ELECTRIC cars costing more than £35,000 are no longer eligible for the plug-in car grant, as the government takes aim at the wealthiest buyers of zero emission cars.
Effective from today, the upper limit of eligibility for new pure-electric cars will be reduced from £50,000. In addition, the total buyers are able to claim off the price of a new electric car is being cut by £500, from £3,000 to £2,500, The Times has learned.
As a result, a number of cars have fallen off the list of eligible vehicles. Drivers with orders for the Tesla Model 3 and Ford Mustang Mach-E, both of which start at just over £40,000, will be waking up to the news that their vehicles are now £3,000 more expensive.
Higher specification versions of many more affordable models will be caught up, too, including the Kia e-Niro, Honda e and Volkswagen ID.3. However, it was claimed that more than half of electric car models would still be eligible for funding after the change.
The move comes after a “surge in demand” for pure-electric vehicles, according to The Times’s Whitehall source, who added that the overall funding level was not being reduced, rather spread further. The Treasury has allocated £403 million for the plug-in car grant up to April 2023.
“We’re ending the Tesla subsidy,” the source said. “Taxpayers should not be subsidising people to buy £50,000 cars.”
They added: “Given soaring demand we are refocusing on the more affordable zero-emission vehicles . . . where taxpayers’ money will make more of a difference.”
Almost three times the number of pure-electric cars were sold last year compared with the previous 12 months, according to data from the Society of Motor Manufacturers and Traders. Although the total number was only 108,205 – just 6.6% of new car registrations – the increase in electric car sales was against an overall market decline of 29.4%, due to the coronavirus pandemic shutdowns.
The market spasms resulted in the Tesla Model 3 recording more registrations than any other new car in the UK last December, though the American electric car didn’t record enough sales for the year as a whole to register in the top 10 best sellers of 2020.
The UK government is aiming to move all drivers to zero emission vehicles in an effort to meet tough emissions targets, including become net carbon neutral by 2050, and has announced a ban on sales of new petrol and diesel from 2030. Hybrids – including plug-in hybrids – will be removed from showrooms five years later.
Graham Hoare, chairman, Ford of Britain could not hide his frustration at the effective increase in cost over the advertised priced to early customers of the Mustang Mach-E.
“Today’s news from the UK Government that plug-in grants for passenger and commercial vehicle customers are being reduced is disappointing and is not conducive to supporting the zero emissions future we all desire,” he said.
“Robust incentives — both purchase and usage incentives — that are consistent over time are essential if we are to encourage consumers to adopt new technologies, not just for all-electrics but other technologies, too, like PHEVs (plug-in hybrids) that pave the way to a zero emissions future.”
Many others in the car industry noted the contradiction in reducing incentives for electric cars while the market share is so small, as well as aiming to reduce carbon emissions.
John Wilmot, CEO, car leasing comparison website LeaseLoco, said the government should be offering more incentives, not cutting the grant: “While no-one expected the free cash offer to last forever, is this really the best time to announce a further cut, at a time when households are tightening their belts?
“One of the major barriers to early switching to electric is the cost of many of the EVs on the market, even at the cheaper end. The grant at least cushioned the blow, but cutting it again will disincentivise car owners and make them think twice about switching to electric now over purchasing cheaper new diesel and petrol cars or buying secondhand.
“Cutting the grant sends the wrong message to car owners that the Government isn’t taking the EV switchover seriously.”
Edmund King, the AA president, said: “This is not great news for those waiting for delivery of the stylish entry-level Ford Mustang Mach-E as they will find that the price has ‘gone up’ by £3,000. Many buyers would have been counting on the subsidy.
“On the other hand, most drivers knew that the ‘free ride’ wouldn’t last for ever and at least more early adopters should be able to benefit from spreading the grant further.”
RAC head of roads policy Nicholas Lyes said that by cutting the grant from £3,000, the Government may risk people holding on to their older, more polluting vehicles for longer.
“Ministers seem to talk-the-talk when it comes to encouraging people into cleaner vehicles, but cutting the plug-in car grant certainly isn’t walking the walk,” he said.
“While it’s understandable to focus grants on the affordable end of the market where there’s the best opportunity for greater take-up, the industry has been hit hard by the pandemic and incentives to get consumers to go green remain vital in encouraging the sale clean new cars.
“The extent to which drivers might delay upgrading their vehicles as a result of the economic effects of the coronavirus is also yet to be seen, which makes the timing of this announcement all the more surprising.
“Even though more models are coming on to the market, our research suggests upfront cost remains a concern to drivers when comparing the cost of an electric vehicle with a similarly sized conventional vehicle.”
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