WITH electric vehicles gaining sales ground, the government has blindsided the industry by cutting the EV grant by £500 and excluding those costing more than £35,000.
According to The Times newspaper, the grant will be cut from £3,000 to £2,500 because the increasing popularity of EVs makes the scheme unsustainable. The upper price limit for models benefitting from the grant will be reduced from £50,000 to £35,000, the report added.
The changes are believed to be effective immediately and will impact burgeoning EV sales which are running 40% ahead of last year. Last month full EVs and plug-in hybrids took a combined 13.0% market share, up from 5.7% in February 2020.
The Society of Motor Manufacturers and Trader said earlier this month that the Budget was a “missed opportunity given the lack of measures to support the market overall and notably the transition away from pure petrol and diesel cars and vans”.
EV grants were originally £5,000 and has been steadily cut over the years. Reducing the upper limit will also impact the UK’s most popular EV, the Tesla Model 3 as well as Ford’s Mustang Mach-E.
The rise in EV registrations has been driven by company car benefit-in-kind tax relief and salary sacrifice schemes as well as the Government’s plans to halt the sales of diesel and petrol in 2030.
AA president Edmund King said that while the cut is “not great news”, it will spread the grant further but added that it is disappointing for those planning a Mach-E or Tesla 3.
SMMT chief executive Mike Hawes said in a statement: “The decision to slash the plug-in car grant 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.”
Sue Robinson, Chief Executive of the National Franchised Dealer Association, described the cut as “extremely disappointing” and risks undermining the progress the UK has been making towards a zero-emission market.
She added: “The cost of the electric cars currently available on the market remain higher than their petrol or diesel counterparts and it is vital that buyers continue to be incentivised. Additionally, commercial vehicles keep the economy running, as the recent increase in LCV registrations demonstrates, and this reduction will have a significant impact on small businesses and sole traders.
“Sales of electrified vehicles have been performing well but they still represent a relatively small proportion of the overall market; the timing of the cut to the grant is unfortunate as a number of private customers are currently waiting for showrooms to reopen to get familiar with new types of vehicles, including EVs.
“NFDA has repeatedly highlighted that we must avoid a situation where the least well-off drivers are deterred from buying a new, low-emission vehicle when the time comes to replace their old one”.
Paul Hollick, chair, Association of Fleet Professionals, said: “Our view on this is that it is just too much, too soon. While we have seen massive enthusiasm growing for EVs in the fleet sector over recent months, the whole subject is still very much in its infancy and there is general agreement that the help that the grant scheme provides remains if not essential, then very important.
“We’re especially disappointed around the £35,000 ceiling on cars. There are a number of models that fleets are adopting in number that will be affected by this. The situation in the van market is even more acute. Fleet adoption of electric vans has barely begun simply because of lack of availability of models and to reduce the grants substantially, just as they are starting to enter production, is a little mystifying.
“However, the bigger point is really the lack of signposting from government. We’ve been saying for some time that the 2030 EV target is very much achievable for fleets but that what we need is a clear roadmap over time, especially when it comes to the fiscal basics that affect company cars such as benefit in kind, road fund licence and, in this instance, the EV grant scheme.
“This change has pretty much come out of the blue and doesn’t do anything to create the kind of stability that we think is needed around the whole subject of fleet adoption of EVs.
“Particularly, the fact that all of this takes effect immediately means that orders still in progress will be affected. So a business that sent an order for an EV to their leasing company yesterday but which hasn’t yet been placed with the manufacturer will have to be requoted, which is just an unnecessary complication.”
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