Government cuts electric car grant: Everything you need to know

Posted by Neil Thomason

The Department for Transport has announced further cuts to the Plug-in Car Grant, with soaring demand for EVs cited as the reason for refocusing the grants on the most affordable zero emission cars.

First introduced in 2011, the Government pledged £5,000 towards the price of an electric vehicle and plug-in hybrids but the criteria has slowly tightened over the past decade. The grant has now been reduced from £2,500 to £1,500 and the value of vehicles eligible for the funding assistance reduced from £35,000 to £32,000.

Some 20 electric vehicles fall into this strict criteria, with support for wheelchair accessible vehicles being prioritised, and retaining the £2,500 grant and a higher £35,000 price cap. Grant rates for the plug-in car grant will now be £5,000 for large vans and £2,500 for small vans, with a limit of 1,000 per customer per year.

Transport Minister Trudy Harrison said: “The market is charging ahead in the switch to electric vehicles. This, together with the increasing choice of new vehicles and growing demand from customers, means that we are refocusing our vehicle grants on the more affordable vehicles and reducing grant rates to allow more people to benefit, and enable taxpayers’ money to go further.”

The news comes just as electric vehicle uptake has really started to accelerate, with SMMT reporting battery electric vehicles (BEVs) equated to 18.8% of the new car market in November, with 21,726 units sold – more than double compared with November 2020.

Year-to-date, 1,538,585 new cars have been registered, of which 17.5% have been BEVs or PHEVs, meaning one in six new cars is capable of being plugged in. Plug-in car grant orders in 2021 are already over 250% higher than in 2020, demonstrating the strong shift to an electric future.

Industry comments on the change

Mike Hawes, SMMT Chief Executive, said: “Slashing the grants for electric vehicles once again is a blow to customers looking to make the switch and couldn’t come at a worse time, with inflation at a ten-year high and pandemic-related economic uncertainty looming large.

“We need to move the market even faster – from one in a hundred cars on the road being electric, to potentially one in three in just eight years – which means we should be doubling down on incentives […] UK drivers risk being left behind on the transition to zero-emission motoring.”

Further comments came from Paul Willcox, Managing Director, Vauxhall: “The changes provide a confusing message to UK consumers and will harm EV adoption at a time when we need to be doing all we possibly can if we are to stand a chance to move the UK to electrified only vehicles by 2030. 

“Whilst we understand the government’s desire to phase out the plug-in vehicle grant at some point, we really need to see a more strategic, longer-term approach.  A lack of clarity and certainty for customers can only harm EV adoption and leave the UK lagging behind other countries in the race to decarbonise personal transport.”

Generous tax incentives for EVs remain in place, including favourable company car tax rates, which can save drivers over £2,000 a year and we expect the total cost of EV ownership to reach parity during the 2020s compared to petrol and diesel cars.