PHEVs lose Plug-in Car Grant as EVs see funding cut

All current plug-in hybrids will not be eligible for the UK Government's Plug-in Car Grant (PiCG) from Friday 9th November 2018, after the Department for Transport (DfT) announced today (Thursday 11th October) that changes to funding will also see grants for pure-electric models cut to £3,500.

The Office for Low Emission Vehicles (OLEV) - part of the DfT and the office that administers the grant - has confirmed that Category 2 and Category 3 ultra-low emission vehicles that were eligible for funding will no longer be so from mid-November.

Grant rates are awarded using an EV classification system, each EV being classed depending on the level of CO2 emissions and the EV-only capable range:

• Category 1: CO2 emissions <50g/km and a zero emission range of at least 70 miles
• Category 2: CO2 emissions <50g/km and a zero emission range between 10 and 69 miles
• Category 3: CO2 emissions of 50-75g/km and a zero emission range of at least 20 miles

Currently, Category 1 vehicles benefit from the full £4,500 grant while Category 2 and 3 vehicles receive £2,500. No conventional PHEVs on sale as new in the UK qualify for Category 1 rules. With the introduction of more stringent WLTP testing, models are only moving further away from those limits currently.

Should a manufacturer produce a plug-in hybrid that meets Category 1 criteria, the model would then be eligible for PiCG funding. Currently, the only PHEV to meet these limits is the BMW i3 REX. However, the range-extended EV is set to be removed from sale by BMW, as a battery upgrade has seen the i3 REX deemed surplus to requirements, thanks to the longer range offered by the larger battery pack.

Changes see the grant of £4,500 for Category 1 models reduced to £3,500 too, as OLEV says this reflects the falling costs of pure-electric models. Should sales be higher than expected though, the grants - currently fixed until the next decade - could be reduced further to continue some form of support for electric vehicles.

First introduced in 2011, the Plug-in Car Grant has been applied to 168,000 models, the majority of which are PHEVs. The UK plug-in car market sees PHEVs out-sell pure-EVs two to one, and it is perhaps this continued success for hybrids that has seen OLEV look to cut the grant from this vehicle type.

While PHEVs continue to sell well, EV sales success varies greatly, and has not matched hybrid registrations for a number of years. While the removal of grants for PHEVs could readily be argued, retaining the levels of support for pure-EVs would have given a stronger message to customers at a time when they are being persuaded to invest in electric models thanks to an increasing numbers of models are coming to market with real-world driving ranges in excess of 150 miles, and a number offering more than 200-250 miles.

The last few months have seen the Jaguar I-Pace and Hyundai Kona Electric both go on sale with official ranges around 300 miles, while Audi, Mercedes, and Kia all have EVs launched, and due in the UK soon, with ranges quoted at between 250 and 300 miles. Although it will remain to be seen, it is expected that the reduction in grants, alongside limited availability from manufacturers, creates additional hurdles for customers to overcome when going electric.

From 9th November, many of the UK's most popular plug-in models will no longer be available with a discount of £2,500 off their purchase price. The Mitsubishi Outlander PHEV for example, the UK's best-selling EV, is likely to cost around £7,000 more than an equivalent diesel model, despite offering far greater efficiency and reduced emissions. A VW e-Golf will move to around £4,000 more than a comparable diesel Golf, that is unless manufacturers absorb the additional costs for customers.

While a focus on pure-EVs is to be commended by the government, it could be that support for plug-in models in general has been reduced too soon at a time when the market is still in its early stages. Electric vehicles make up almost 3% of new cars sold each month, so although it's a rapidly growing market, it is still a small one.

Even before the announcement of changes to the PiCG, it was hoped that HM Treasury will freeze company car BIK rates for electric vehicles for the next financial year. Rates move up from 13% to 16% for most plug-in models for FY 2019/20, before dropping to just 2% for pure-electrics the following year.

With the company car market a key driver in the uptake of electric vehicles, a freeze in BIK rates would likely give a boost to the market at a time when it will otherwise possibly struggle.

Find out more about electric cars

Chris Lilly

Author:Chris Lilly
Date Updated:11th Oct 2018

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