Government withdraws Plug-in Car Grant but EVs remain highly attractive

Government withdraws Plug-in Car Grant but EVs remain highly attractive

Posted by

Marc Murphy

June 2022

The Government has announced the withdrawal of the Plug-In Car Grant (PICG), a £1,500 subsidy towards the acquisition cost of a new electric car, saying the money saved will be invested in different vehicles, such as vans, and infrastructure instead.

The withdrawal is with immediate effect, although the Government says that grants will still be honoured for vehicles already on order. Instead, £300 million of Government money will be directed towards stimulating EV sales in specialist sectors, such as light commercial vehicles, and charging infrastructure.

Battery electric LCVs accounted for only 4% of new van sales in the first five months of this year, and represent only 0.6% of the commercial vehicle parc, where diesel still accounts for a 96.2% market share.

Additional funding for public charging network

The Government has also said that it will target future funding towards the expansion of the public chargepoint network, which it sees as an important element in sustaining electric car sales.

Transport Minister Trudy Harrison said: “Government funding must always be invested where it has the highest impact. Having successfully kickstarted the electric car market, we now want to use Plug-In Grants to match that success across other vehicle types, from taxis to delivery vans and everything in between, to help make the switch to zero emission travel cheaper and easier.”

When the PICG was launched in 2011, it applied to both electric and plug-in hybrid (PHEV) cars, and offered up to £5,000 off the price of a car with CO2 emissions below 75g/km.

Since then the amount of the subsidy has gradually been reduced, while the qualifying criteria have tightened. PHEVs no longer qualify, and the price of eligible vehicles has been lowered to a maximum of £32,000. Before its withdrawal, the grant was £1,500, having been cut to that level from £2,500 last December.

Fleet Alliance CEO Andy Bruce, commented: “There are still enormous benefits from leasing an electric car at the moment despite the removal of the PICG, not least from the very low Benefit in Kind tax rates they attract – currently 2% in this tax year – which represents a huge saving over ICE cars.

“In addition, the risk in leasing an EV is now very low as they become more mainstream and established, which helps keep monthly rentals down and reduces residual value risk.

“Meanwhile, battery technology is improving all the time, the battery is fully maintained and under warranty, so any risk associated with battery during its life is virtually eradicated.

“And, as our EVs are sourced through our panel of carefully selected major funders, we benefit from the access to stock and levels of discounts available to large bank-owned leasing companies,” he said.

Salary sacrifice makes EVs affordable for everyone

To make EVs available to a wider audience, Fleet Alliance recently launched a salary sacrifice product aimed specifically at electric cars.

“Our salary sacrifice product makes EVs more affordable to all drivers, not just company-car drivers, while cutting the corporate carbon footprint and better managing grey fleet risk into the bargain,” said Andy Bruce.

“There has never been a better time to start making the switch to full electric from a tax point of view, as leasing costs are continuing to fall. And with the rising price of energy on world markets, EV-rich fleets will definitely reap the cost benefits over the coming months and years.

“Sales of battery electric vehicles are now on the increase – and accounted for 12.4% of new vehicle sales in May – and we believe that, given the record cost of fuel at the pumps, they represent tremendous value,” he added.

Concerns over PICG withdrawal

Automotive trade associations have reacted with concern to the decision to withdraw the PICG, saying that now was not the time to end the incentives to buy electric cars if zero net emissions targets were to be met.

Mike Hawes, Chief Executive of vehicle manufacturers’ trade body, the SMMT said the decision sent the wrong message both to motorists and to an automotive industry which remains committed to government’s net-zero ambition.

“Whilst we welcome government’s continued support for new electric van, taxi and adapted vehicle buyers, we are now the only major European market to have zero upfront purchase incentives for EV car buyers, yet the most ambitious plans for uptake,” he said.

“If we are to have any chance of hitting targets, government must use these savings and compel massive investment in the charging network, at rapid pace and at a scale beyond anything so far announced.”

The Association of Fleet Professionals (AFP) said the withdrawal of the PICG suggested the government may now believe the company car market had sufficient EV momentum to require no more support.

Paul Hollick, chair at the AFP, said: “What the government should note is that the impetus behind EV use by businesses is partially driven by environmental concerns but also by financial advantages. If the sums for operating EVs don’t stack up, adoption could very well slow down,” said Hollick.

The Government has announced a ban on the sale of new petrol and diesel cars and vans in less than eight years’ time from 2030 as a part of its ‘Road to Zero’ strategy.

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