Electric cars are about to get a lot more expensive

electric car
electric car

In California, you may soon have to pay for every mile you drive. Texas has already brought in an extra registration fee. New South Wales is planning a form of road pricing, while tariffs imposed in the US and soon the EU as well are expected to massively increase the sticker price of every car.

Add it all up, and one point is clear. Electric vehicles are about to get a lot more expensive. But hold on. Even by the standards of industrial policy, this is taking things too far.

The same governments which have been heavily subsidising battery-powered cars as part of the drive towards a net zero economy are now imposing punitive taxes on them. Surely it is time they made their minds up – or just left it to the market to decide.

Across the developed world, the tax raid on electric vehicles has already begun. California, which has been known to lead the rest of the world on such matters, has already fired the starting gun. As the state with the highest number of electric vehicles in the US, it has started a pilot programme to charge motorists for every mile they cover.

Drivers will have the option of hooking up their car to a tracking device, or sending over evidence of the mileage driven, with rates varying from $0.02 to $0.04 per mile covered. It is not mandatory yet, but given more drivers are ditching the pump to go all electric, the state will be desperate to find ways of recouping lost petrol tax revenue.

And New South Wales in Australia is planning a road charge specifically for EV users for 2027, even though it is currently held up in the courts as challengers question its legality. Texas is taking a slightly different route, with an extra registration fee of $400 a year for anyone who owns an electric vehicle.

But these schemes may all be overshadowed by the huge tariffs the US and the EU impose on imported EVs, with President Biden slapping a 100pc levy on Chinese made vehicles. Yet, as economists warn, tariffs are a tax on the consumption of a product: all this will mean is that anyone buying a battery-powered car will have to pay more for it regardless of where it is manufactured.

Nor is it just taxes. Evidence is mounting that EVs are more expensive to run. There are reports that the extra weight of the battery means that tyres are wearing out after less than 10,000 miles, a far lower figure than for petrol equivalents, while insurance and maintenance costs are soaring because the repair bills are so much higher (a small dent that could be easily fixed for most petrol cars may cause great damage to an expensive battery).

Sure, we can all understand why electric cars are getting more pricey. Road taxes and fuel duties may have originally been introduced to cover the cost of building and managing the road network, but over the last few decades they became a crucial part of overall government revenues.

In the UK, for example, fuel duty raises close to £25 billion annually, while in 2022/23, £4.5 billion was spent on road maintenance. The figures are similar across major developed economies.

Yet it doesn’t seem to have occurred to the masterminds who decided to encourage everyone to switch to electric cars that it would knock a huge hole in state budgets. Unless governments want to raise income or sales taxes, or start imposing huge levies on electricity, then road charges, registration fees, and tariffs may be the only way to try and make up for lost tax revenues.

The trouble is, there are serious problems with every alternative on offer. First, and most obviously, every additional charge is going to discourage drivers from making the switch. If people are required to pay an extra registration fee, or some form of pay-per-mile charge, then more drivers will stick with an old petrol or diesel model. The same is true of tariffs that push up the cost of buying the car in the first place.

Next, many of the schemes are open to fraud and manipulation. In California, there is already widespread opposition to tracking devices that log every journey made, and it is hard to believe that some people won’t turn them off occasionally – even if by accident.

Even on a modern software-packed car it may not be hard to hack a mileage counter, and avoid paying any significant charges. Unless there are cameras everywhere, as in Sadiq Khan’s London, it will be impossible to enforce charges.

In reality, the whole drive towards EVs is rapidly descending into a farce, even by the often comical standards of state-driven net zero policy.

Governments have spent the last ten years massively subsidising electric cars, and are still pouring billions every year into grants and tax credits for manufacturers to build new battery plants and manufacturing hubs. And at the same time, taxes on EVs are being imposed, often at ever-increasing levels. It is a mess.

So here’s a radical idea. Perhaps governments should make up their minds whether they want to switch to EVs or not, and if they do, they should at least create a coherent plan. And if they cannot decide whether they are a good thing or not, perhaps they should just leave it to consumers and manufacturers to work out whether they want them or not.