The Government has confirmed that it will substantially reduce financial incentives designed to help motorists purchase the greenest new cars on sale.
As we reported earlier this week, the Plug-in Car Grant will have revised rates from November 9, with the current electric car subsidy reduced from £4,500 to £3,500 and the grant for plug-in hybrid cars – which was £2,500 – rescinded entirely.
Cheekily, the Department for Transport has even suggested it may introduce the trimmed rates earlier if there’s a surge in orders of electric and hybrid models as drivers try to take advantage of the expiring rates.
The move has angered motoring groups, who have slammed the timing of the decision, which comes as ministers try to reduce emissions by forcing drivers out of petrol and diesel vehicles and into more expensive electrified cars.
Full price hybrids: The decision to slash the Plug-in Car Grant for electric vehicles and remove the £2,500 subsidy entirely for hybrids means some of the UK’s best-selling green cars will become significantly more expensive to purchase from next month
An announcement on Thursday evening confirmed what This is Money reported back in July.
The decision will see the financial incentives substantially reduced for electric models and culled for plug-in hybrids altogether.
That means anyone who wants to buy the UK’s best-selling electrified model – the Mitsubishi Outlander PHEV – from November 9 will have to pay the full price, from £36,755 to £45,600.
This is despite the Government’s proposal to remove petrol and diesel cars from sale in 2040 and force all motorists to own electrified models from 2050.
The Department for Transport said the ‘changes to funding’ will ‘support purchasing the next 35,000 of the cleanest vehicles’.
‘These changes to financial incentives reflect the ongoing success of the Plug-in Car Grant in increasing uptake of electric vehicles, a key part of the government’s Road to Zero strategy.
‘The PICG has helped the plug-in hybrid market become more established, and the government will now focus its support on zero emission models like pure electric and hydrogen fuel cell cars.’
It failed to confirm if there would be a vehicle price cap on grants based on the total value of the car.
How the Plug-in Car Grant rates will look from November 9
CATEGORY 1 CARS – GRANT REDUCED FROM £4,500 TO £3,500
These vehicles have CO2 emissions of less than 50g/km and can travel at least 112km (70 miles) without any CO2 emissions at all.
BMW i3 and i3s
Hyundai IONIQ Electric
Hyundai Kona Electric
Kia Soul EV
Mercedes-Benz B-Class Electric Drive
Nissan e-NV200 (5-seater and 7-seater)
Smart EQ fortwo
Smart EQ forfour
Tesla Model S
Tesla Model X
CATEGORY 2 CARS – £2,500 GRANT REMOVED
Category 2 cars These vehicles have CO2 emissions of less than 50g/km and can travel at least 16km (10 miles) without any CO2 emissions at all.
Audi A3 e-tron
Hyundai IONIQ PHEV
Kia Niro PHEV
Kia Optima PHEV
Mercedes-Benz C350 e (with 17 inch rear wheels)
Mercedes-Benz E350 e SE
Mitsubishi Outlander (except Commercial)
Toyota Prius Plug-in
Volkswagen Golf GTE
Volkswagen Passat GTE
Volvo S90 Twin Engine
Volvo V60 D5 Twin Engine
Volvo V60 D6 Twin Engine
Volvo V90 Twin Engine
Volvo XC60 Twin Engine
CATEGORY 3 CARS – £2,500 GRANT REMOVED
These vehicles have CO2 emissions of 50 to 75g/km and can travel at least 32km (20 miles) without any CO2 emissions at all.
Mercedes-Benz E350 e AMG Line
The new grant rates will come into effect on Friday 9 November, though the DfT incredibly included a caveat in it’s statement saying it may introduce the lowered subsidy levels earlier if there’s a surge in demand for electric and hybrid cars before this date.
This is highly unlikely to take place, as it was reported last week that many manufacturers have ceased taking orders for their hybrid cars as they are prioritising the production of petrol and diesel models.
Volkswagen has stopped taking orders for its plug-in hybrid models – the Golf GTE (pictured) and Passat GTE – as it concentrates on the production of petrol and diesel cars
RAC head of roads policy Nicholas Lyes said the decision to reduce rates was a ‘major blow to anyone hoping to go green with their next vehicle choice’ and blasted the decisions for ‘making little sense when we need to focus our efforts on lowering emissions from vehicles’.
