Bright Spark

Scrapping of plug-in grant makes sense

It was long signalled, but now it’s finally happened; the government has ended the plug-in car grant via which it subsidised the purchase of new electric vehicles. Of course, by the end of its life, the plug-in grant was not what it had been. Initially set at a generous £5,000 when it was introduced in 2011, it applied at first not only to pure electric cars but also a wide range of qualifying hybrids and plug-in hybrids as well. Gradually, though, the scheme was tightened up. The maximum grant was reduced in stages to £1,500, while hybrids and plug-in hybrids, as well as more expensive pure electric cars, no longer qualified.

 When the grant was brought in, annual sales of pure electric cars were in the hundreds. This year, the government says that sales of electrics reached almost 100,000 by the end of May, representing about one in six of new cars taking to British roads. Clearly the transition to electric still has some way to go, but I think it could reasonably be argued that the switch now has sufficient momentum to be self-sustaining, and that there probably isn’t much point in spreading the subsidy cash ever more thinly over a much larger number of cars.

The plug-in grant has always had its critics, who pointed out that it subsidised comparatively well off people to buy new cars that are more expensive than the average, but I think it probably did make sense as a pump-priming measure to get the market going at the beginning when EV prices were very high, just as it probably makes sense to taper it off now that the market has got going, with strong demand producing long waiting lists for many of the most popular models.

But while the market for EVs now has plenty of momentum, new electric cars still look very pricey to mainstream car buyers, and because there are still very few older EVs, the second-hand options are quite limited. The government says that there are currently 24 EV models priced at less than £32,000, compared with 15 a year ago, and that the cost of what it calls ‘monthly purchase and rental schemes’ has fallen ‘significantly’. But I’m not sure that EVs really have become significantly more affordable. Certainly, the number of different models on the market is increasing, including at the lower end of the scale, but on the other hand, there are far fewer discounts and pre-registration deals around, so true transaction prices have moved much closer to full list prices. 

Also, we have lost, or are losing, two of the cheapest mainstream EV options from the market. Deals on cars from the now all-electric smart brand start at about £18,000, but production of the four-door EQ forfour has now ended, leaving only the fortwo to live on for the time being. The next smart will be an electric SUV, which looks set to be quite a bit pricier than the existing range. The other loss is the Volkswagen e-up! and its Skoda and SEAT sisters. These were conspicuously good value at about £20,000, but the last supplies have dried up. That means the entry price for a new EV is heading towards £25,000, which is where the keenest deals on cars such as the Renault Zoe and the electric Corsa are – although you might find a Fiat 500e for a little less. If you missed out on an e-up! and you insist on having a VW badge on your EV, you’re now looking at more like £36k for the cheapest versions of the admittedly larger ID.3. As for the government’s claim that the monthly costs of EV ownership on finance have fallen, I’m sure that’s going to start looking a bit different now that interest rates are on the rise again.

I suppose the point is that with these significant shifts in EV pricing and market dynamics, a small plug-in grant of £1,500 is just going to get lost in the noise and make very little difference anyway. So where does this all leave the overall economics of EV ownership? The pros and cons are still much the same. EVs still cost more to buy than most petrols or diesels, but also still cost less to run, thanks to lower fuel and maintenance costs. And motoring is still getting much more expensive regardless of the sort of car you buy.

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