UK car sector Autumn Budget 2025 impact: EV fleets, motoring businesses and automotive companies

The Autumn Budget’s impact on the UK car sector is clearer than ever: motoring taxes are changing, EV running costs are rising, and fleet operators must rethink their 2025–2028 strategy. Whether you run a dealership, manage an EV fleet, or operate a repair centre, the budget introduces policies that directly affect margins, purchasing decisions and long-term planning.

The most significant shift is the new tax regime for electric vehicles. From April 2028, the government will introduce a pay-per-mile system for EVs, with the Electric Vehicle Excise Duty (eVED) set at 3p per mile for fully electric vehicles and 1.5p per mile for plug-in hybrids. This marks a major change in the UK EV tax policy and will influence how businesses assess whole-life vehicle costs.

For fleet operators in particular, the 2025 budget creates additional pressure. Rising EV running costs, new motoring taxes and tighter operating margins mean that decisions taken over the next 12 to 18 months will shape profitability well into 2028.

In this article, we break down the UK car sector Autumn Budget impact, explain how the new tax measures work, and outline practical strategies to help automotive businesses stay competitive as the UK transitions into its next phase of EV adoption.

UK Autumn Budget 2025: Key motoring and EV policy announcements

The Autumn Budget sets out a completely new structure for motoring taxation, with measures that directly affect how electric vehicles are taxed and operated in the UK. At the centre of these changes is the shift from fuel-based taxation to a mileage-based model for EVs and plug-in hybrids, a move that reshapes running costs, fleet economics and long-term investment plans.

Pay-per-mile tax on EVs and plug-in hybrids (eVED)

From April 2028, the government will introduce the Electric Vehicle Excise Duty (eVED):

• 3p per mile for fully electric vehicles
  
• 1.5p per mile for plug-in hybrids

This EV pay-per-mile UK 2028 charge sits on top of standard Vehicle Excise Duty and, where relevant, the Expensive Car Supplement.

The policy is designed to replace falling fuel duty revenues as motorists move away from petrol and diesel. However, the eVED charge of 3p per mile radically changes the cost-benefit calculation that previously made EVs cheaper over their lifetime.

For example, a delivery business running 28,000 miles per vehicle annually will now face £840 per EV per year in eVED charges. Scale that to a 100-vehicle fleet, and the additional annual cost is £84,000,  a material shift in fleet economics.

Effect on EV running costs and government forecasts

Government modelling suggests the average driver travelling 8,500–9,000 miles per year will pay £240 to £270 in extra annual cost. The OBR estimates the policy will generate £1.1 billion in 2028–29, rising to £1.9 billion by 2030–31.

But there’s a major consequence: the OBR also expects the tax to reduce EV sales by around 440,000 vehicles over five years, compared with previous projections. That is a substantial budget impact on the automotive sector and raises questions about the UK’s longer-term EV adoption trajectory.

Other relevant motoring and EV decisions in the Budget

Alongside eVED, the Autumn Budget includes several additional measures for motorists and automotive businesses:

• Fuel duty remains frozen until September 2026, offering short-term relief for petrol and diesel users.
  
• The Expensive Car Supplement threshold for zero-emission vehicles increases from £40,000 to £50,000 from April 2026, improving affordability for mid-market EVs.
  
• The government continues to support EV charging infrastructure, with funding aimed at expanding public and workplace charging.

These positives help, but they do not fully answer the core industry concern: will EVs remain cheaper after the new tax?

This question sits at the heart of fleet planning and dealership strategy - and the next section explores exactly how these policies will affect different parts of the automotive industry.

Budget impact on the automotive sector: Risks and challenges

The 2025 Autumn Budget introduces new cost pressures across the automotive value chain. Whether you run a dealership, manage a fleet, operate charging infrastructure or work in vehicle leasing, the changes reshape financial planning for 2026–28.

Higher running costs for EV fleet operators and businesses

Fleet operators face the most immediate pressure from EV fleet cost increases in the UK. High-mileage commercial fleets covering 20,000 to 30,000 miles a year will see annual operating costs rise by hundreds of pounds per vehicle.

Previously, EVs delivered clear savings: electricity at 3p to 5p per mile, lower maintenance and minimal taxation. But with an eVED charge of 3p per mile, that advantage narrows significantly.

For UK fleet operators, 2025 budget planning now means re-running whole-life-cost models and reassessing whether current vehicle choices remain viable.

Potential slow-down in EV demand

The OBR’s projection of 440,000 fewer EV sales over the next five years signals a cooling market. Dealers and manufacturers should expect slower growth, particularly among high-mileage buyers who previously relied on EVs being the cheapest long-term option.

