UK lawmakers signal u-turn on EV ‘Tesla tax’ after industry backlash

The UK government is considering revising its recently expanded electric vehicle (EV) tax policy, just months after it came into force. The move could offer much-needed relief to car buyers and manufacturers alike.

In April 2025, the UK extended the Expensive Car Supplement (ECS), commonly dubbed the “Tesla Tax”, to include electric vehicles priced over £40,000 ($54,000). Initially introduced in 2017 for petrol and diesel cars, the ECS added hundreds of pounds annually in vehicle excise duty. The aim was to level the playing field, but instead, it may have backfired.

According to This is Money, sales of new EVs have slumped in recent months, with major carmakers blaming the policy for turning buyers away. Several manufacturers warned the tax could undermine Britain’s net-zero targets, and some even suggested scaling back local EV production.

Labour MP Lilian Greenwood, Under-Secretary for the Future of Roads, is now leading calls to raise the ECS threshold, at least for zero-emission vehicles. “We will consider raising the threshold for zero-emission cars at a future fiscal event,” she said in a letter, describing it as a step to “make it easier to buy electric cars.”

The auto industry responded positively, calling it a “move in the right direction.” Robert Forrester, CEO of dealership group Vertu Motors, said it could help revive consumer confidence but warned: “It only takes us part of the way.”

Tesla, often seen as the bellwether of the EV market, also saw sharp sales declines in Q1 2025. Aside from the tax, the brand has faced increasing scrutiny, with some pointing to CEO Elon Musk’s political controversies as another barrier to buyer trust.

Despite challenges, used EV sales are booming, driven by improved battery life and lower running costs. Many buyers are also opting to charge EVs using solar panels, with platforms like EnergySage offering ways to save up to £8,000 ($10,000) on home installations.

While any official policy change would likely come in the autumn 2025 Budget, industry insiders believe the conversation alone could reignite interest in new EVs. As countries race to decarbonise, the UK’s EV tax debate could offer valuable lessons on balancing affordability with climate goals.

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