Government slashes popular electric vehicle grant with immediate effect

Sam Dickerson

18 Mar 2021

New grant price threshold means Tesla Model 3 or anything over base-level offerings for the Hyundai Kona 64kwh or Volkswagen I.D 3 will not be eligible.

The UK government has slashed the grant for electric cars by £500 with immediate effect, much to the dismay of prospective purchasers and the automotive sector alike.

The Government's push to encourage more eco-friendly vehicles on the road has seen it subsidise 35 percent of the purchase price of certain models, up to a maximum contribution of £3,000.

However, the government didn't anticipate such a surge in demand and the success of the scheme has prompted a rethink, meaning the highest grant available has been dropped to £2,500, while the upper limit of eligible cars is down from £50,000 to £35,000.

Due to the lowered price eligibility criteria, the Tesla Model 3 - one of the country's best-selling electric vehicles (EV) - won't meet the grant's freshly lowered limits due to its £40,500 cost.

Customers looking at another popular EV, the Hyundai Kona Electric 64kWh, could opt for the base model, which would be eligible for the grant with a recommended retail price of £33,275, just under the £35,000 threshold.

The Volkswagen I.D 3's basic spec Life model comes in at £32,300, but the next option up, Business, costs £36,030, just over the new qualifying limit.

The news comes a fortnight after the Chancellor Rishi Sunak had announced a generous subsidy for petrol and diesel car drivers by freezing fuel duty.

Electric cars currently cost more than their combustion engine counterparts and are seen as of crucial importance with regards to meeting the UK’s decarbonisation targets, banning the sale of new combustion engine vehicles by 2030, part of its aim to achieve net-zero emissions by 2050.

The timing of the government's decision, in increasing the cost of many EVs for prospective buyers, has perplexed customers and manufacturers alike, with the sector suffering so badly over the last year on many fronts due to the effects from COVID-19 and lockdowns on their dealerships, supply chains and revenues.

The contributory scheme was introduced in 2011, and the government has provided close to £1.3 billion in plug-in vehicle grant funding to bring ultra-low emission vehicles onto UK roads, supporting the purchase of more than 285,000 vehicles, according to government figures.

Defending the government's new policy, Transport Minister Rachel Maclean said: "We want as many people as possible to be able to make the switch to electric vehicles as we look to reduce our carbon emissions, strive towards our net-zero ambitions and level up right across the UK.

"The increasing choice of new vehicles, growing demand from customers and rapidly rising number of chargepoints mean that, while the level of funding remains as high as ever, given soaring demand, we are refocusing our vehicle grants on the more affordable zero-emission vehicles – where most consumers will be looking and where taxpayers’ money will make more of a difference.

"We will continue to review the grant as the market grows," Maclean added.

Mike Hawes, SMMT chief executive, believes the decision to slash the grant is badly timed, saying: "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," he added. 

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Sam Dickerson

18 Mar 2021