This uncertainty reshapes the UK EV market outlook for 2028. Dealerships that invested in charging bays, technician training and upgraded facilities now face longer payback periods. And for the EV tax changes UK business fleets must absorb, many companies are likely to pause or slow their electrification timelines.

Impact on the second-hand EV market and residual values

Rising EV running costs in the UK influence what buyers are willing to pay for used vehicles. If motorists know they’ll face ongoing per-mile charges, they factor that into purchase decisions. A three-year-old EV that previously held 55–60% of its value may now fall closer to 50% to 55%.

This directly affects leasing providers, whose business models rely on accurate residual value forecasting. Lower real-world resale values mean tighter margins, potential losses, and ultimately higher future lease rates, making EVs less affordable for businesses and consumers.

Challenges for charging infrastructure providers, fleet leasing and maintenance businesses

Charging infrastructure operators built expansion plans around strong EV uptake. With hundreds of thousands fewer EVs expected on the road, utilisation rates may fall and payback periods lengthen. This hits rapid-charging networks hardest, where installation can cost £50,000 to £100,000 per hub.

Fleet leasing companies face dual pressure: falling residuals on existing EV portfolios and softer new vehicle demand. Maintenance businesses, especially those that invested heavily in high-voltage training and specialised equipment, may now wait longer to recover those costs as EV adoption slows.

Mixed signals for the transition to electric

While the Budget raises the Expensive Car Supplement threshold for EVs and continues funding for charging infrastructure, the new per-mile tax introduces uncertainty. Will EVs remain cheaper after the new tax? The answer is no longer universal - it now depends entirely on mileage, usage and charging behaviour.

Before looking at industry reactions, the next section explores practical cost-saving steps businesses can take immediately to offset the Budget’s impact.

Cost-saving opportunities for automotive businesses after the budget

The 2025 Budget adds new cost pressures, but there are several immediate ways automotive businesses, fleets and dealerships can protect their margins. These quick wins help offset the budget impact on the automotive sector, especially as EV running costs rise.

Quick, high-impact cost reductions

Reduce mileage and optimise routes

Use telematics and real-time scheduling tools to eliminate unnecessary miles - particularly important as the eVED charge of 3p per mile increases operating costs.

Reassess EV vs ICE fleet mix

Run updated whole-life cost models that include EV pay-per-mile UK 2028 charges. Some fleets may benefit from a mixed approach rather than full electrification.

Improve energy efficiency and driver behaviour

Train drivers on efficient EV operation and review workshop energy usage to cut electricity consumption.

Switch from card payments to Pay by Bank

Dealerships and service centres can reduce payment processing fees by up to 90% improving cash flow with instant settlement.

Automate accounting, invoicing and fleet admin

Automation reduces admin hours, improves accuracy and helps businesses manage rising compliance and reporting demands.

Renegotiate supplier and energy agreements

Revisit contracts for parts, servicing, consumables, energy and equipment. Even small percentage reductions help offset rising EV running costs.

Consolidate fleet operations

Pool vehicles where possible, reduce under-utilised assets, and improve scheduling to lower per-vehicle cost.

These actions won’t eliminate the pressures created by the Autumn Budget, but they will significantly reduce the operational impact on car sector businesses. The companies acting early are the ones most likely to maintain and even improve their margins during 2026.

Industry responses to the new policies reveal just how divided the sector is. Here’s what key stakeholders are saying next.

Industry response and risks to the EV transition

Reaction to the Autumn Budget 2025 transport and EV reforms has been mixed. While some accept the need to replace declining fuel duty revenue, most industry groups warn that the new framework, particularly the EV pay-per-mile UK 2028 tax, introduces uncertainty at a critical point in the transition.

Concerns from fleet operators and logistics businesses

High-mileage operators say the eVED charge of 3p per mile makes long-term planning harder. Fleets that are already committed to electrification now face recalculations of total cost of ownership, replacement cycles and route strategies.

Dealerships, manufacturers and supply chain impacts

Analysts highlight that slower EV adoption will affect dealerships, manufacturers and suppliers already dealing with tight margins. The policy could weaken investment cases for new EV production lines and UK-based component facilities.

Controversy over plug-in hybrid treatment

Critics question why plug-in hybrids will pay half the per-mile EV rate, despite real-world emissions often exceeding official testing figures. Some warn that this could incentivise PHEV purchases from drivers who rarely charge them.

Concerns from automotive and environmental groups

The Society of Motor Manufacturers and Traders (SMMT) warns the Budget risks slowing momentum at a time when stability is needed. Manufacturers have invested billions on the assumption of consistent EV policy support.

