Labour’s Chancellor has been urged to “stop murdering the motor trade” which is set to be hit with huge changes within months.
It comes after the boss of a major car brand warned that upcoming car tax changes will have a disproportionate impact on driver demand for new vehicles.
Under the tax changes announced by Chancellor Rachel Reeves in the Autumn Budget, drivers would see their first year Vehicle Excise Duty (VED) contributions sharply increase with some more than doubling.
Now, Kevin Griffin, the UK boss of Korean car brand KGM, formerly SsangYong, has called on Reeves to help stop drivers from avoiding buying vehicles due to the tax implications.
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Car tax hikes will see some vehicles pay as much as £5,490 under the new VED rates
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On top of the car tax increases, carmakers are also being hit with huge electric vehicle targets to help the UK meet its ambitious Zero Vehicle Mandate by 2030, which has put additional strain on the industry.
Under the plans, the UK will need to have at least 28 per cent of new car sales electric by this year before reaching 80 per cent in 2030 and 100 per cent by 2035.
Carmakers who fail to meet the standards can face hefty penalties including a £15,000 fine per non-compliant vehicle over the limits.
Griffin told The Sunday Times: “Stop murdering the motor trade. Because that’s what you’re doing with your increase in first year road fund license. And the push towards electrification where the country is not ready to take it on board. Stop it and start supporting [the industry]. And if you support them, you’ll actually find that they’ll support you.”
Griffin warned that “for a company of our size” they could face fines of up to £12million if their electric vehicle count was above the penalty threshold of more than 2,500 vehicles.
Shockingly, the carmaker stated that the car tax increases have already caused trouble since its new Actyon model is fitted with a 1.5-litre turbocharged engine that emits 194g/km.
At present, the average driver would pay £1,650 in VED charges for the first year. However, from April, this will double to a whopping £3,300, before dropping to £195 for the second-year rate.
Vehicles emitting between 131g/km and 150g/km, like the Hybrid Kia Sportage SUV, will see VED contributions rise from £270 to £540.
Having highlighted the car tax problems for the Actyon,the brand has now adjusted its expectations for sales of the vehicle in the UK,forecasting fewer than 500 sales this year instead of its projected 2,000 and 3,000 units.
The adjustment follows the rules of the ZEV mandate which would see carmakers who sell more than 2,500 vehicles in the UK a year subject to penalties for failing to meet the EV targets. But KGM stated to get around this, they would deliberately keep sales low to avoid being hit with fines.
Griffin added: “The credits are hugely expensive. Because we’d buying a credit [for each car sold beyond the quota] for £12,000. All you’re doing is throwing money away. [In the UK] we’re an importer of vehicles, we’re not a manufacturer of vehicles.
“So our margins within the cars are not 30 per cent, 40 per cent, 50 per cent. They’re not. So we can’t afford to buy credits at £12,000; we’re not going to make that up.”
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KGM says it has low expectations for vehicle sales of its new Actyon model in the UK
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Under the April changes, electric vehicles will also be subject to VED for the first time, with first year charges starting from £10 until 2029-30.