UK’s plug-in car grant scheme closes, with funding to be re-allocated to other types of EV

The grant scheme first launched in 2011 and provided individual motorists and businesses with grant funding towards the upfront cost of a new electric car. After a series of extensions were offered by the Department for Transport (DfT) during the 2010s, it was announced at the Autumn Statement last year that the scheme would be closing in the 2022-23 financial year.

A statement published today (14 June) by the DfT confirms that the scheme is closing today, having provided £1.4bn in grants. It argues that the scheme has “successfully kick-started the UK’s electric car revolution”. Around 100,000 pure electric and hybrid electric cars were sold in the UK during the first five months of 2021, compared with around 1,000 during the whole of 2011. One in six new cars registered in the UK in 2021 were electric, the DfT stated, with an increase in this proportion likely in 2022, as the EV market continues to weather the pandemic and cost-of-living crisis more strongly than the broader car market.

The DfT notably made two consecutive reductions in the level of funding available for each car under the plug-in car grant scheme during 2021. Funding available per person was decreased from £3,000 to £2,500 in March 2021, then to £1,500 in December 2021. At the same time, the eligibility criteria was changed from vehicles costing up to £35,000 to vehicles costing up to £32,000.

These changes disappointed some environmental groups and bodies representing motorists and carmakers at the time. The DfT maintains that “successive reductions in the size of the grant and the number of models it covers, have had little effect on rapidly accelerating sales or on the continuously growing range of models being manufactured”.

As such, the DfT is set to re-allocate the funding previously made available under the scheme to other plug-in grant schemes for other vehicles. More funding is expected for wheelchair-accessible vehicles (WAVs), taxis, motorcycles, vans and trucks. Plug-in van and grant schemes were extended to the 2024-25 financial year back in March.

“Government funding must always be invested where it has the highest impact if [the UK’s EV] success story is to continue,” said Transport Minister Trudy Harrison.

“Having successfully kickstarted the electric car market, we now want to use plug-in grants to match that success across other vehicle types, from taxis to delivery vans and everything in between, to help make the switch to zero-emission travel cheaper and easier.”

Harrison added that one of the DfT’s other EV priorities will be improving access to public charging infrastructure.

March saw the Department publishing a new Electric Vehicle Infrastructure Strategy, supporting a stated commitment to ensure that all British motorists are never further than 30 miles away from a rapid public charging point and to improve the reliability of public charging points. A report published by Policy Exchange last spring revealed that the UK’s annual charging point installation rate stood at just one-fifth of the levels needed to support the levels of EV uptake the Government is forecasting.

Industry reaction

The DfT’s approach has drawn a mixed reaction.

The Society of Motor Manufacturers and Traders’ (SMMT) chief executive Mike Hawes said it “sends the wrong message to motorists and to an industry which remains committed to the Government’s net-zero ambition”.

Hawes said: “Whilst we welcome Government’s continued support for new electric van, taxi and WAV buyers, we are now the only major European market to have zero upfront purchase incentives for EV car buyers yet the most ambitious plans for uptake.

“With the sector not yet in recovery and all manufacturers about to be mandated to sell significantly more EVs than current demand indicates, this decision comes at the worst possible time. If we are to have any chance of hitting targets, government must use these savings and compel massive investment in the charging network, at rapid pace and at a scale beyond anything so far announced.”

The RAC’s head of policy Nicholas Lyes said: “The UK’s adoption of electric cars is so far impressive but in order to make them accessible to everyone, we need prices to fall – having more on the road is one important way of making this happen, so we’re disappointed the Government has chosen to end the grant at this point. If costs remain too high, the ambition of getting most people into electric cars will be stifled.”

Octopus Electric Vehicles’ director of technology and innovation Claire Miller said: “It would be difficult to underplay the significance of the plug-in car grant. When the scheme started, you could fit the annual registration of electric cars in your local car park – today we’re seeing hundreds of thousands sold in just the first half of the year. Drivers are waking up to the benefits of making the switch to an EV and we’re seeing demand soar.

“It’s now over to the manufacturers to meet demand with supply. Supply chain issues have led to long wait times for the latest EVs on the market. Manufacturers must do everything they can to strengthen supply at every stage to meet current and predicted demand. Without it, we’ll have more customer frustration and slower growth of the second-hand market through these crucial early years of the electric decade.”

Kearney’s global sustainability director Angela Hultberg said: “After the fantastic strides made at COP26 last year, led in part by the UK government,  with multiple countries around the globe agreeing to ban the sale of new petrol and diesel cars from 2030, today’s news doesn’t seem very befitting of 2022.

“This really comes down to a question about timing. Have we reached the point where EV adoption is no longer in need of support? With prices of energy, food and other main living expenses going up, this seems doubtful. In fact, with fuel prices rising, this seems to be an ideal point in time to make EVs look even better compared to the internal combustion engine, making the choice of an EV a no-brainer for for consumers. If something is working, and working well, why end it before you cross the finish line?

“But the proof will be in the pudding, as they say. If not for supporting consumers with grants, what will the money be spent on? If the government can allocate these funds to schemes that will in fact increase EV uptake for taxis, last-mile vehicles and similar, the sustainability agenda might still come out on top. It remains to be seen what the long-term plan actually is, and how it will be executed.”

Zipcar UK’s general manager James Taylor said: “We’re incredibly disappointed at the Government’s decision to end the EV plug-in grant for cars. Car clubs are at the forefront of electrification, but we need the Government’s support to reach 100% EV adoption.

Car clubs provide affordable access to EVs for the general public. In London, 12% of car club cars are electric, compared to just 1% of privately owned cars. Since introducing over 400 electric vehicles to our fleet, over 90,000 Zipcar members have driven an EV.

This decision is a step backwards, and places a further cost burden on the sector. The removal of the scheme also directly contradicts the Department for Transport’s decarbonisation strategy, in which it stated the Government would provide support for car clubs to go fully electric.”

LeasePlan UK’s head of consultancy services and customer value Matthew Walters said: “The move towards zero-emission vehicles remains a critical part of the UK’s decarbonisation strategy, and so, by removing key financial incentives for the consumer, the government risks undermining its own progress. Cost remains a barrier to entry for many drivers, so now is not the time to remove the carrots that make EVs more accessible. We can’t end up in a position where the Government’s strategy centres solely around sticks, like Clean Air Zones.

“We agree that additional support is needed for vans and infrastructure in the electric transition. However, the timing of this announcement is a cause for concern, as it may cause drivers to put off making the decision to make the switch. As petrol and diesel prices reach record highs, the government now has an important role to play in educating drivers about the lower whole-life costs of driving an EV, as well as the environmental benefits – and this is where we want to see its focus on.”

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