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Shaun Sadlier's blog: Why EV grants remain essential

Date: 22 January 2020

Just before Christmas, news broke of the German government's plans for electric vehicle (EV) subsidies - and it was good news for potential EV buyers over there. 

Effectively, grants for purchasers of new EVs will increase by a half over current levels during the five years from 2020 in a move designed to increase the speed of adoption and underline manufacturer investment in the new technology, including plug-in hybrids.  

The German government wants to see 10 million EVs on the roads by 2030 and, in support of that, is also investing to provide one million charging points by 2035.  

All of this contrasts quite noticeably with the situation in the UK, where the government reduced EV grants a year ago and in effect abolished them entirely for plug-in hybrids, stipulating that the electric range must be at least 70 miles.  

Additionally, ministers are already discussing a point in time when subsidies will be removed completely. The Road to Zero strategy document, published last year, stated: "As the market becomes better established and more competitive, the need for direct government financial support will decrease." This point is indisputable, of course - at some point the EV market will need to stand on its own two feet without any intervention - but we believe that it is still some way into the future.  

At the moment, there is quite a lot of time spent number crunching to investigate the rate at which interested fleets can adopt EVs and plug-in hybrids. It's an exciting exercise and one that we fully embrace. However, it is clear that to make the figures stack up, there is a need for Government support. 

The reasons for this are not always simple but the biggest is that because the market for used EVs is relatively new, setting future residual values has not initially been easy, but expertise is increasing and the situation is now much better managed. Over time, EV whole life costs will become more competitive and their residual values are expected to be higher than their internal combustion engine equivalents due to shifts in demand and supply, especially for battery EVs. 

We believe that 2020 is likely to be the year that the EV market really starts to take off - there are strong signs that the company car market is ready, the recharging infrastructure has improved noticeably and the range of models available is increasing every month.  

However, this will only happen if the right level of support is available. The UK has a new government and we look to see it continuing with a strong and long term commitment to grants in the EV sector.

Shaun Sadlier is head of Arval's Mobility Observatory in the UK