Analysis

Plug in turn off

The Government’s Plug-in Car Grant (PiCG) is no more. Natalie Middleton explains why

In a much-anticipated, but widely dreaded, move the Government closed the Plug-in Car Grant (PiCG) from mid-June with immediately effect. As a result, buyers – including fleets –can no longer claim £1,500 off the price of new electric cars under £32,000.

Instead, the Department for Transport and Office for Zero Emission Vehicles (OZEV) said £300m in grant funding would now be refocused towards extending plug-in grants to boost sales of plugin taxis, motorcycles, vans and trucks and wheelchair-accessible vehicles.

The closure of the PiCG had been widely anticipated although many in the fleet and automotive sectors had long said that the incentive remained vital to EV take-up.

The grant was launched in 2011 to help bridge the upfront price difference between ultra-low emission cars and their internal combustion engine equivalents, initially offering £5,000 or up to 20% off the purchase price of a new car. Since then, it’s provided over £1.4bn and supported the purchase of nearly half a million clean vehicles.

The DfT and OZEV said the scheme had succeeded in creating a mature market for ultra-low emission vehicles, helping to increase the sales of fully electric cars from less than 1,000 in 2011 to almost 100,000 in the first five months of 2022 alone.

They added that the shift in focus would enable funding to target expanding the public charge point network. Earlier this year, the Government unveiled its long-awaited Electric Vehicle Infrastructure Strategy, pledging to increase the UK’s EV charge points 10fold and supported by a £1.6bn investment in charging infrastructure committed in part when the 2030 ICE ban was announced.

The Plug-in Car Grant had been slashed in a series of changes in recent years that had also seen plug-in hybrids effectively removed from the scheme. And OZEV had signalled in May 2021 that the Government intended to “gradually deliver a managed exit” from the plug-in grants going forwards, although it said other support measures would be continued.

In a statement, the Government stated that it had always been clear the PiCG was temporary and said that successive reductions in the size of the grant – and the number of models it covers – had had little effect on rapidly accelerating sales or on the continuously growing range of models being manufactured.

It also said that significant savings in running costs for electric cars compared to petrol or diesel equivalents can often exceed the current £1,500 value of the grant, and electric car drivers will continue to benefit from incentives including zero road tax and favourable company car tax rates, which can save drivers over £2,000 a year.

These findings were backed by a new public evaluation report, published at the same time as the PiCG announcement and highlighting that while the grant was vital in building the early market for electric vehicles, it has since been having less of an effect on demand, with other existing price incentives, such as company car tax, continuing to have an important impact. The report also found the plugin van market will benefit from grant incentives more to support businesses and their fleets in making the switch.

Transport minister, Trudy Harrison, said: “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.”