Plug-in grants on electric cars and vans have been slashed and eligibility criteria changed with immediate effect in a government move that’s been slammed across the industry.

Only around 20 electric cars are still eligible for the Plug-in Car Grant after today’s changes

It means Plug-in Car Grants for electric cars now fall to a maximum of £1,500 from the previous £2,500 while the price ceiling drops from £35k to £32k.

Meanwhile, van grants have also been cut, according to the joint announcement today from the Department for Transport (DfT) and Office for Zero Emission Vehicles (OZEV).

For small vans, the funding falls further to a maximum of £2,500, from the £3,000 level implemented in the spring this year. And for large vans it falls to £5,000 from £8,000. Both have a limit of 1,000 grants per customer, which will “enable a more sustainable grant scheme and will ensure that taxpayers’ money is distributed more fairly across businesses seeking to transition their vehicles to zero emission”.

No changes to the grants for larger commercial vehicles have been announced. However, wheelchair-accessible vehicles are now being prioritised, which retain their previous £2,500 grant and get a higher £35,000 price ceiling.

And the Government also said it will introduce new rules next year that will mandate a minimum payment method – such as contactless payment – for new 7.1kW and above charge points, including rapids. Meanwhile, motorists will soon be able to compare costs across networks which will be in a recognisable format similar to pence per litre for fuel and there will be new standards to ensure reliable charging for electric vehicle drivers.

Announcing the changes today, Transport Minister Trudy Harrison said that with demand so strong, “it is right that we seek to focus the grants, which are funded by the taxpayer, on the areas where they will have the most impact and where the market still needs government support”.

She added: “Generous tax incentives, including zero road tax and favourable company car tax rates, which are a strong driver of uptake and can save drivers over £2,000 a year, remain in place. It is expected that the total cost of EV ownership will reach parity during the 2020s compared to petrol and diesel cars.”

It’s only nine months since grants were last cut and the pricing ceiling dropped from £50k to £35k and that decision had been branded premature. It had also led to a raft of action among carmakers to reduce model pricing to ensure key electric cars still qualified for the grants.

And more recently, in May this year, OZEV said that the grants would be subject to future changes with no notice and added that with while the grants had been extended until 2022/23, the Government intends to “gradually deliver a managed exit” from them going forwards – although other support measures will be continued.

OZEV also said at the time that while it had been able to give notice at the end of 2018 and in March 2020 when the grants were slashed, this was due to lower uptake and it confirmed it was “unlikely to be able to provide additional notice” in the future. Both announcements had led to a large spike in orders, in particular in 2020, before the changes kicked in, and OZEV said that the “Government has a responsibility to manage the grant budget and to deliver value for money for taxpayers”.

Industry reaction brands it an “extremely disappointing” move

Today’s decision has come under fire across the fleet and automotive sector, in particular for the reduced grant rates on electric vans – a market still very much in its infancy and working to gain a foothold with operators.

Gerry Keaney, BVRLA chief executive, said: “Financial incentives such as the Plug-in Grants have proven to be a positive factor in encouraging people into electric vehicles, evidenced by the continued growth we’re seeing. Subsidies cannot run forever, but the fleet sector relies on certainty, reducing these grants will have a negative impact on this.

“While we’ve seen high levels of uptake within the car market, the situation is not the same for electric vans. The disparity across the industry means that sweeping solutions are not suitable.

“Incentives have had a positive impact to date but there is more to be done. It is disappointing to see support declining when cost remains a crucial stumbling block.

“There remain many barriers that are slowing down the mass transition to electric vans. Today’s news increases those challenges and will delay the uptake of electric vans. This is particularly the case for SMEs, where the lack of price parity between ICE vehicles and electric alternatives makes it hard to create a realistic business case to make the switch.

“For the move towards electric vans to gain momentum, more support and incentives are essential, now is not the time to remove or reduce them.

“We are calling on the Government to provide more support around commercial vehicles, including an extension of the Plug-in Van Grant beyond the current 2022/2023 end date.”

The National Franchised Dealers Association (NFDA), which represents franchised car and commercial vehicle dealers in the UK, also said the move was extremely disappointing and urged the Government to consider a number of issues that will be affecting dealers and customers at an operational level. These include the impact to customers in the middle of ordering an EV. While the Government has said it will allow dealers or vehicle manufacturers to claim for any orders that were placed by customers in the seven consecutive days before the grant rate change which were not logged on the portal, it doesn’t apply to any orders midway through.

Chief executive Sue Robinson added: “Cutting the grant strongly disincentivises EV adoption across the UK. This, in turn, will exacerbate the unequal, regional EV uptake gap. While the market share of EVs is growing at an impressive rate, it is premature to reduce the levels of this support to the consumer and send the wrong message to the public, especially as other G7 nations continue to ramp up consumer support.”.

Meanwhile, the RAC also said the grant cut, which leaves only around 20 EV models now eligible, was disappointing and doesn’t leave a great deal of choice for consumers.

Head of roads policy Nicholas Lyes continued: “RAC research suggests that drivers already feel the upfront cost of electric vehicles is too high, so this has to be seen as a step in the wrong direction. With a little luck, additional models coming on to the market will help negate the Government’s cut to the plug-in car grant. In the meantime those wanting to make the switch may be well advised to take advantage of more affordable leasing options.

“While it’s true that sales of electric vehicles have been growing strongly, it’s worth noting that this is still from a relatively low base. We’re concerned the Government has taken this step too soon.”

But while Richard Peberdy, head of automotive, KPMG UK, agreed that the timing of the decision was questionable, he added that the automotive industry remained confident about EV take-up and the path to net zero.

“Our recent global automotive survey suggests that industry executives see a strong need for subsidy schemes right now to aid the transition to EVs. But, over three quarters of executives told us that even if subsidy schemes were totally removed, EV adoption will still be widespread by the end of this decade.”