The UK government’s plug-in car grant, which takes £2500 off the cost of eligible new EVs, will remain until at least the 2022-23 financial year, but what will happen after that is unknown.
The automotive industry has been vocal about it staying in place beyond that date in order to help the UK’s car parc go electric by 2030. It has been reduced twice since its introduction at £5000 in 2011, while plug-in hybrids had their eligibility rescinded two years ago and an EV price cap was introduced in 2020 and lowered this year.
The fate of the grant – which has to date aided more than 285,000 EV purchases – is just one of a number of uncertainties clouding the future of EVs beyond 2023, including around their taxation. In a report released in July, the SMMT warned that if the sector doesn’t “transition successfully to a zero-emissions future with ambitious global trading terms”, it could lose some 90,000 jobs. However, the industry body said that if the UK becomes a leader in zero-emissions vehicles, 40,000 new well-paid and highly skilled jobs could be created by 2030.
In order to encourage more EVs onto the country’s roads, the SMMT called on the government to commission an independent review to “holistically consider the long- term future of fuel, vehicle and road-based taxes in a decarbonised sector”. It added that if we want people to invest in EVs, “we need to ensure that they will not be surprised by new taxes down the line and that these new taxes don’t undermine the transition to zero-emissions vehicles”.
The SMMT also wants the government to continue the EV grant beyond its current term and exempt ultra-low- emissions vehicles (ULEVs) from taxation for the next five years. It said that short-term tax exemption, including from VAT, as well as extending consumer and fleet incentives, would help bridge the gap until ULEVs can reach total cost of ownership parity on their own.
However, according to Ian Fletcher of industry analyst IHS Markit, removing the grant won’t adversely affect EV sales in the future, as manufacturers will be motivated to shift as many EVs as possible in order to cut average emissions and therefore avoid fines. Fletcher said: “I think a lot of the manufacturers will find a way, even if it means going to the in-house finance unit, if it means that they don’t have to pay £400 million or whatever the fine is. It’s better for them in the long term that they get these vehicles out there in the marketplace, and they will find a way. “From a manufacturer perspective, they’re probably not as dependent on subsidies to bring in customers, as a £2500 subsidy is modest. It’s a psychological thing, ultimately.”