UK to end plug-in vehicle grant to focus on expanding EV charging network

The UK government has decided to close the plug-in vehicles grant scheme for new cars to refocus the GBP300 million ($362.3 million) in funding on expanding the public electric vehicle charging network, it said June 14.

It said it was closing the grant after "successfully kickstarting the UK's electric car revolution and supporting the sale of nearly half a million electric cars."

The funding would rather go toward the "main barriers to the EV transition," including public charging and supporting the purchase of other road vehicles that require further development to switch to electric, it said.

"The scheme has succeeded in creating a mature market for ultra-low emission vehicles, helping to increase the sales of fully electric cars from less than 1,000 in 2011 to almost 100,000 in the first five months of 2022 alone," the government said, adding that battery and hybrid EVs made up around half of all new cars sold and EV sales represented one in six new cars.

According to data from the Society of Motor Manufacturers and Traders, 92,512 BEVs were sold over the January-May period, up 71.2% year on year and making up 14% of the total market share.

The total share of internal combustion engine cars has fallen from 58.2% in full-year 2021 to 49.5% in January-May 2022, SMMT data showed.

Higher EV demand has boosted battery raw material prices. The Platts seaborne lithium carbonate and lithium hydroxide assessments from S&P Global Commodity Insights have surged 118% and 139.7% respectively since the start of 2022 to $73,700/mt CIF North Asia and $76,000/mt CIF North Asia June 14.

'Wrong message'

While the SMMT welcomed the government's continued support for new electric van, taxi and adapted vehicle buyers, SMMT CEO Mike Hawes said in a statement that the UK was now "the only major European market to have zero upfront purchase incentives for EV car buyers yet the most ambitious plans for uptake."

"The decision to scrap the plug-in car grant sends the wrong message to motorists and to an industry which remains committed to government's net zero ambition," he added.

The UK government plans to ban the sale of new gasoline and diesel cars by 2030.

"With the sector not yet in recovery, and all manufacturers about to be mandated to sell significantly more EVs than current demand indicates, this decision comes at the worst possible time," Hawes said, adding that if the UK had any chance of hitting targets, the government had to use the savings and "compel massive investment in the charging network, at rapid pace and at a scale beyond anything so far announced."

The government said it had "always been clear" that the grant was temporary and it had confirmed GBP582 million funding in 2020 until 2022-23.

"Successive reductions in the size of the grant, and the number of models it covers, have had little effect on rapidly accelerating sales or on the continuously growing range of models being manufactured," it said.

In March 2021, the government reduced grants for EVs priced under GBP35,000 from GBP3,000 to GBP2,500 and scrapped grants for higher-priced vehicles.

In December, it then reduced the grant again to up to GBP1,500 for cars costing less then GBP32,000. It also prioritized support for wheelchair accessible vehicles, which kept the GBP2,500 grant and the GBP35,000 price cap.

The government pointed out that the running cost savings for EVs compared to ICE vehicles often exceeded the current GBP1,500 grant and EV drivers would still benefit from "generous incentives including zero road tax and favorable company car tax rates, which can save drivers over GBP2,000 a year."

Refocus funding

In addition to increasing charging points to help eradicate range anxiety and make the transition to zero-emission transport easy and convenient for everyone, it also plans to boost sales of plug-in taxis, motorcycles, vans and trucks and wheelchair accessible vehicles.

The government has already committed GBP1.6 billion to building the UK's public charge point network.

In November, it introduced new legislation to compel new homes and buildings, including supermarkets and workplaces, to install EV charge points from 2022.

The government had injected GBP2.5 billion into the transition to EVs since 2020, but had to invest funding where it would have the highest impact, Transport Minister Trudy Harrison said.

"Having successfully kickstarted the electric car market, we now want to use plug-in grants to match that success across other vehicle types...to help make the switch to zero emission travel cheaper and easier," she added.

A recent report had found that, while the plug-in car grant was "vital in building the early market for EVs, it had since been having less of an effect on demand, with other existing price incentives such as company car tax, continuing to have an important impact," Harrison said, adding that it had also been found that the plug-in van market would benefit more from grant incentives to support businesses to make the switch.

With the refocus, she said EV drivers could expect cheaper, more reliable and quicker public charge points, as the government was committed to installing 10 times more on-street chargers by 2030.