History has shown that if you rip out incentives for electric vehicles, then the market dramatically shrinks – so why did the UK Government cut the car grant for plug-in hybrids last month when it claims to want us all to be driving electrified cars in the not-so-distant future?
The Government argues the purchase grants it introduced in 2011 have lowered the price of around 100,000 plug-in hybrids since and that the market is now “established”. It’s keeping grants for pure electric cars, albeit at a reduced level.
Whether the demand is established or not is tricky to define. Yes, the UK is the largest market for plugin hybrid cars in Europe, according to JATO Dynamics, beating even Germany and Norway. In the UK, they also outsell electric cars at the rate of three to one. But at 33,584 sold to the end of September, plug-in hybrids such as the Mitsubishi Outlander PHEV, BMW 330e and Volkswagen Golf GTE still only account for 1.8% of the UK market.
JATO reckons that’s not established enough and believes sales will plummet. “The only advantage PHEVs have is their incentive,” said global analyst Felipe Munoz.
Just look at the Netherlands. Our neighbour was the leading market in Europe for plug-in hybrids in 2015 thanks to generous tax incentives for company car drivers. But when the government analysed data from fuel cards, they got a surprise: drivers just weren’t plugging them in. To them, the incentives made the extra fuel drunk just running them as a regular car more than worth it. The incentives quickly shrank and the market collapsed. The Netherlands didn’t even make the top 10 European markets for plug-in hybrids this year.
The Dutch experience was behind our government’s decision, one senior industry figure believes. “We’ve known for some time that some ministers were heavily influenced by the Netherlands report on PHEVs,” they said. Despite lobbying from the car makers to say that, unlike the Dutch, UK drivers were in fact plugging in their cars and thus cutting CO2, the Government removed the £2500 purchase grant.