Government plug-in car grant cut by £500 and limited to EVs under £35k

Tags: #budget

The UK’s motor industry has been caught off-guard by a surprise cut to the government’s plug-in vehicle grant. An announcement was made early today (March 18) – with no prior warning – slashing the grant by £500, to £2500, and reducing its scope to EVs costing under £35,000.

This means that effective immediately, buyers of popular EVs like the Hyundai Kona Electric with a 64kWh battery, Tesla Model 3 and higher-spec VW ID.3s will no longer benefit. The same goes for commercial vehicles over £35,000. Previously, the plug-in car grant stood at £3000 and applied to EVs up to £50,000.

According to the press release from the government, the changes to the scheme are being “targeted at more affordable models to allow more people to make the switch”. The decision has apparently been made off the back of the fact that since 2019, the number of sub-£35k EVs has gone up by almost 50 per cent, citing the entry-level Hyundai Kona 39kWh and MG ZS EV as examples.

The plug-in car grant scheme was renewed last year with £582m of funding to ensure it carries on until 2023. It has already supported the purchase of 285,000 low and zero emissions vehicles since it was introduced in 2011.

Transport Minister Rachel Maclean said: “The increasing choice of new vehicles, growing demand from customers and rapidly rising number of charge points 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.”

Maclean’s parting statement that, “We will continue to review the grant as the market grows”, suggests that further reductions in the grant will happen in due course.

Industry caught by surprise

You would have thought that before changing one of the cornerstones in the drive to a low-emissions electric future, the government would have prepped the industry to ensure it was ready. But you would have thought wrong. Car makers, retailers and industry bodies have been completely blind-sided by the announcement, and it has not gone down well.

Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders, said: “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.

“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.”

The BVRLA’s Chief Executive, Gerry Keaney, reflected the SMMT’s sentiment around timing: “Today’s move is poorly timed and will slow down the transition to zero emission motoring. Confidence in electric vehicles and their running costs is fragile, so slashing the grants and eligibility criteria will put a brake on the fantastic market momentum we have seen in recent months.”

He added; “Coming just months before the COP26 summit and as other countries are increasing their zero emission subsidies, this move could also have a big impact on the supply of electric vehicles coming into the UK.”

Manufacturers have also joined in with the criticism of today’s move. Graham Hoare, Chairman of Ford Britain said: “Today’s news that plug-in grants for passenger and commercial vehicle customers are being reduced is disappointing and is not conducive to supporting the zero emission future we all desire. Robust incentives – both purchase and usage incentives – that are consistent over time are essential if we are to encourage consumers to adopt new technologies.”

MG’s range of EVs – the MG ZS EV and MG5 EV – will continue to be covered by the PiCG, but the company has stated that it will make up the £500 shortfall for anyone who buys either model before the end of March. Guy Pigounakis, MG’s Commercial Director, is also unimpressed, though: “While we welcome any news that encourages people to buy affordable electric cars, for it to come in the middle of the toughest March trading conditions ever is a blow to customers.”

We wouldn’t be surprised if more car companies step up to honour the £3000 figure for a short time.

Discover EV’s take

It’s hard to follow the logic here, and it makes you wonder what the cuts are trying to achieve. The government’s spin that it is helping more people to make the switch by targeting lower priced models is obviously nonsensical. A lower grant simply reduces choice and provides less incentive to make the switch, especially for those on the border between switching to EV and sticking with ICE.

The example of the Hyundai Kona Electric is a case in point. The 64kWh car, which is now ineligible, will do 280 miles comfortably on a charge. The 39kWh car is closer to half of this – and as we all know, range anxiety is a big factor in making the switch to an EV.

Then there’s the fact that the government wants to phase out ICE-powered vehicle sales by 2030. An ambitious and important change like this requires investment and incentives, and yet here we are, four months since the announcement with one of the key EV incentives being narrowed in scope.

The reduction of the plug-in car grant is extremely unhelpful for car buyers, the industry, the environment, and the government’s own ambitions.