Environmental groups argue the government should have explored alternative revenue models rather than imposing a tax on zero-emission vehicles.

Calls for clearer long-term policy signals

Fleet organisations recognise the fiscal challenge but argue that the timing adds avoidable uncertainty. Many operators had already mapped out their transition to electric, plans that now require reassessment.

With industry confidence shaken, the key question becomes: What practical steps can businesses take now? The next section breaks down actionable strategies to help automotive companies navigate the new landscape.

How automotive businesses and fleet operators can respond to the 2025 budget changes

The Budget introduces real cost pressures, but automotive businesses have several practical levers to offset rising EV fleet cost increases in the UK and protect margins.

1. Reassess fleet strategy: EV vs Hybrid vs ICE

A fresh total cost-of-ownership (TCO) review is essential. Include:

• purchase price and financing
  
• electricity or fuel costs
  
• VED and the Expensive Car Supplement
  
• the new eVED charge (3p per mile for BEVs, 1.5p for PHEVs)
  
• maintenance and insurance
  
• residual values
  
• benefit-in-kind tax impacts

For high-mileage vehicles, the numbers shift quickly. A van covering 40,000 miles per year will incur £1,200 a year in eVED charges, enough to make some efficient diesels more cost-effective than EVs for certain duty cycles.

Scenario modelling now matters more than ever.

2. Optimise fleet usage and reduce mileage

Route and mileage optimisation delivers immediate savings. Using telematics, many operators can reduce mileage by 10% to 15% through:

• dynamic route planning
  
• delivery consolidation
  
• better scheduling
  
• EV-specific driver efficiency training

Every mile saved cuts electricity costs and tax liability. With eVED at 3p per mile, unnecessary journeys become far more expensive.

3. Update pricing models and renegotiate contracts

Businesses offering leasing, rental, logistics or delivery services should review pricing to reflect the Autumn Budget 2025 motoring tax changes. Consider:

• mileage-based tiers
  
• per-mile surcharges
  
• adjusted delivery zones
  
• minimum order thresholds

Revisit company car policies, including BIK and mileage reimbursement, as the new tax fundamentally alters which vehicles make financial sense for employees and employers.

4. Adopt alternative mobility models

Reducing fleet size directly reduces tax exposure. Options include:

• shared vehicles rather than one car per employee
  
• micro-EVs or cargo bikes for short-distance urban trips
  
• hub-and-spoke delivery designs
  
• shared mobility pools for fluctuating demand

A smaller, better-utilised fleet often delivers greater savings than switching vehicle type alone.

5. Cut payment processing costs by switching to Pay by Bank

Payment processing fees are a major and often overlooked cost. For example:

A £35,000 vehicle sale on a card can cost £400 to £700 in fees.

The same transaction via Pay by Bank (an Open Banking payment solution) will typically cost £50 to £150 (and potentially much less, depending upon the operator.

Savings apply across vehicle sales, servicing, parts, rental payments, fleet charging and subscription models. Pay by Bank also provides:

• same-day settlement
• strong fraud prevention
• no chargebacks
• seamless integration (e.g., with Wonderful’s One API or via its enterprise division, Asima)

For businesses absorbing motoring tax increases, these cost reductions offer immediate margin relief.

6. Engage in policy consultation and industry lobbying

The government is still shaping the technical details of eVED. Automotive businesses should participate in consultations to influence:

• potential exemptions for commercial fleets
  
• transitional treatment for existing EVs
  
• adjusted rates for different vehicle classes
  
• business mileage allowances
  
• reliefs for essential service operators

Collaborating with industry groups ensures that the challenges UK fleet operators face from EV tax changes are heard and can influence the development of a more practical system.

Now that short-term measures are clear, the next step is understanding how to build a resilient long-term strategy under the new EV taxation framework.

Long-term outlook and strategic implications

The 2025 Budget introduces structural changes that may reshape the UK EV market outlook for 2028 and beyond. Higher running costs from the eVED charge of 3p per mile risk slowing EV adoption, particularly among high-mileage operators who previously relied on strong lifetime savings to justify electrification.

For fleet operators, the economics are now more nuanced. Electrification still offers environmental benefits and insulation from volatile fuel prices, but the cost advantage has narrowed. Many businesses will adopt a selective approach, electrifying clear-use cases while retaining efficient ICE or hybrid vehicles where the total cost of ownership remains lower. This mixed-fleet strategy will become the norm for most UK fleet operators navigating 2025 Budget pressures.

Manufacturers may also adjust their roadmaps. The prospect of reduced demand could delay new EV model launches or influence pricing strategy. Charging infrastructure providers face longer payback periods and will require more patient capital, especially if utilisation growth slows.

