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Plug-in car grant cut announced by UK Government

Date: 18 March 2021   |   Author: Sean Keywood

The value of the UK Government's plug-in car grant has been reduced by £500.

Effective immediately, the government will provide grants of up to £2,500 for new EVs - down from £3,000 previously.

In addition, the grant is now only applicable to cars costing less than £35,000, down from the previous threshold of £50,000. The government argues that the number of EVs under the new threshold has increased by almost 50% since 2019, and says more than half the models currently on the market will still be eligible for the grant.

A cut to the plug-in van grant has also been announced.

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."

Reacting to the news, Society of Motor Manufacturers and Traders chief executive Mike Hawes was highly critical.

He said: "The decision to slash the plug-in car and van and 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.

"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."

BVRLA chief executive Gerry Keaney said: "Given the surge in battery electric vehicle adoption, it makes sense for the government to reconsider where and how it uses grants and incentives, but 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. 

"Coming just months before the COP 26 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."

David Bushnell, principal consultant at leasing company Alphabet GB, said that while it was positive that electric company car drivers still benefited from attractive BIK tax rate, the grant cut would make the government's net-zero target harder to achieve, and could potentially damage the fleet industry.

He said: "Whilst it's understandable that cuts need to be made to support the UK's deficit, the timing of this is ill-judged and does not support the push towards clean energy or the ban on sales of petrol and diesel vehicles by 2030.

"By providing little advanced warning on these grant changes, the fleet industry will be immediately impacted. Adjusting these figures at a time when decisions on company policies are being made could be potentially damaging to the fleet industry, particularly as it is responsible for the majority of the used car market. 

"There are going to be a significant number of corporate and commercial vehicles currently in the lease company order process that will now miss out on the government grant. This will have cost implications for businesses across the UK, at a time when many are trying to recover from the pandemic."

Leaseplan UK commercial director Chris Black agreed that the lack of notice given made the situation more difficult for fleets.

He said: "The decision to announce and change plug-in grants on the same day has taken the industry by surprise, and the lack of notice hasn't allowed businesses to proactively manage the situation. 

"Whilst the instantaneous change will minimise a spike in claims, it has resulted in a great deal of disruption for customers and many across our industry. How this will affect the rapidly growing EV market remains to be seen."

Black said that on taking a step back it was possible to see both positives and negatives about the policy, saying that by reducing the grant and limiting its eligibility, the government was ensuring that more people would be able to benefit from it over a longer period of time.

However, he added: "What's problematic and potentially harmful is the timing: many motorists were just waking up to the cost saving and environmental benefits of EVs. 

"Combined with other grants and subsidies such as lower BIK tax and 0% VED, the plug-in grant provides drivers and fleet operators with a strong incentive to make the switch to EVs. "By reducing or taking away these benefits, the government risks undermining its own messages around decarbonisation and 'building back green' post-pandemic."