By Tom Pyman and for MailOnline and Rob Hull for This is Money
Grants for electric cars are set to be slashed by £500 and won’t apply to the best-selling Tesla vehicle any more under new plans.
A government drive to encourage more green vehicles on the road has seen it subsidisie 35 per cent of the purchase price of certain models up to a maximum of £3,000.
However, a surge in demand has placed huge strain on the scheme, meaning the highest grant available is being dropped to £2,500, while the upper limit of eligible cars is down from £50,000 to £35,000.
As a result, Tesla’s popular Model 3 – consistently Britain’s best-selling electric car in the last 12 months – won’t be covered by the grant any longer due to its £40,500 price tag.
Tesla’s popular Model 3 (pictured) – consistently Britain’s best-selling electric car in the last 12 months – won’t be covered by the grant any longer due to its £40,500 price tag
Announcing the cuts on Thursday morning, Transport Minister Rachel Maclean said: ‘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.
‘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 new limitations means models like Ford’s new Mustang Mach-E, expected to hit the market soon, will also not be covered by the grant, though ministers insist overall electric car funding remains unchanged, with more than half of plug-in models still eligible for the scheme even after the change.
‘Today’s news from the UK Government that plug-in grants for passenger and commercial vehicle customers are being reduced is disappointing and is not conducive to supporting the zero emissions future we all desire,’ said Graham Hoare, chairman at Ford of Britain.
‘Robust incentives – both purchase and usage incentives – that are consistent over time are essential if we are to encourage consumers to adopt new technologies, not just for all-electrics but other technologies too like plug-in hybrid electric vehicles that pave the way to a zero emissions future.’
But the decision was made with the view that taxpayers ‘should not be subsidising people to buy £50,000 cars’, Whitehall sources told the Times.
The pot will instead be spread more thinly over the next two years.
However, it is likely to spark fury not only among manufacturers but also environmental groups, which have urged the government to introduce more incentives so drivers switch from petrol and diesel cars to less polluting models.
Petrol and diesel cars and vans will no longer be sold in 2030, before hybrids also become banned five years later as part of the drive towards having greener cars on the road.
More than 100,000 plug-ins were sold last year, nearly three times as much as in the previous 12 months, but that still only represented around one in 15 new registrations.
The Ford Mustang Mach-E (pictured), which is due to arrive in the UK in a matter of weeks, will also not be covered as a result of the grant’s price cap being lowered
The Plug-in Car Grant was launched in 2011 to promote the purchase of greener cars. Back then, the subsidy value was up to £5,000 off the price of a new EV. The value of the grant is now half that amount
Edmund King, the AA president, told the paper: ‘This is not great news for those waiting for delivery of the stylish entry-level Ford Mustang Mach-E as they will find that the price has ‘gone up’ by £3,000. Many buyers would have been counting on the subsidy.
‘On the other hand, most drivers knew that the ‘free ride’ wouldn’t last for ever and at least more early adopters should be able to benefit from spreading the grant further.’
RAC head of roads policy Nicholas Lyes says ministers ‘talk-the-talk when it comes to encouraging people into cleaner vehicles, but cutting the plug-in car grant certainly isn’t walking the walk’.
The motoring group’s spokesman says the timing of the announcement couldn’t be worse, with the industry already hard hit by the pandemic, with incentives like the Plug-in Car Grant being ‘vital’ to get consumers to go green at a time when personal finances are being hit.
‘Even though more models are coming on to the market, our research suggests upfront cost remains a concern to drivers when comparing the cost of an electric vehicle with a similarly sized conventional vehicle,’ Lyes told us.
‘By cutting the grant, the Government may risk people holding on to their older, more polluting vehicles for longer.’
The grant to incentivise the purchase of electric and – at the time – hybrid vehicles was launched back in 2011.
When it arrived a decade ago, it offered to pay £5,000 toward the price of a new electric car and some plug-in hybrids to reward early adopters of green vehicles.
This was subsequently reduced to £4,500 and was again scaled down in October 2018 to £3,500 as the government looked to curtail the incentive.
Commenting on the news, Mike Hawes, chief executive at the Society of Motor Manufacturers and Traders, said the decision to slash the Plug-in Car Grant is the ‘wrong move at the wrong time’.
In a statement issued this morning, he said: ‘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.’
By cutting the grant, the Government may risk people holding on to their older, more polluting vehicles for longer, says the RAC
Sue Robinson, Chief Executive of the National Franchised Dealers Association, which represents franchised car and commercial vehicle dealers in the UK, added: ‘Sales of electrified vehicles have been performing well but they still represent a relatively small proportion of the overall market; the timing of the cut to the grant is unfortunate as a number of private customers are currently waiting for showrooms to reopen to get familiar with new types of vehicles, including EVs.’
Jim Holder, editorial director, What Car?, said slashing the subsidy and restricting its availability for pricier plug-in models could potentially limit the government’s drive to encourage more motorists to switch to electric vehicles ahead of the 2030 ban on sale of new petrol and diesel passenger cars.
He explained: ‘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.
‘There are wider implications, too: chopping the grant only widens the gap between EV and ICE [internal combustion engine] prices and emphasises a worrying underlying perception that electric cars are the preserve of the wealthy.
‘So too the removal of the grant threatens the already paper-thin profitability of selling EVs in the UK – with huge grants available in countries such as France and Germany manufacturers will likely focus supply to those countries, again throttling the transition to electrification in the UK.
‘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.’