‘Of particular concern, some popular zero emission capable plug-in hybrid models will lose their plug-in car grant altogether.
‘With up-front costs still a huge barrier for those hoping to switch to an electric vehicle, this move from the Government is a big step backwards and is in stark contrast to countries like Norway where generous tax incentives have meant that it has one of the highest ownership levels of ultra-low emission vehicles of anywhere in the world.’
Jack Cousens, head of roads policy for the AA said there was plenty of evidence to suggest that the move will stall their efforts to reduce vehicle emissions.
‘Seven out of 10 drivers say grants are necessary to buy an ultra-low emission vehicle until such time that the price compared to a conventional petrol or diesel car is the same.
‘And eight out of 10 say that the high purchase price of electric and hybrid cars is the main stumbling block to owning such a car. This announcement will simply put more drivers off from buying greener cars.
‘Rather than give consumers excuses to shy away from the greenest possible option, Government needs to provide reasons and incentives to convince drivers hybrid and electric cars are the way forward.
‘At a time when air quality is of great concern, those who bought diesels in good faith, and with Government encouragement, will feel they have been given the cold shoulder rather than a helping hand.’
If you want to buy the new £60,000 Jaguar I-Pace you will only receive a grant of £3,500 towards the purchase price of the car
The AA said 7 out of 10 drivers think grants are necessary to help with the purchase of green – but pricey – electric cars, like the Tesla Model S and X
Alex Buttle from online car buying comparison website Motorway.co.uk added that the move felt like a ‘mad curveball by government at a time when they should be introducing more grants to encourage car drivers to switch to cleaner car models’.
He added: ‘It comes at the worst possible time for electric vehicles as last month’s SMMT new car sales showed that electric and hybrid take up was already slowing.
‘The mission to convince car buyers to switch appears to be losing traction and the hope that electric cars would re-invigorate the new car industry now feels like a fading dream.
‘This decision will just cause unnecessary confusion and could well put the brakes on electric car sales.’
Mitsubishi Motors UK said it was ‘surprised and disappointed’ at the decision, which is ‘completely at odds with the Government’s stated objective of making the UK a world leader in green mobility in the future’.
Motoring groups blasted the timing of the decision, saying it goes against ministers’ objectives to reduce vehicle emissions
This is Money revealed back in July that this could be the case, having found references in the Government’s ‘Road to Zero’ strategy document suggesting that grants to help the purchase of electric and hybrid cars and home charger installments could be scaled back.
The official document stated: ‘As the market becomes better established and more competitive, the need for direct government financial support will decrease.
‘We therefore expect to deliver a managed exit from the grant in due course and to continue to support the uptake of ultra low emission vehicles through other measures.’
The SMMT previously called for the plug-in grants to be maintained ‘at least at the current rate’ beyond 2020.
The DfT incredibly included a caveat in it’s statement saying it may introduce the lowered subsidy levels earlier that November 9 if there’s a surge in demand for electric and hybrid cars before this date
‘Evidence shows that prematurely removing upfront purchase incentives before the market is mature can have a devastating impact on demand,’ commented Mike Hawes, chief executive at the motor industry body.
‘Consistent and technology-neutral incentives are needed if government’s extremely high ambition levels are to be met.’
He added this week: ‘We understand the pressure on the public purse but, given the importance of environmental goals, it’s astounding that just three months after publishing its ambitious vision for a zero emissions future, government has slashed the very incentive that offers our best chance of getting there.
‘Industry is working hard to address the challenges of CO2 and air quality but, while it can produce the technology, it cannot determine the pace of uptake.
‘We have consistently said that if the UK is to be fit for an electrified future, we need a world-class package of incentives and infrastructure.
‘Government needs to rethink its policy, else its ambitions will never be realised.’
The Electric Vehicle Homecharge Scheme may also be cut from next year.
The Road to Zero document said it will continue in its current form – with a grant of £500 – until March 2019, or until 30,000 installations have been supported.
Again, the strategy will review grant levels with a view to removing financial support for having plug-in points installed at homes as uptake increases and the market becomes self-sustaining.
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