The government’s decision to cut the electric car grant by £500 – and exclude EVs that cost more than £35,000 – is a step ‘too soon’, say experts.
The Times reports today that the electric car grant will be cut from £3,000 to £2,500 as the surge in popularity for EVs makes the scheme ‘unsustainable’.
At the same time, the upper price limit for cars allowed to benefit from the grant will be reportedly reduced from £50,000 to £35,000.
The changes to the scheme are said to be effective immediately.
They mean the UK’s most popular EV – the Tesla Model 3 – will be excluded from the grant as well as Ford’s forthcoming Mach-E, as they both cost more than £35,000.
A source dubbed the grant ‘the Tesla subsidy’ and told the paper that taxpayers ‘should not be helping people buy £50,000 cars’.
What Car? editorial director Jim Holder said the cut is coming at the wrong time – just as many buyers are researching a switch ahead of the 2030 ban on internal combustion engine (ICE) cars.
He told Car Dealer: ‘While it was inevitable the carrot of the grant would whittle down over time and eventually be replaced by punitive measures, this feels too soon to take another step on that journey.
‘The 2030 combustion-only ban was announced with much fanfare – the thinking behind how to make the transition to that goal appears to be worryingly muddled, with this decision being further evidence of that.’
Tom Barnard, editor-in-chief of Electrifying.com, a website that helps buyers make the switch to EVs, said he expects manufacturers to rush in electric vehicles that dip under the £35,000 ceiling.
He said: ‘Obviously it’s not helpful for the electric car market to remove any form of government incentive, but it’s understandable that the grant has been shrunk as EV registrations soar.
‘The company car benefit-in-kind tax relief and salary sacrifice schemes in particular seem to have been a real hit with business users.
‘The £35,000 list price break will have an interesting effect, and we can expect car makers to rush to make models which tuck in under the threshold.’
The paper’s source suggested that the government grant may be retargeted at more affordable electric cars where ‘taxpayers’ money will make more of a difference’.
Electric vehicles are notoriously more expensive than their ICE counterparts and this additional cost is often slated as the main barrier for consumers making the switch.
The plug-in car grant was originally £5,000 and has been steadily cut ever since.
Mike Jones, compiler of the Car Dealer Top 100, and executive chairman of accountancy experts ASE Global, said incentives needed to match the government’s 2030 ambitions.
He told Car Dealer: ‘It seems perverse that, at a time when they need consumers to increasingly adopt electric vehicles they are decreasing the incentive to do so.
‘At the moment, without subsidies, electric cars are more expensive than ICE ones and the government is presumably assuming that the OEMs and dealers will effectively provide the subsidy on cars over £35k to ensure that OEM CO2 mix targets are hit and fines avoided.
‘We will have to see if this transpires, but we would have a greater chance of widespread adoption if consumer incentives were also aligned to the electrification goal.’
AA president Edmund King told the paper that this was ‘not great news’ as many car buyers waiting for models – including the new Ford Mach-E – would be ‘counting on the subsidy’.
What Car?’s Holder added that interest in EVs was ‘booming’ but said while research was rising, there was a ‘hesitancy’ to commit to buy.
He added: ‘For many that do buy an EV, the grant is considered as a crucial incentive to close the premium between an EV and a combustion-engined car.
‘Right now, electric car searches and enquiries on What Car? Are at an all-time high. This news is sure to dent that long-term – although there could be a small rush to secure the extra discount if the window of opportunity remains for a short period.’
Reacting to the news, SMMT chief executive Mike Hawes issued a statement saying: ‘The decision to slash the plug-in car grant and van & truck grant is the wrong move at the wrong time.
‘New battery electric technology is more expensive than conventional engines and incentives are essential in making these vehicles affordable to the customer.
‘Cutting the grant and eligibility moves the UK even further behind other markets – markets which are increasing their support, making it yet more difficult for the UK to get sufficient supply.
‘This sends the wrong message to the consumer, especially private customers, and to an industry challenged to meet the government’s ambition to be a world leader in the transition to zero emission mobility.’