Government axes plug-in car grant, as industry warns shock move comes at ‘worst possible time’

The government has today scrapped its flagship plug-in car grant scheme in a surprise move, pledging to refocus electric vehicle (EV) incentives and funding towards taxis, vans, trucks, and motorcycles, as well as the expansion of the public chargepoint network.

Announcing the shock move this morning, the Department for Transport (DfT) said the plug-in car grant had achieved its aim of “kickstarting the UK’s car revolution”, after subsidizing the sale of nearly half a million electric cars.

The scheme, introduced in 2011, initially offered drivers £5,000 off the purchase of a new plug-in electric or hybrid car, but the subsidy has been repeatedly cut in recent years to a level of £1,500 per car.

The government said it was now axing the scheme altogether because it was no longer needed spur EV purchases, arguing that recent reductions in the size and scope of the grant had “had little effect” on rapidly growing sales of electric cars, or helped to expand the range of EVs being manufactured.

“The government continues to invest record amounts in the transition to EVs, with £2.5bn injected since 2020, and has set the most ambitious phase-out dates for new diesel and petrol sales of any major country,” said Transport Minister Trudy Harrison. “But government funding must always be invested where it has the highest impact if that success story is to continue.”

Sales of EVs have been growing rapidly in recent years in the UK, with zero mission vehicles bucking a broader industry slump. Last month, battery electric vehicles represented 12.4 per cent of all new car registrations in the UK, according to SMMT data, with demand for plug-in models far outperforming the wider auto market.

Further elaborating on its decision to end the plug-in car grant, DfT stressed that drivers of EVs were now reaping significant savings in running cost compared to drivers of internal combustion engines (ICE) facing soaring petrol and diesel prices in the midst of the global gas price crisis.

Figures published by EV subscription company Elmo this morning calculated the cost of charging an EV this month stands at around £15 for 300 miles of motoring, whereas drivers of petrol and diesel cars are facing costs upwards of £100 to travel the same distance.

However, the government’s decision to close the scheme was slammed by auto industry body the Society of Motor Manufacturers and Traders (SMMT), with CEO Mike Hawes arguing the decision sent the “wrong message” to both motorists and an industry that was committed to helping the government reach its climate goals.

“Whilst we welcome the government’s continued support for new electric van, taxi, and adapted vehicle buyers, we are now the only major European market to have zero upfront incentives for EV car buyers, yet the most ambitious plans for uptake,” he said

Hawes added that the policy change had come at the “worst possible time”, noting that the sector was still struggling to recover from the Covid-19 pandemic. “If we are to have any change of hitting targets, government must use these savings and compel massive investment in the charging network, at rapid pace and at a scale beyond anything so far announced,” he said.

James Court, CEO of industry body Electric Vehicle Association, similarly criticized the government’s decision to close the scheme ahead of schedule, and before the sticker price of EV’s was comparable with petrol and diesel cars.

“We are disappointed by the removal of the grant, in a move that comes before EVs reach price parity with ICE vehicles, which is widely expected to happen in the next few years,” he said. “The end of the plug in grant was signaled last year, but we hoped for a Treasury reprieve during a cost-of-living crisis, with EVs offering consumers a way of insulating themselves against sky high petrol and diesel costs.”

And Claire Miller, director of technology and innovation at Octopus Electric Vehicles, said the scheme had played a pivotal role in growing the UK’s electric car market.

“It would be difficult to underplay the significance of the plug-in car grant. When the scheme started, you could fit the annual registration of electric cars in your local car park – today we’re seeing hundreds of thousands sold in just the first half of the year,” she said. “Drivers are waking up to the benefits of making the switch to an EV and we’re seeing demand soar.”

Miller said it was now down to manufacturers to ensure that supply of electric cars could keep pace with growing demand for the zero emission vehicles. “Supply chain issues have led to long wait times for the latest EVs on the market,” she said. “Manufacturers must do everything they can to strengthen supply at every stage to meet current and predicted demand. Without it, we’ll have more customer frustration and slower growth of the second hand market through these crucial early years of the electric decade.”

Today, the DfT confirmed it will be diverting the £300m that had been assigned to the plug-in car grant scheme until the end of the 2022/2023 tax year towards grants that boost sales of plug-in taxis, motorcycles, vans and trucks , and wheelchair accessible vehicles.

It said it would also divert funds towards expanding the public chargepoint network, so as to alleviate drivers’ fears of “range anxiety” – frequently cited as a barrier to EV adoption – and make zero emission travel “cheaper and easier.”

“With billions of both government and industry investment to be pumped into the UK’s electric revolution, the sale of electric vehicles is soaring,” Harrison said. “We are continuing to lead the way in decarbonising transport, with generous government incentives still in place, while creating high-skilled jobs and cleaner air across the UK.”

The DfT stressed that all existing applications for the grant would be honored as it worked to close the scheme.

However, the move is likely to spark an angry response from environmental campaigners who will note that the UK still lags far behind other European markets in terms of EV adoption. Norway, Sweden, the Netherlands, and Germany all have auto markets where EVs command a significantly higher market share than in the UK, and yet all the leading EV markets in Europe continue to offer generous grant programs as well as support for the EV charging network . Several governments also moved to increase grants as part of green pandemic stimulus packages, even as the UK moved to first cut and then ax grants.


Leave a Comment