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Government cuts plug-in car grant

Subsidy on new electric cars reduced from £3,000 to £2,500 and limited to more affordable vehicles

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The UK government has cut its plug-in car grant (PICG) subsidy on new electric cars from £3,000 to £2,500.

In addition, the grant will also only be available to cars costing £35,000 or less, down from the £50,000 price currently applied. The moves take effect immediately and the grants available to buyers of plug-in vans are also being reduced.

Consumers considering a switch to an electric car have been offered government grants since 2011, initially of £5,000 and available to buyers of both purely electric and plug-in hybrid vehicles. Plug-in hybrids were excluded in 2018 and the level of the grant has steadily been reducing, the last move in early 2020 cutting it from £3,500 to £3,000.

According to the government, the latest reduction has been made to ensure that the grant could continue to be paid out until 2022-23, as announced in the March 2020 budget.

The announcement claims that since 2019 the choice of EVs costing under £25,000 on the market has increased by “almost 50%,” quoting as examples the MG ZS EV and Hyundai Kona Electric – however, only base models of the Hyundai will be eligible for the funding under the new rules.

“This (move) will mean the funding will last longer and be available to more drivers,” the government announcement stated. “Grants will no longer be available for higher-priced vehicles, typically bought by drivers who can afford to switch without a subsidy from taxpayers.”

Transport minister Rachel Maclean said: “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.” She added that the scheme would continue to be reviewed “in line with further price reductions in electric vehicles,” raising the prospect of further cuts.

Industry responds exactly as you’d expect

Today’s decision inevitably produced an angry reaction across the automotive industry. Mike Hawes, chief executive of industry representative body the Society of Motor Manufacturers and Traders, branded the decision as 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,” Hawes said.

“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.”

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Andrew Charman
Andrew Charman
Andrew is a road test editor for The Car Expert. He is a member of the Guild of Motoring Writers, and has been testing and writing about new cars for more than 20 years. Today he is well known to senior personnel at the major car manufacturers and attends many new model launches each year.