UK Government Scraps Plug-In Car Grant

On June 14th, the UK Government announced that it was shutting the plug-in car grant to new orders with immediate effect.

Under the previous scheme, buyers of electric vehicles could receive up to £1,500 in aid. Instead, the Government said that it would refocus funding towards public charging and the purchase of other road vehicles such as plug-in taxis, motorcycles, vans, trucks, and wheelchair accessible vehicles.

Speaking on the matter, Transport Minister Trudy Harrison said: “The government continues to invest record amounts in the transition to EVs, with £2.5 billion injected since 2020, and has set the most ambitious phase-out dates for new diesel and petrol sales of any major country. But government funding must always be invested where it has the highest impact if that success story is to continue.”

The decision has sparked harsh criticism from industry groups.

The RAC head of policy Nicholas Lyes, for instance, said: “The UK’s adoption of electric cars is so far impressive but in order to make them accessible to everyone, we need prices to fall […], so we’re disappointed the Government has chosen to end the grant at this point. If costs remain too high, the ambition of getting most people into electric cars will be stifled.”

Alternative Fuel (AF) Fleet percentage of total car fleet. Source: EAFO (Click on image for link)

Similarly, the Society of Motor Manufacturers and Traders (SMMT) Chief Executive, Mike Hawes, stated that “The decision to scrap the Plug-in Car grant sends the wrong message to motorists and to an industry which remains committed to Government’s net zero ambition” and added that “if we are to have any chance of hitting targets, government must use these savings and compel massive investment in the charging network, at rapid pace and at a scale beyond anything so far announced.

In an article on Germany’s transport subsidies published last week, Teodora Serafimova, a research associate at Florence School of Regulation – Transport Area (European University Institute) explained toIbex Publishing that: “EV subsidies and other types of incentives, be these financial or practical (e.g., access to bus lanes, free parking, etc.) can be an important means to close that price gap and create a level playing field for EVs to compete against their conventionally-fuelled counterparts, whose price, in turn, does not reflect the entirety of the external costs (on human health and the environment) that they generate. As is the case for most new technologies, financial incentives play a crucial role in kick starting the market until the technology matures”.

Most developed countries across the world have some form of financial incentives to increase electric car sales and adoption. These include targeted consumer and commercial schemes aimed at decreasing the cost of EV acquisition, ownership, or charging. In late 2021, 17 EU countries offered incentives for the purchase agreements, whilst 10 offered tax reductions or exceptions for electric vehicles, according to the ACEA.

The UK Government’s decision on EV subsidies should be placed against the backdrop of widespread internal combustion engine bans. With the UK deciding to end the sale of new petrol and diesel cars by 2030, and the EU’s ban on internal combustion car sales from 2035.