Government cuts plug-in car grants from £3,000 to £2,500



Government cuts plug-in car grants from £3,000 to £2,500

Department for Transport says trimming grant payments and tightening eligibility will allow grant scheme to support more motorists who want to switch to electric models

The government has today announced it is to cut payments through the Plug-in Car Grant scheme from £3,000 to £2,500, arguing the move will allow the popular scheme to support more motorists in making the switch to electric vehicles (EVs).

The cuts will be accompanied by new rules that ensure the scheme is focused on the most affordable EV models. From today, the government will provide grants of up to £2,500 for electric cars priced under £35,000, meaning the more expensive models on the market are no longer eligible for government support.

The Department for Transport said the reforms would mean “the funding will last longer and be available to more drivers”, while grants will no longer be available for higher-priced vehicles that are “typically bought by drivers who can afford to switch without a subsidy from taxpayers”.

It stressed that the number of electric car models priced under £35,000 has increased by almost 50 per cent since 2019 and more than half the models currently on the market will still be eligible for the grant, including spacious family cars, such as the Hyundai Kona 39kWh and the MG ZS EV.

“We want as many people as possible to be able to make the switch to electric vehicles as we look to reduce our carbon emissions, strive towards our net-zero ambitions and level up right across the UK,” said Transport Minister Rachel Maclean.

“The increasing choice of new vehicles, growing demand from customers and rapidly rising number of chargepoints mean that, while the level of funding remains as high as ever, given soaring demand, we are refocusing our vehicle grants on the more affordable zero emission vehicles – where most consumers will be looking and where taxpayers’ money will make more of a difference. We will continue to review the grant as the market grows.”

The changes come amidst soaring demand for EVs, which has seen plug-in vehicles provide the one bright spot for an auto industry that has seen demand slump in response to the pandemic. Nearly 11 per cent of new cars sold in 2020 featured a plug, while sales of pure battery electric car sales almost tripled over compared to 2019.

As such, the plug-in grant vehicle scheme was renewed last year with a further £582m of funding intended to last until 2022 to 2023.

The government stressed that it has provided close to £1.3bn in plug-in vehicle grant funding to bring ultra-low emission vehicles onto UK roads, supporting the purchase of more than 285,000 vehicles. It also highlighted that it has previously said it would reduce grants through the scheme over time, as the price of EVs fall and the technology enters the mainstream.

And it reiterated that generous tax incentives, including favourable company car tax rates for EVs, would remain in place which can save drivers over £2,000 a year.

However, while the decision to focus grants on more affordable models is likely to be welcomed, the move to cut grants is set to spark criticism from some EV advocates, given the urgent need to accelerate the switch to EVs to meet the UK’s emissions targets.

Matthew Fell, chief UK policy director at the CBI, said the decision to cut payments could harm the government’s efforts to deliver a ‘green recovery’ from the pandemic. “While long-term reductions in consumer incentives for electric vehicles are inevitable, this is the wrong time to stunt a green recovery by making a sudden change to the grants on offer,” he said. “With a stretching 2030 target in place to phase out sales of new petrol and diesel cars and vans, we must avoid sending mixed messages to consumers and businesses. Switching to an electric vehicle still has many barriers, including high upfront costs and availability of reliable charging points.”

The government has already cut grants from an initial £5,000 and the new £2,500 grant is well below the level offered in countries with a higher level of EV uptake, such as Norway, the Netherlands, and Germany. A number of countries across Europe have also increased EV grants in recent months as part of covid-related stimulus packages. For example, last summer Germany doubled EV grants to up to €9,000.

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