UK government 'disagrees' with recommendation for electric car grants

The UK government has pushed back on reintroducing a grant to lower the cost of electric cars.

In its response to recommendations set out in February by the House of Lords, which included "targeted grants to incentivise the purchase of EVs", the government rejected the idea of a new subsidy.

The UK hasn't had one since the former Plug-In-Car grant (PICG) - which the government claims injected £1.5bn of taxpayer money to support early EV growth - fizzled out a couple of years ago.

While it agreed with some of the other recommendations raised by the Lords report, and that the PICG "was vital in building the early market for electric vehicles", it reckons the grant's effect on demand for electric cars was subsequently less than "other existing price incentives, such as company car tax".

It also predicted that - with battery electric vehicles accounting for 16.5 per cent of new car sales in the UK - the price gap to petrol and diesel cars would continue to narrow as battery costs come down.

In response, Fiat said the government is now 'well and truly on the cusp of [an electric vehicle] crisis'. In a statement, it said: “Half a million electric and plug-in hybrid (PHEV) vehicles were registered during 2023, which is fantastic news. But the EV market for private buyers is in real jeopardy, accounting for fewer than one in five new electric cars registered in 2024.

"The government says it is targeting its incentives where they have the most impact and deliver the greatest value for money. Whilst we welcome that there is an incentive in place for electric van buyers, we know the biggest barrier to entry for a retail electric car buyer is price. Surely, then, the greatest impact would be to address this by helping to reduce the upfront cost of the car, via the reintroduction of a government grant.”

Mike Hawes, Society of Motor Manufacturers and Traders boss, said: “Consumers now enjoy the widest ever choice and availability of electric cars, offering outstanding technology, a smooth, quiet ride and, potentially, cheaper running costs. Government has chosen to regulate the market, mandating manufacturers sell ever more EVs, despite, as they admit themselves, cost parity being unlikely before the end of the mandate.

"So, whilst fleet uptake continues to grow significantly, buoyed by effective government incentives, private customers have no support or encouragement to switch. Achieving ambitious net zero targets depends on moving the whole market and while manufacturers are providing compelling offers, they can’t single-handedly fund the transition indefinitely.

"Support for private buyers – such as temporarily halving VAT on purchases, reform to vehicle excise duty, and reducing VAT on public charging to match home charging – would send the right message, make the transition fair for all and deliver the rapid market transformation the UK sorely needs.”