Western governments have been nurturing an EV market for years. They have had quite some success. But now they have to deal with lost fuel duty revenues from ICE car sales—and they have no other option but to hurt their EV markets.
There are eight states in the U.S. that charge EV drivers a registration fee of $200 per year. Another 24 or more have an annual fee of $100 or more. Now, $100 per year is not a whole lot for most of the people who tend to buy EVs—but it is an additional expense on vehicles that people have been taught to perceive as tax-break carriers only. And people don’t like additional expenses. The conundrum lies in the fact that just as people don’t like additional expenses, governments don’t like lower tax revenues.
Governments have been raking in billions in fuel duty revenues over the decades. Now, these revenues are slimming, thanks to EV proliferation—actively encouraged by those same governments. Per a Financial Times report citing data from the International Energy Agency, last year alone, EV additions to national fleets cost governments globally $10 billion in fuel duty revenue losses.
This could swell to as much as $110 billion by 2035 if the same governments fulfill their transport electrification targets. In other words, governments are depriving themselves, or rather, their successors, of billions in fuel duty revenues in the name of electrification. Luckily for those successors, that electrification will likely not happen exactly as planned—because of these additional taxes being slapped on EVs at a time when demand has started to become quite fragile.