Almost half a million electric vehicles (EVs) have been supported by the plug-in grant scheme over the past decade. Sales of zero-emission cars have risen by 89% and plug-in van orders have already reached 250% higher than in 2020. Analysis shows that in the last 3 months nearly 1 in 4 new cars sold had a plug.
The second cut in grants for electric vehicles in 2021
Due to the increase in plug-in cars, vans, and motorcycles, the government announced on 15 December 2021 that the grant scheme for zero-emission vehicles will now target less expensive models, allowing the funding to go further and helping more people make the switch to an electric vehicle (EV).
New electric car grant rates and eligibility criteria
Plug-in Car Grant (PiCG), which offered consumers 35% off the purchase price of an EV car up to a maximum of £2,500, has been cut to £1,500.
A change has also been made to the plug-in car grant eligibility criteria. Previously, electric cars with a recommended retail price (RRP) of up to £35,000 used to qualify, but now the maximum is £32,000.
Moreover, hybrid electric cars that emit less than 50g/km of CO2 and are capable of travelling at least 70 miles without emitting any emissions are no longer eligible for the grant.
Changes to electric van grant and entitlement
Grant rates have also been cut for light commercial vehicles (LCVs) under the Plug-in Van Grant (PiVG).
Consumers purchasing or leasing small vans weighing 2.5 tonnes gross vehicle weight (GVW) or less were eligible for 35% off the vehicle price up to a maximum of £3,000. That limit has now been lowered to £2,500.
Similarly, the grant has been cut for larger vans with GVW of 2-3.5 tonnes, from a maximum of £6,000 to £5,000.
Grant rates for vehicles over 3.5 tonnes remain unchanged.
What about EV orders placed prior to the EV grant changes?
A dealer or vehicle manufacturer will be able to claim for orders placed in the seven days before the rate change that were not logged on the portal. Therefore, any orders placed between 12:01 am on December 8 and 11.59 pm on December 14, before the grants rate changed, and have not yet been logged on the portal, will be paid according to the previous rates and eligibility criteria.
"We’re concerned the Government has taken this step too soon," says Nicholas Lyes (RAC)
The RAC's head of roads policy, Nicholas Lyes, called the plug-in grant cut "disappointing", noting that only 16 EV car models are now eligible.
"RAC research suggests that drivers already feel the upfront cost of electric vehicles is too high, so this has to be seen as a step in the wrong direction," he added. "With a little luck, additional models coming on to the market will help negate the Government’s cut to the plug-in car grant. In the meantime, those wanting to make the switch may be well advised to take advantage of more affordable leasing options.
“While it’s true that sales of electric vehicles have been growing strongly, it’s worth noting that this is still from a relatively low base. We’re concerned the Government has taken this step too soon.”
The Office for Zero Emission Vehicles (OZEV) issued the following email to plug-in grant portal users: “In order to make our available funding go further and help more businesses and consumers to make the switch, we are re-focusing our vehicle grants on the more affordable vehicles, reducing grant rates and limiting the number of van grants available to 1,000 per customer per year.”
The updated terms have been applied from 7 am on December 15th 2021. The OLEZ grant portal has been temporarily suspended while the new rates are implemented.
OZEV explained: “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.”
"The market is charging ahead in the switch to electric vehicles," said Trudy Harrison, the transport minister. "This, together with the increasing choice of new vehicles and growing demand from customers, means that we are refocusing our vehicle grants on the more affordable vehicles and reducing grant rates to allow more people to benefit, and enable taxpayers’ money to go further.
"We want as many people as possible to be able to make the switch to an electric vehicle, which is why we will also be introducing new rules to make it easier to find and pay at charge points.
"This will ensure drivers have confidence in our charging infrastructure, as we look to reduce our carbon emissions, create green jobs and level up right across the UK."
What's interesting, the reduction comes as more than three quarters (77%) of respondents said EVs can be widely adopted without government subsidies by 2030. Meanwhile, 91% of global executives said such programs should be supported.
KPMG UK's head of automotive Richard Peberdy said: “Today’s grant cut reduces consumer incentivisation to make the switch to electric vehicles, at a time when inflation is rising and wider economic uncertainty continues.
"Although the timing of this decision is questionable, the automotive industry remains confident about the path to net-zero.
"Our recent global automotive survey suggests that industry executives see a strong need for subsidy schemes right now to aid the transition to EVs.
"But, over three-quarters of executives told us that even if subsidy schemes were totally removed, EV adoption will still be widespread by the end of this decade.”
How did the market respond to the last plug-in grant changes in March 2021?
Last year, the government reduced the electric car grant from £3,000 to £2,500 and excluded models costing more than £35,000.
The market responded by dropping the prices of 18 zero-emission models to meet the eligibility criteria. It will be interesting to see whether they follow the same pattern this time.
The government limits the number of applications for electric van grants each year
The government has imposed a limit on how many times per year large fleets can apply to electrify their commercial vans.
During each financial year (April 1 to March 31), businesses, organizations or individuals can receive up to 1,000 grants. These limits do not apply to leasing companies like us, though.
Any orders placed on the portal before 7 am on December 15 will not be included in the limit for this year.
Orders for plug-in truck grants will continue to be subject to per customer and total limits.
According to OZEV, the move will ensure the plug-in van grant scheme is "sustainable" and that the grant is distributed fairly across all stakeholders.
Motorcycle and moped grants are also changing
Mopeds and motorcycles will also be affected by the grant changes. Under a new grant program, the government will provide 35% off of the cost of a motorcycle up to £500, and £150 off of the cost of a moped, with a price cap on vehicles of £10,000.
Previously, the government offered a discount of 20% up to a maximum of £1,500 on electric motorcycles and mopeds.
Almost 50% of mopeds sold this year were battery-powered, according to the publication, with some models now being priced similarly to their internal combustion engine counterparts. Changes like these and the new price cap will ensure that funding is directed where it is really needed to support the transition to zero-emission two-wheelers.
Government's £3.5 billion commitment to support the transition to zero-emission vehicles
Among these is its recent investment of £350 million to support the electrification of UK vehicles and their supply chains, as part of its £1bn commitment, and £620 million for EV grants and infrastructure, focusing on local residential charging points.
Integrating end customers into the grant portal
In order to monitor the plug-in van grant limit and ensure that grants are fairly allocated, OZEV is also requiring that orders created on the portal include a valid 'end customer'.
When it comes to leasing orders, this refers to the lease company's customer, not the lease company itself.
Claims that lack this information or contain the wrong customer details will be cancelled.
How will the government's cut in EV grants affect your decision to switch to an electric car or van? Let us know!