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THE government has made a further cut in the Plug-in Car Grant which had been aimed at making electric cars more affordable – the second cut this year.
The grant has been chopped today by £1,000 to £1,500. Back in March it was reduced from £3,000 to £2,500. Significantly, the threshold for qualification for the grant has also been reduced from £35,000 to £32,000.
Anyone who placed orders between 8 December and 14 December will still qualify for the old £2,500 grant, on cars costing up to £35,000. The Plug-in Van Grant has also dropped, to £2,500 for vans under 2.5 tonnes and £5,000 for vans between 2.5 tonnes and 5.0 tonnes
When the last change was announced before the summer, the government said this was to ensure funding lasts longer. However, EV sales have accelerated since and last month, they comprised almost one in five new car sale.
A notice from the Office for Zero Emission Vehicles (OZEV) says the “Government has a responsibility to manage the grant budget and to deliver value for money for taxpayers and as signalled to industry following the March 2021 grant changes, has therefore been unable to provide notice ahead of the grant changes”.
OZEV added: “Once the webpage has been revised to reflect the grant changes, it is the responsibility of manufacturers or their representatives to notify OZEV if listed vehicles should not be eligible. Orders placed following the update of the webpage for vehicles later found to be priced above the cap will be cancelled. Vehicles eligible for the grant are also being amended on the grant portal”.
Following the latest announcement, Edmund King, AA president, said: “Many drivers and fleets will be recalculating today to see if they can still afford their chosen EV now that the grants and threshold have been cut. With ambitious targets heading into 2030 it seems counterintuitive to reduce incentives although we accept that those purchasing the lower value EVs probably have greater need for assistance.
“Drivers have consistently told us that the main barrier to EV ownership is the initial purchase price. While we are encouraged that new EV sales have increased this year, we feel this mainly due to company car purchases and salary sacrifice schemes.
“This type of purchase is not available for everyone, so reducing the grant and the number of vehicles eligible will be a disappointment for many.
“The most effective method of encouraging mass electric car adoption is to scrap the VAT – a policy we have called for since 2020. Low income households say this would help them the most in switch away from fossil fuels.”
The National Franchised Dealer Association described the announcement as “extremely disappointing”. Chief Executive Sue Robinson said: “Cutting the grant strongly disincentivises EV adoption across the UK. This, in turn, will exacerbate the unequal, regional EV uptake gap. While the market share of EVs is growing at an impressive rate, it is premature to reduce the levels of this support to the consumer and send the wrong message to the public, especially as other G7 nations continue to ramp up consumer support.
“We have already spoken with the Department for Transport to outline our concerns and we will continue to liaise with the Government. We encourage our members to contact us if they require any assistance or clarification”.
The NFDA urged the Government to consider a number of issues that will be affecting dealers and customers at an operational level:
- Price transparency: The sudden cut to the grant penalises those customers who were in the midst of choosing an EV but have not yet ordered one and will now see a price change overnight.
- Consumer communications: Without prior notice, dealers now need to go quickly through all of their dealer systems and advertised prices/marketing materials to change prices to ensure they keep customers satisfied.
- Stock: Dealers will be left holding stock that overnight has become more expensive for the consumer.
- Margins: In some instances, dealers have had margins reduced on various models to ensure they fit within the previous £35,000 RRP Cap. With already small margins, they will now have vehicles in stock that are significantly more expensive on both outright purchase and monthly payments.