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The Society of Motor Manufacturers and Traders (SMMT) has commissioned new research into how vehicle taxation could change in the future, advising any future government not to veer wildly from the current system.
The SMMT commissioned the Centre for Economics and Business Research (Cebr) to consider the future of motoring taxation, focussing primarily on the role of vehicle excise duty (VED) in future UK fiscal policies on motoring.
The Cebr has suggested expanding the current VED system to include three new bands for the most efficient cars, while a new emissions tax should be introduced for vans.
According to the report, the three new bands suggested are 0-50g/km, 51-75g/km and 76-100g/km - and a new VED system for vans would be based on CO2 emissions per tonne of loading capacity.
Based on the current system, the research from the SMMT forecasts nearly three quarters of all new cars will be VED exempt by 2025. This would place pressure on the Government's VED revenues and the SMMT wants to pre-empt any potential changes with research from this new report.
The Cebr said manufacturers are "sympathetic to the need for change" but they do not want an overhaul of the entire tax system.
The report said: "Often, advanced notice and gradual phasing of new policies over longer periods is desirable to allow manufacturers time to adjust production."
Cebr also recommended current incentive schemes like the plug-in car and van grant need to remain in the medium-term in order to nudge drivers into lower emission vehicles.
The BVRLA has welcomed the Cebr's "timely and sensible" report into the future of motoring taxation.
Gerry Keaney, BVRLA chief executive, said: "The Cebr rightly recognises the huge success of the government's incentive-based taxation regime, which has helped bring UK CO2 emissions below EU 2015 targets."
The BVRLA said the fleet sector had led the move towards zero emissions - with the average new lease car registered in 2014 emitting 116.8g/km CO2, which is 7% less than the average for all new registrations in the same period.
Keaney said: "As car CO2 emissions fall, the Government needs to act to protect its tax revenues and we support the Cebr's call for a gradual, well-signposted change to VED bandings.
"The van market is the fastest growing sector of UK road users and it is about time that the LCV VED regime included some kind of incentive that encourages operators to choose cleaner vehicles. As the Cebr says in its report, this needs to be given careful consideration to prevent any unintended consequences for particular sectors of the van market.
"The new government will undoubtedly want to review its motoring tax strategy and we would welcome the opportunity to discuss all these issues with the Treasury."
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