saw EV market share fall from 19% to 4%. For investors, policy design, exemptions and timing will be critical variables: a broadly applied per‑mile charge could alter EV demand trajectories, manufacturer compliance costs under the ZEV mandate, charging‑network economics and fiscal receipts, whereas carefully targeted or phased approaches would mitigate market disruption.

Analysis

Chancellor Rachel Reeves is widely expected to announce an electric-vehicle pay-per-mile charge at next week’s budget, with initial reports suggesting about 3p a mile from 2028; using a DfT average of 8,900 miles and 1.4m EVs, that equates to roughly £267 per vehicle or ~£375m annually, while policy details (odometer checks, self-declaration, exemptions) remain undefined. The change is framed as a replacement for evaporating fuel duty receipts—fuel duty at 52.95p/litre (roughly 5p/mile) is forecast to raise £24.4bn this year but is expected to fall after the 2030 ban on new petrol/diesel cars—creating a material fiscal funding gap. Stakeholder pushback and political sensitivity are pronounced: manufacturers and motoring groups including Ford, AutoTrader and the AA have expressed concern, and privacy/tracking objections accompany any mileage-based scheme; TfL and recent VED/capital charge changes show the government is already shifting costs. The move carries a clear demand risk for EV adoption—New Zealand’s switch to road-user charging saw EV market share fall from 19% to 4%—and interacts with the UK ZEV mandate (one in three new cars zero-emission next year, rising to 80% by 2030), VAT on public charging (20%), and the tapering of grants, meaning policy design, exemptions and timing will materially affect manufacturer compliance costs, charging economics and consumer uptake.

Key Decisions for Investors

• Monitor the budget and subsequent legislative text closely for implementation timing, measurement method (odometer vs. telematics) and exemptions, and avoid adding significant EV-demand-dependent positions until those specifics are clear
• Reweight toward companies providing low-cost home-charging solutions, scalable public charging operators with price-competitive models, or firms likely to receive transitional support, given higher public-charging costs (VAT 20%) and potential behavioral shifts
• Stress-test automaker and supplier exposure to lower-than-expected EV adoption using the New Zealand precedent (EV share drop from 19% to 4%) and consider hedges for OEMs with aggressive EV revenue assumptions
• Monitor fiscal-receipt signals and consumer-sentiment metrics as catalysts for trading opportunities—fuel duty currently raises £24.4bn versus an estimated ~£375m from current EVs at 3p/mile—since further tax design choices could create winners and losers across autos, charging and mobility services