Jaguar Land ROver issues statement in response to the Budget, and how it may impact on UK sales.

Jaguar Land Rover said premium automakers will be unfairly penalized by a new UK vehicle tax scheme that is expected to hit sales of large SUVs and big sedans.

Starting in 2017, drivers of cars with a list price above 40,000 pounds (56,000 euros) will have to pay a 310-pound supplement on top of the 140-pound standard annual vehicle tax.

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Industry insiders said the tax hike will hit domestic demand for expensive cars. Besides JLR, the UK is home to high-end brands such as Bentley, Rolls-Royce, McLaren Automotive, Aston Martin, Lotus and Morgan.

"It sends a very negative message to the UK's premium automotive industry,” JLR said in a statement. "The UK should be proud of its premium car manufacturers, which support huge numbers of jobs and investment, not specifically penalize them."

The UK's auto industry association, the SMMT, said the new tax regime came as a "surprise and is of considerable concern."

The introduction of a surcharge on premium cars "risks undermining growth in UK manufacturing and exports," the lobby group said.

"British-built premium cars are in increasing demand at home and globally, and the industry helps to support almost 800,000 jobs in the UK. Leveling a punitive tax on these vehicles will almost certainly impact domestic demand,” SMMT CEO Mike Hawes said in a statement.

Colin Couchman, IHS Automotive's director for light vehicle sales forecasts, said buyers of large sedans and SUVs may now choose smaller vehicles, which typically that yield lower margins. This would affect the bottom line at a number of automakers. If the premium tax was applied today, it would affect 6 percent of vehicles sold in the country, Couchman said, quoting figures from analyst firm Polk.

Plug-ins to pay more

The government’s vehicle tax reforms also will strip away a key incentive to buy a low-CO2 vehicle.

Currently, cars that emit less than 100 grams of CO2 per kilometer are exempt from vehicle tax. Starting in April 2017, however, only vehicles that emit less than 50g/km of CO2 will be exempt from paying the 140-pound tax. Only electric cars and the most efficient plug-in hybrids will qualify for the tax break.

Today, the owner of a 56,545-pound BMW X5 plug-in hybrid SUV that produces 75g/km of CO2 pays no vehicle tax, but starting in 2017 that driver’s annual tax bill would rise to 450 pounds.

“The new regime will dis-incentivize the take up of low-emission vehicles,” the SMMT's Hawes said.

The extra money raised from the new tax regime will be used to improve the UK’s roads, the government said.

UK car sales reached their highest level ever in the first six months, hitting 1.37 million, according to SMMT figures. The country is the second-largest car market in Europe behind Germany.

Nick Gibbs

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