It’s been a predictable story for years now, and all it really does is make the car industry look silly – government reduces grant allowance, car industry complains, world doesn’t end and EV sales keep increasing anyway.
This week, the government announced that it was reducing the Plug-in Car Grant allowance for EVs once again. This is probably about the fifth or sixth time that this has happened since the grant was first announced about a decade ago, when it started out as a £5,000 taxpayer contribution towards every new electric car.
The grant allowance has steadily decreased over the years, and this week the level dropped from £2,500 down to £1,500. In parallel, the the price threshold for eligible vehicles has been decreasing and the focus has shifted from all plug-in cars to only pure EVs.
This was always the plan. The government was quite clear that the grant allowance would reduce over time as electric cars became more affordable, and that’s what has happened. The overall pool of money isn’t decreasing, but it’s being targeted at lower-priced EVs rather than luxury cars. It’s a rare case of the government actually sticking with a policy and keeping a promise.
Yet every time the grant allowance is reduced, we get the same cut-and-paste moaning from the same sources within the car industry, predicting that everyone will stop buying EVs. And every time, the market share of EVs just keeps increasing.
The car industry is its own worst enemy
The grant was last reduced back in March, from £3,000 to £2,500, and the threshold for eligibility dropped from £40K to £35K. The industry howled. And what happened? EV sales have continued skyrocketing without so much as a blip.
That simply reinforces the government’s approach. Sales of new EVs certainly haven’t tanked as was suggested, so the goverment will justifiably see the industry as crying wolf (again).
Yet the car industry undermined its own argument even further. When the last £500 reduction was announced, a number of car companies immediately cut their prices by £500 to offset the grant reduction. Others slashed the prices of their cars so they’d still qualify for the grant. A similar scenario will almost certainly play out this time.
Again, this just strengthens the government’s argument that decreasing the grant is the right way to go.
If you’re in the Treasury and you see car companies willingly reducing new car prices by £500 to match your grant reduction, or cutting prices even further to maintain the grant funding, you’d understandably assume that they didn’t really need that grant money in the first place.
EVs are no longer a niche market
New EV sales are currently at just under 20% of the overall market share and growing each month – a year ago it was 9%. EV market share was about double that of diesel in November, which is again a consistent direction of travel. So everything’s basically going according to plan.
Electric cars are still more expensive than petrol cars, although the gap is shrinking quickly. This is particularly felt at the lowest price points of the new car market, so it makes sense that any government grant money should be targeting cheaper EVs rather than more expensive ones.
As we pointed out in our inaugural Expert Rating Index report last month, there are currently more than 40 different new electric cars already on the market with more arriving each month. There are also clear tax benefits for company car users that make EVs more affordable than petrol or diesel cars – which are far more valuable than the plug-in grant – so there are still plenty of opportunities for car manufacturers to get more people into electric cars.
Tackle charging rather than crying for handouts
The biggest area where the car industry can, and should, pressure the government on its ‘net-zero’ plan is to accelerate the roll-out of EV charging points. Although the UK is better than most countries in this regard, it can do better and will need to do better as the car market shifts towards electrification.
The Society of Motor Manufacturers and Traders (SMMT) recently bemoaned the number of charging points per EV in the UK (it’s currently one point for every 16 EVs), but it didn’t set out any kind of target for what it thinks that number should be. For comparison, the best country is South Korea with a 3:1 ratio while the Netherlands is 5:1. Germany (Europe’s largest new car market) is 17:1, so just behind the UK.
Various studies have shown that the biggest hurdle to faster EV adoption is uncertainty over charging. Cost is obviously a factor, but it’s no longer the top concern car buyers considering a switch to electric power.
As we’ve previously written here, an electric car is a viable proposition for most households if you can charge at home. But if you have to rely on public charging, it’s much less attractive. So the industry should channel all its lobbying into getting more charging points in more places.
