California may soon charge you for each mile driven. Texas already charges an additional registration fee. New South Wales plans to implement a road pricing system, and tariffs in the US (and soon the EU) are expected increase sticker prices for every vehicle.
One thing is for sure: electric vehicles are about to get more expensive. Electric vehicles will soon be more expensive. Hold on. This is a bit much, even by industrial policy standards.
The governments that heavily subsidized battery-powered vehicles as part of their drive to a net-zero economy now impose punitive taxes. It’s time to make a decision or let the market decide.
The tax raid on electric cars is already underway in the developed world. California, a state that has always been considered a leader in this area, has started the process. California, the US state with the most electric vehicles, has launched a pilot program that charges motorists per mile.
The rate will vary between $0.02 and $0.04 per mile driven. The state is still not obligated to make it mandatory, but as more people are switching to electric cars and abandoning petrol pumps, they will be looking for ways to recoup lost tax revenue.
New South Wales, Australia plans to implement a road fee for electric vehicle users in 2027. However, the legality of this plan is being questioned by those who are challenging it. Texas has a different approach, charging an additional $400 per year to anyone with an electric car.
These schemes could be overshadowed, however, by the massive tariffs that the US and EU impose on imported EVs. President Biden imposed a 100pc levy for Chinese-made vehicles. Tariffs, say economists, are taxes on consumption: this means that any buyer of a battery powered car, regardless of its origin, will pay more.
It’s not just about taxes. Evidence is growing that EVs cost more to operate. The extra weight of the batteries means that tyres wear out much faster than petrol equivalents. Insurance and maintenance costs also increase because repair bills are higher.
We can all see why electric cars have become more expensive. The original purpose of road taxes and fuel duty was to pay for the costs of maintaining and building the roads. But over the years, they have become a major source of government revenue.
Fuel duty in the UK is estimated to be around 25 billion pounds sterling per year, while road maintenance will cost 4.5 billion pounds sterling by 2022/23. These figures are consistent across all major developed economies.
It doesn’t appear to have occurred that the people who made the decision to encourage everyone to switch over to electric cars would cause a massive hole in state budgets. If governments don’t want to increase income taxes or sales tax, or start imposing large levies on electric, road charges, registration costs, and tariffs are the only ways to make up for lost revenue.
There are problems with all the alternatives. Every additional fee will discourage drivers from switching. Whether it’s an additional registration fee or a pay-per mile charge, more drivers are likely to stick with their old petrol or diesel models. Tariffs can also increase the price of a car.
Many of these schemes are also open to fraud or manipulation. California has a strong opposition to tracking devices which log all journeys. It is difficult to imagine that people will not turn them off from time to time, even accidentally.
It may be possible to hack into a car’s mileage counter and avoid paying significant fees. It will be difficult to enforce charges unless there are cameras everywhere like in Sadiq Khalifa’s London.
Even by the standards of the state-driven policy that is often comical, the entire drive towards EVs has descended into a farce.
The government has been subsidising electric vehicles for the past ten years. They continue to pour billions of dollars into tax credits and grants each year, allowing manufacturers to construct new battery factories and manufacturing hubs. EVs face taxes, which are often increasing. This is a mess.
Here’s an idea that is radical. Possibly governments should decide whether or not they want to switch over to EVs, and if so, create a coherent strategy. If they can’t decide if they are good or bad, they could leave it up to the manufacturers and consumers to decide if they want them.
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