'Double whammy': UK Government makes second cut to EV grant scheme this year
The Government has cut the level of its Plug-in Car Grant available by £1,000 per person and also shortened the list of eligible vehicles, in a move that has proven unpopular against the backdrop of surging fuel prices and the UK's position as COP26 host.
The Department for Transport (DfT) announced this morning that, from today (15 December), motorists will be able to claim up to £1,500 towards the upfront cost of a new electric vehicle (EV). This is down from £2,500. A reduction from £3,000 to £2,500 was put in place this March.
At the same time, the eligibility criteria for the vehicles is also being changed. Up until now, vehicles costing up to £35,000 were covered. Now, the maximum has been set at £32,000.
The DfT said in a statement that refocusing grants on affordable vehicles will “make the best use of taxpayer money”. It has pointed to the fact there are currently 20 models on the market meeting the eligibility criteria. These include Smart’s EQ Forfour and Fortwo; the electric Fiat 500; the electric Mini; the Nissan Lead and Volkwagen’s e-Up.
Moreover, the changes mean that plug-in hybrids are now effectively exempt, as there are no models on the UK market that meet the criteria.
The £2,500 grant and £35,000 price cap will remain in place for wheelchair accessible vehicles. Also, tax incentives for company cars remain unchanged.
Similar cuts are also being made to the Plug-in Van grant scheme the setup for motorcycle and moped grants. For small vans of 2.5 tonnes or less, the maximum amount of grant available per person will be reduced from £3,000 to £2,500. For larger vans, the amount will be cut from £6,000 to £5,000.
For motorcycles, the new cap is £500, and for mopeds, it is £150. There is also a new maximum price of eligible vehicles, set at £10,000.
The DfT said in a statement that the changes will not affect its total overall spending on the EV transition, and that it is still planning £3.5bn this Parliament. But some green groups are skeptical, and there is not yet information on how the savings will be recouped.
When the Plug-in-Car Grant was first launched in 2011, it provided a maximum of £5,000 per person and, in some cases, covered one-quarter of the cost of a new vehicle. It has supported the purchase of around half a million hybrid and pure electric vehicles to date.
Representatives from the automotive industry have called the “overnight” changes a blow for manufacturers and for consumers, who are currently grappling with fuel price hikes (the average petrol price is currently £1.46 per litre) and extensions to low-emission zones in places like London and Portsmouth. These challenges and more are pushing attitudes towards EVs, but industry experts have said that many will have needed higher levels of financial support to make the switch.
What Car?’s editorial director Jim Holder said: “[The Government] wants to promote environmentally-friendly transport, yet it is reducing the incentive to do so at a time when electric cars are still more expensive to buy and represent a minority in the new car market.”
The RAC’s head of roads policy Nicholas Lyes added: “While it’s true that sales of EVs have been growing strongly, it’s worth noting that this is still from a relatively low base. We’re concerned the Government has taken this step too soon”
The AA’s president Edmund King called the decision “counterproductive” and a “great disappointment for fleets and vehicles pushing forward with the EV transition”.
“With ambitious targets heading into 2030, it seems counterintuitive to reduce incentives, although we accept that those purchasing the lower value EVs probably have a greater need for assistance,” King told This Is Money.
“'Drivers have consistently told us that the main barrier to EV ownership is the initial purchase price. While we are encouraged that new EV sales have increased this year, we feel this is mainly due to company car purchases and salary sacrifice schemes.”
Similarly, Bonnet's co-founder Patrick Reich said: "The move will likely disincentivise consumers to make the switch to EVs and inhibit the development of EV infrastructure, such as slowing the installation of more public charge points.
“Despite a rise in EV adoption, the cost of these vehicles remains a stumbling block. While scaling back grants would have to happen in the future, this decision feels premature and could have serious implications in the UK reaching its net-zero by 2050 goal.”