Electric car prices could be set to rise after ministers said they would cut grants that help with the cost of electric cars, claiming it will make funding last longer and allow more motorists to go green.
The Department for Transport (DfT) announced it will provide grants of up to £2,500 for electric cars priced under £35,000, down from the previous maximum of £3,000 for cars under £50,000.
It means grants will no longer be available for higher-priced models, which are typically bought by drivers who can afford them without subsidies, officials said.
But the motor industry said the reductions in funding and eligibility were the “wrong move at the wrong time” and incentives were essential for making electric battery vehicles affordable for motorists.
The number of electric car models priced under £35,000 has increased almost 50% since 2019, and more than half the models on the market will be eligible for the grant, the DfT said.
Transport minister Rachel Maclean said: “We want as many people as possible to be able to make the switch to electric vehicles as we look to reduce our carbon emissions, strive towards our net-zero ambitions and level up right across the UK.
“The increasing choice of new vehicles, growing demand from customers and rapidly rising number of chargepoints mean that, while the level of funding remains as high as ever, given soaring demand, we are refocusing our vehicle grants on the more affordable zero-emission vehicles – where most consumers will be looking and where taxpayers’ money will make more of a difference.”
Car industry body the Society of Motor Manufacturers and Traders (SMMT) criticised the move.
Mike Hawes, SMMT chief executive, said: “New battery electric technology is more expensive than conventional engines and incentives are essential in making these vehicles affordable to the customer.
“Cutting the grant and eligibility moves the UK even further behind other markets, markets which are increasing their support, making it yet more difficult for the UK to get sufficient supply.
“This sends the wrong message to the consumer, especially private customers, and to an industry challenged to meet the Government’s ambition to be a world leader in the transition to zero-emission mobility.”
RAC head of roads policy Nicholas Lyes said the car industry had been hit hard by the pandemic and incentives to get consumers to go green remained “vital” in encouraging the sale of clean new cars.
“Even though more models are coming on to the market, our research suggests upfront cost remains a concern to drivers when comparing the cost of an electric vehicle with a similarly sized conventional vehicle,” he warned.
“By cutting the grant, the Government may risk people holding on to their older, more polluting vehicles for longer.”
The Government has set a target to phase out the sale of new conventional petrol and diesel cars and vans by 2030 to tackle climate emissions and air pollution from vehicles with combustion engines.
Nearly 11% of new cars sold last year had a plug, up from 3% in 2019, with the number of plug-in cars sold more than doubling as overall vehicle sales fell in the face of the pandemic.
The plug-in grant scheme was renewed last year, with £582 million of funding for green cars, motorbikes and vans intended to last until 2022/23.
As battery prices fall, manufacturers can increase the range of electric vehicles – the distances cars can drive between charges – and make them more affordable.
The Government said tax incentives, including company car rates, which can save drivers more than £2,000 a year, will remain in place.
It is also investing £15 billion in alternatives to driving, including funding for buses, cycling, rail networks and local city transport, the DfT said.