The automotive world goes into 2025 feeling positive, but also with some uncertainty around EVs and PHEVs, says Peter McDonald, mobility director at Ohme.

Peter McDonald, mobility director, Ohme

30 October 2024 might be memorable for being the date of the first annual UK Budget delivered by the first woman to be Chancellor of the Exchequer, Rachel Reeves. But, for company car drivers, it was noteworthy for other reasons.

Introducing updates on company car tax rates, incentives on EVs and a whole lot more besides, there was a lot to unpack in the budget. For fleet managers, it enables them to plan ahead, knowing what’s coming until 2029/30. For EVs in particular, that meant the first-year rate of tax will remain frozen until then, making them cheaper to own and run.

When it comes to Benefit-in Kind rates, EV drivers will see a slight rise to 7% in 2028/29 and then 9% in 2029/30, but it’s PHEV drivers who will see the steepest climbs. By the time we are into the 2028/29 tax year, all PHEV drivers will be facing a rate of 18%. There is a particularly large jump from 2027/28 up to 2028/29, when it goes from 8% to that 18% for PHEVs capable of between 70 and 129 miles on electric.

So what does all this mean for fleet managers in both the short and long term?

Lease companies are likely to continue to increase their EV fleet penetration, both for cars and vans, going forward. Leasing companies have been good friends to OEMs wanting – and needing – to sell their EVs.

PHEV sales are currently booming (up 19.6% so far this year at the time of writing) and, as their electric ranges improve, so home charging will become more important for them too. Some PHEVs on the market have large batteries – the Mercedes-Benz GLE Plug-in Hybrid boasts a 31.2kWh pack – almost the size of some smaller full EVs.

A home charger for EV fleets is an obvious addition, but chargers haven’t been as popular with PHEV drivers previously. As those PHEV battery sizes grow, so home chargers will become a new priority for the drivers too. Without them, drivers may not be able to leave home in the morning with a full charge and, therefore, won’t be able to maximise their savings on running costs. All fleet managers will know that to minimise the total cost of ownership of running a PHEV on fleet, the cars need to maximise their EV range.

For those drivers not yet ready to switch to a full EV, it seems that these larger-batteried PHEVs could be a potential answer to them not sticking with pure petrol power, even if as a stepping stone to a future EV. Leasing companies and salary sacrifice companies have already shifted much of their volume to EVs, making them and their volume of increasing importance and corporate attraction to OEMs.

Don’t think that PHEVs aren’t valuable for OEMs either. Despite the ZEV mandate target figures being focused on EVs, PHEVs will also help manufacturers to reduce their average CO2 figures, which is also crucial for hitting those targets. With the 2025 target rising to 28% from 22% in 2024, there will be increasing talk about this throughout 2025.

However, with that jump in BiK for the 2028/29 tax year, 2025/2026 will effectively be the last year that PHEV drivers will be able to enjoy a lower rate for the entirety of their three-year lease.

What the Budget also did, however, was see the Government publish the company car tax tables up to 2029/30, an additional two years on from what had been published.

While many fleets and fleet managers are rarely thinking much beyond the next three years, this does at last give them the ability to look and plan in the longer term.

And, while those plans might inevitably change – just as governments might do – it at least gives a vague sense of direction to the outlook and view on EVs generally from a political standpoint. It’s not quite a crystal ball into the content of future budgets, but it’s certainly better than nothing. And when OEMs and the EV sector need all the encouragement they can get, that can only be good news.