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The UK government has announced a new package of EV subsidies worth £650 million ($870 million). The Electric Car Grant (ECG) offers up to £3,750 ($5,000) off the cost of new zero emission vehicle (ZEV) priced at £37,000 ($49,550) or less. The scheme opens on the 16th of July and is set to run until 2029.
How does the scheme work?
Once opened, automakers will apply to have their vehicles included in the scheme, and when approved the discount will be applied straight to the vehicle’s list price. Automakers will have to submit production related emissions figures from which they will be graded into three bands.
- The top band, or “greenest” vehicles, will receive the whole £3,750 discount
- Band two will receive a £1,500 ($2,000) discount
- Band three will not receive any discount
Band three is likely to include all Chinese OEMs as ratings will include electricity grid carbon emissions.
A targeted approach
Will Roberts Automotive research lead at Rho Motion commented “The subsidy targets vehicles at the more affordable end of the price spectrum where we are seeing consumer interest growing.”
However, this section of the market remains small, according to Rho Motion analysis, at most? 26% of BEVs sold so far this year would be eligible for the subsidy. This highlights the limited availability of models in the affordable and smaller segments; however, this is expected to improve as manufacturers introduce more options to the market.
How do the subsidies fit in with the government’s ZEV mandate?
Despite direct subsidies for consumers largely ending in 2022, UK BEV sales have continued to grow as the market has matured. The reintroduction of targeted support has been welcomed by the industry, which sees it as a positive step towards accelerating adoption, supporting investment, and maintaining momentum.
“Politically, the subsidies are important as well. The UK government has reconfirmed its plans for a ban on pure petrol and diesel vehicle sales by 2030, with hybrid vehicles following in 2035 for cars, leaving only zero emissions vehicles, of which BEVs are currently the only viable solution,” Roberts said.
Under the ZEV mandate, 28% of all automaker passenger car sales must be ZEV in 2025. However, when considering the program’s flexibilities, the effective target is closer to 22-23%. According to Rho Motion’s EV & battery database, BEVs accounted for 21.6% of vehicles sales from January to May this year, with many automakers expected to hit the target.
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