The UK government has cut grants for electric car buyers, to the horror of the automotive industry as it tries to rapidly shift away from fossil fuels.
The maximum grant for electric cars has been reduced to £2,500 with immediate effect on Thursday, from £3,000. The government has also lowered the price cap for cars eligible for the subsidy from £50,000 to £35,000.
The cut is likely to be controversial, only a fortnight after the chancellor, Rishi Sunak, extended a generous implicit subsidy for petrol and diesel car drivers by freezing fuel duty.
Electric cars cost more than those with internal combustion engines, but are seen as a crucial part of meeting the UK’s decarbonisation targets.
It means the government has unilaterally increased the cost of an electric car, which produces zero carbon dioxide exhaust emissions, at the same time as keeping down the costs of burning petrol and diesel – in the same year the UK is hosting the UN’s climate conference, Cop26.
The government said it wanted to target help at people less able to afford electric cars, rather than wealthier buyers of premium vehicles.
The transport minister Rachel Maclean said the government wanted “as many people as possible to be able to switch to electric vehicles”, but flagged rising costs. “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,” she said.
The car industry criticised the move, which has meant the government has cut the support for electric cars by £1,000 in little more than a year. In the March 2020 budget Sunak cut the grant from £3,500 to £3,000 and introduced the £50,000 eligibility cap. When the support was introduced in 2011, it was worth up to £4,500 per car.
Mike Hawes, chief executive of the Society of Motors Manufacturers and Traders, a lobby group, said: “The decision to slash the plug-in car grant and van and truck grant is the wrong move at the wrong time. 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, 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.”