UK Electric Car Grant: Labour confirms new £650m EV incentive

The UK government has announced a new £650 million Electric Car Grant (ECG) to help cut the purchase cost of new EVs.

The new EV incentive will offer discounts of up to £3,750 on brand-new cars priced up to £37,000, helping make almost half of new electric models on sale in the UK more affordable.

From July 16, car makers will be able to apply to add their vehicles to the grant scheme. They will then apply the grant directly to the list price of the car, saving drivers thousands without the need to fill out any additional paperwork.

The upfront price of electric cars is still seen as a key obstacle to drivers, making the switch – especially private retail customers – with most EV list prices higher than an equivalent petrol or diesel car. Despite lower running costs, lower environmental impact and a growing number of cheaper EVs, misconceptions of the costs around electric cars are still among the biggest causes of reluctance among motorists.

Announcing the new Electric Car Grant, Transport Secretary Heidi Alexander said: “This EV grant will not only allow people to keep more of their hard-earned money – it’ll help our automotive sector seize one of the biggest opportunities of the 21st century.

“And with over 82,000 public chargepoints now available across the UK, we’ve built the infrastructure families need to make the switch with confidence.”

Rewarding green production

The new UK Electric Car Grant scheme will run from now until the 2028/29 financial year and is designed to offer the biggest savings on the “greenest” cars.

Manufacturers will have to commit to a verified science-based target on production-related emissions. Vehicles will be divided into two tiers of discount depending on the environmental impact of their manufacturing. Band one cars will be eligible for the full £3,750 discount, while band two vehicles will qualify for a £1,500 government-funded reduction.

Intended to help those buying more “accessible” vehicles, the grant will only apply to cars priced at less than £37,000.

The move follows months of pressure from the UK car industry. Despite EV sales continuing to rise, car makers have warned that they would still fall short of the 28% market share set out in the ZEV mandate. They have demanded action to stimulate private purchases rather than the fleet and business custom that has driven most of the growth.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said: “Today’s announcement of the return of government support for the purchase of electric vehicles is a clear signal to consumers that now is the time to switch.

“Rapid deployment and availability of this grant over the next few years will help provide the momentum that is essential to take the EV market from just one in four today, to four in five by the end of the decade.

“This announcement is a welcome response to consistent calls from the industry for more support, which will be in addition to the substantive subsidies already provided by manufacturers. Taken with recent announcements regarding infrastructure investments and the Industrial Strategy, the UK has the opportunity to maintain its position as a leader in both the manufacture and sale of zero emission vehicles.”

New EV incentives ‘long overdue’

Dan Caesar, CEO of lobbying body Electric Vehicles UK, welcomed the new incentives as a “significant step” in making EVs more accessible. He commented: “While battery-only EVs are much cheaper to buy and run than most realise, surveys show that cost misperceptions are the primary reason for hesitance. A generous grant, of this nature, gives a new group of interested buyers, that might have thought that going electric was beyond them, a gentle nudge into what is great tech.

Ginny Buckley, chief executive of Electrifying.com, added: “Nearly one in two new electric models are now more affordable thanks to these long-overdue incentives. Crucially, the support is aimed exactly where it’s needed most: from school-run staples to budget-friendly runarounds, the grants apply to cars that fit the needs of everyday drivers.

“Despite a new EV being registered every 60 seconds in June, sales to private buyers have stalled – and in our latest survey of 11,000 UK drivers, 76% told us upfront cost is the biggest barrier to making the switch. These returning incentives are the spark the private market needs to reignite momentum and give even more drivers the confidence to go electric.”

Dr Andy Palmer, founder of Palmer Energy Technology, helped bring the Nissan Leaf – one of the very first mainstream EVs – to market. He said car makers now needed to use the extra sales generated by the Electric Car Grant to help bring down their list prices, ultimately removing the need for incentives. He noted: “we’ve seen this being done very successfully in China where price parity [with petrol models] is already achieved, and EV marke share is already circa 50%.”

The previous Plug-in Car Grant scheme, which operated from 2011 to 2022, began by offering savings of up to £5,000 on new EVs but was gradually reduced to £1,500 before being phased out.

‘Vital boost’

The UK Electric Car Grant news comes shortly after the government announced a £63m package to help improve England’s public and private charging infrastructure. Vicky Read, CEO of industry body ChargeUK, commented: “This announcement is brilliant news – for drivers and for the UK’s transition to electric vehicles.

“Hot on the heels of the weekend’s announcement on measures to support charging, including meeting ChargeUK’s calls for improvements to signage on main roads, today’s package is another vital boost to the charging industry, helping it invest with confidence.”