It’s unclear whether these changes represent a temporary fiscal adjustment or a longer-term shift in motoring tax policy. Businesses should plan for flexibility: avoid overcommitting to a single technology pathway, maintain optionality in procurement, and focus on operational efficiency.

There is also a broader competitiveness question. If other countries continue offering robust EV incentives while the UK tightens taxation, UK automotive manufacturing and investment could feel the strain, an issue the industry is watching closely.

Before we conclude, here are clear answers to the key questions UK fleet operators, motoring businesses, and automotive companies are asking right now.

Frequently asked questions

What did the 2025 UK Autumn Budget do for electric cars?

It introduced the eVED per-mile tax from 2028 (3p for EVs, 1.5p for PHEVs), raised the EV Expensive Car Supplement threshold to £50,000, and confirmed ongoing support for charging infrastructure.

How much will EV drivers pay under the new per-mile tax?

Most drivers doing ~9,000 miles will pay £240 to £270 yearly. High-milers at 20,000 miles pay ~£600, and commercial drivers at 30,000 miles pay ~£900, all on top of normal VED.

When does the new EV pay-per-mile tax start?

The EV pay-per-mile UK 2028 charge begins in April 2028, giving fleets and businesses almost three years to prepare for higher running costs.

Will fleet operators be hit hard by the Budget?

Yes. UK fleet operators’ 2025 budget plans face major cost increases. A 100-vehicle fleet doing 25,000 miles each would see around £75,000 in extra annual eVED charges.

Are plug-in hybrids taxed the same as EVs under the new rules?

No. PHEVs pay 1.5p per mile while battery EVs pay 3p. Critics warn this could encourage PHEV use even when real-world emissions exceed official figures.

What can businesses do to offset the increased cost of EVs?

Prioritise TCO modelling, route optimisation, driver efficiency training, shared mobility options, and switch to open banking to cut payment fees by 50–90%.

Will EV adoption slow because of the new Budget?

Likely. Forecasts suggest 440,000 fewer EV sales in five years. Whether EVs remain cheaper now depends on mileage, use case, and charging access, not a universal answer.

The road ahead: Adapting to Budget changes

The UK Autumn Budget 2025 sends mixed signals. Support for charging infrastructure and the higher ECS threshold points toward continued EV commitment, yet the new eVED charge reshapes running costs. The impact on the UK car sector is significant, but adaptable businesses can still find opportunities.

EV tax changes UK business fleets now require deeper analysis and flexible planning. High-mileage operators face the greatest pressure from eVED charging 3p per mile, but efficiency gains, better utilisation, and smart vehicle selection can soften the impact. Engagement with policy development will also influence how final rules take shape.

With costs rising, operational streamlining becomes essential. Switching from card payments to Open Banking payments reduces transaction fees by 50% to 90% across vehicle sales, aftersales, and fleet operations. Payment providers like Wonderful provide fast, practical relief at a time when margins are tightening.

The budget’s automotive sector impact calls for reassessing strategy, optimising mileage, evaluating EV vs hybrid vs ICE choices, and adopting lower-cost payment infrastructure. Active participation in upcoming eVED consultations and a flexible long-term plan will help businesses manage uncertainty under the Autumn Budget 2025.

Whether the UK’s electric transition accelerates or slows will depend on policy refinement and industry response. Businesses that stay adaptable, focus on cost efficiency, and invest in operational excellence will be best placed to succeed regardless of how the policy landscape evolves.

Protect your automotive business: Take action now

Evaluate fleet TCO under the new EV pay-per-mile UK 2028 regime, comparing electric, hybrid, and efficient ICE vehicles across all mileage scenarios. Optimise routes using telematics to cut unnecessary mileage, lowering both eVED charges and energy costs.

Reassess vehicle mix based on actual usage. For high-mileage operations, efficient diesel or petrol may now be more cost-effective if EV running costs in the UK in 2025 no longer deliver clear savings.

Integrate Open Banking payment solutions immediately to reduce transaction costs by 50% to 90%, providing vital margin relief for dealerships, service centres, charging providers, and fleet operators.

Engage with government consultations on eVED implementation. Advocate for commercial vehicle exemptions, business mileage allowances, and practical adjustments to ensure policy reflects operational realities.

Plan for multiple scenarios. The 2028 automotive landscape remains uncertain. Build flexibility into fleet strategy, maintain a diverse vehicle portfolio, and avoid over-commitment to any single technology to keep your business resilient and profitable.

The Automotive businesses that act decisively now, optimising operations while engaging constructively with policy, will navigate the UK car sector Autumn Budget impact more effectively and emerge stronger as the market stabilises.