The car industry fears tax hikes may take place in the UK as greener cars are proving to be more successful than expected, it has been reported.

More eco-friendly cars are in demand and therefore production has increased but because of this, the government "won’t raise the revenues it expected", the chief executive of the Society of Motor Manufacturers and Traders, Paul Everitt, told the Independent.

The government has promised tax breaks for cleaner vehicles but it is feared the CO2 thresholds on tax may have to be shifted to avoid the government losing a lot of income.

Mr Everitt told the paper that the government needs to consult with the automotive industry in order to establish a long-term for CO2 taxes and incentives.

Recently, the government revealed a new initiative aimed at providing a monetary incentive to those buying ultra-low carbon vehicles.

From January 2011 buyers will receive a Plug-In Grant of £5,000 off a new low-carbon car, which will account for around 25 per cent of the overall car cost.

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