- 22nd March 2021
- Posted by: Suzy Hill
- Category: Personal Tax, Business News
Electric vehicle grants cut to £2,500
The government has cut the plug-in car, van and truck grant by £500 to £2,500 claiming it will broaden the range of electric vehicles qualifying for the scheme, a move that has come in for criticism as the government aims to stop the sale of petrol and diesel cars by 2030
The grant scheme for electric cars, vans and trucks has been updated to target less expensive models and reflect a greater range of affordable vehicles available, allowing the scheme’s funding to go further and help more people make the switch to an electric vehicle. The move means that less luxury cars will now qualify for the scheme.
The Department for Transport will provide grants of up to £2,500 for electric vehicles on cars priced under £35,000. This sees a 16% cut in the grant from the current £3,000 for vehicles up to £50,000.
‘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,’ said Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT).
‘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.’
This will mean the funding will last longer and be available to more drivers, the government statement said. Grants will no longer be available for higher priced vehicles, typically bought by drivers who can afford to switch without a subsidy from taxpayers.
The number of electric car models priced under £35,000 has increased by almost 50% since 2019 and more than half the models currently on the market will still be eligible for the grant, including family cars, such as the Hyundai Kona 39kWh and the MG ZS EV.
Government measures to encourage people to switch to electric vehicles are working, despite high initial costs, with nearly 11% of new cars sold in 2020 having a plug. This was up from just over 3% in 2019 – and battery electric car sales almost tripled over that same period.
The plug-in vehicle grant scheme was renewed last year, with £582m of funding intended to last until 2022 to 2023.
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 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.
‘We will continue to review the grant as the market grows.’
The plug-in car grant was introduced 10 years ago to stimulate the early market for zero emission vehicles. Since 2011, government 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.
Tax incentives, including favourable company car tax rates, which can save drivers over £2,000 a year, will remain in place.
The government is also investing more than £15bn of new money in alternatives to cars, including:
- £3bn for buses;
- £2bn for cycling;
- more than £4bn for local transport in cities; and
- £5bn for enhancements to the rail network, including electrification and reopening lines closed under the Beeching cuts to rail lines in the 1960s.
More affordable batteries mean that manufacturers can increase the range of the vehicles, including the VW ID.3 Pro (from £32,000 RRP) with a 263-mile range – more than the distance between London and Middlesbrough. This is more than three times the typical range available when the plug-in car grant first launched in 2011, due to steep falls in battery costs.