UK Government Announces New Electric Car Grant
The UK government has confirmed that an Electric Car Grant will be reintroduced as part of a £650 million drive to encourage more people to make the switch to EVs.
Although the most recent data produced by the Society of Motor Manufacturers and Traders (SMMT) showed that one in four buyers is now moving towards electric cars, that is still below the current EV mandate of 28% in place for 2025.
Despite the current figures – which are driven largely by fleet sales - demand for battery electric vehicles amongst private has been hit by changes to the rules around Vehicle Excise Duty that came into effect earlier this year.
Electric vehicles are no longer eligible for free VED as has previously been the case, whilst new electric cars above £40,000 are now subject to the expensive car supplement.
That pushes the amount of tax payable from the second to the sixth year of registration up to a total of £620 a year, with the move affecting a large number of current electric models.
It will also impact on second hand EVs that were registered after 1 April 2025, thereby affecting the used market going forwards.
In a bid to boost demand, the government’s new scheme will offer drivers up to £3,750 towards the cost of a new electric vehicle although the discounts will only be offered to cars with a list price of under £37,000.
Drivers who buy EVs priced at £37,000 or less will receive either £3,750 or up to £1,500 off at the point of sale. Cars fall into one of two bands depending on the emissions they produce during the manufacturing process. Those in ‘band one’ will receive the full £3,750 discount, whilst those in ‘band two’ will receive up to £1,500 off. Specific figures relating to these bands have not yet been released.
Manufacturers must apply to be part of the scheme, with ‘eligibility dependent on the highest manufacturing sustainability standards’, and will recoup the discount directly from the government in order to apply the discount as soon as they have registered for the scheme.
Registrations begin on 16th July 2025, with the scheme then open to the end of the 2028/29 financial year.
Announcement of the ECG comes on the back of the government announcing a wave of initiatives set to drive EV uptake. Committing £63 million to help support charging at home for those without a driveway, and to help transition NHS fleets to electric vehicles.
“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,” Transport Secretary Heidi Alexander said.
“And with over 82,000 public charge points now available across the UK, we’ve built the infrastructure families need to make the switch with confidence.
“This is our Plan for Change in action. We’re backing British drivers, British jobs and British growth.”
Having been vocal in the need for action if the UK is to come close to hitting the mandates in place for EV sales, the SMMT was amongst the groups to welcome the announcement.
“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,” chief executive Mike Hawes said.
“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 1 in 4 today, to 4 in 5 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.”
Although the manufacturers who will sign up for the scheme has still to be confirmed, the likes of Ford, Vauxhall, Renault, Nissan, Kia and MINI all produce EVs that would be eligible for the grant.