Rachel Reeves risks 'murdering' car sector as punishing new tax hikes loom in weeks

Car boss warns the Chancellor she is (Image: Getty)

The car industry is set to take a hit this year as Rachel Reeves is warned she needs to “stop murdering the motor trade”.

The huge changes taking effect in April will see Vehicle Excise Duty (VED) contributions majorly increase, which could see a negative impact on driver demand for new cars.

Kevin Griffin, the UK head of Korean car brand KGM, is urging the Chancellor to encourage Brits to buy new vehicles opposed to avoiding it due the tax rises.

Alongside the sharp hike in VED, carmakers are tasked with new electric vehicle targets as part of Labour’s Zero Emission Vehicle (ZEM) Mandate by 2030. The ambitious plans outline the need for the UK to have at least 28% of new cars sales eclectic by this year. This target will increase to 80% by 2030 and 100% by 2035.

Companies who fail to meet these high targets will then face huge penalties, which include a £15,000 fine per non-compliant vehicle over the limit.

KGM's Actyon model is forecast to sell less than 500 models in the UK (Image: Getty)

But Mr 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."

VED charges currently stand at £1,650 for the average driver for the first year. However, April will see this figure double to a staggering £3,300 in some cases before dropping to £195 in the second year.

Rachel Reeves’ tax hikes have now caused sales projections for companies like KGM to plummet drastically. The brand now predicted the Actyon model will generate fewer than 500 sales this year opposed to the originally projected 2,000-3,000 units.

Rachel Reeves urged to help support people to buy cars opposed to putting them off (Image: Getty)

The ZEM mandate applies to carmakers that sell more than 2,500 vehicles in the UK a year, but Mr Griffin’s company claimed they would need to deliberately keep sales low to avoid the fine.

He said: "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%, 40%, 50%. They’re not. So we can’t afford to buy credits at £12,000; we’re not going to make that up."