The UK is steadily embracing alternatively-fuelled vehicles. Sure, hydrogen power is a way off, but mainstream electric cars and plug-in hybrids make up a small but significant portion of the market, and most importantly, that number is growing every year. A major reason for this growth is the plug-in car grant, set up by government to encourage consumers to consider an electric vehicle.
The scheme was set up in 2011 to offer a large chunk of taxpayer's cash to subsidise people purchasing electric cars. The reason was that at that point, there were few electric or plug-in hybrid options, and they were significantly more expensive than a regular petrol or diesel car. Five years on, though, the market has changed, and from 1st March 2016 the plug-in grant has changed too.
The original grant was set at a generous £5,000 for all eligible vehicles, but now things are slightly different. Read on for our guide to what the changes mean - and whether your next vehicle might be a winner or a loser.
How is the plug-in car grant changing?
The electric car subsidy is changing in three significant ways from March 1st 2016
1. From that date onwards, eligible cars will be banded into the following three categories:
2. The maximum available grant is being cut from £5,000 to £4,500 for category 1 vehicles, but slashed from £5,000 to just £2,500 for category 2 and 3 vehicles.
3. A £60,000 ‘on the road’ price cap is also being introduced, so cars which are more expensive will not be eligible for the grant at all.
The change means most full-electric cars will continue to receive the full (but lower) grant, but many plug-in hybrid vehicles in categories 2 and 3 will have their grants cut in half.
This includes the Mitsubishi Outlander PHEV – currently the UK’s best-selling low-emissions vehicle – which will be £2,500 more expensive after March 1st.
While it’s not good news for individual buyers of many of the most popular hybrids, the changes make sense if the government wants to target support where it’s needed most.
Full-electric cars like the Nissan Leaf and Renault Zoe would be significantly more expensive than equivalent petrol or diesel family hatchbacks and superminis were it not for the reduction in price provided by the plug-in car grant. They also suffer from very heavy depreciation, with the Nissan Leaf retaining only 20% of its value after three years/36,000 miles, so total running costs could become prohibitively expensive were it not for the grant.
The hybrids in category 2 and 3 tend to be larger cars so the cost of the advanced plug-in powertrains is a smaller proportion of the overall list price. It means that they’re more competitive against petrol and diesel alternatives. It’s a similar story on the residual value front where our latest figures suggest the category 2 Mitsubishi PHEV hybrid should keep up to 45 per cent of its value after three years/36,000 miles.
With small, all-electric category 1 cars offering far lower emissions than the large plug-in hybrids in categories 2 and 3, it’s understandable that the Government is looking to refocus the grant to incentivise more environmentally friendly buying decisions.
The key date here is February 29th 2016, but that’s the deadline for claiming a plug-in car grant under the existing, more generous, terms – NOT the deadline for ordering your car.
The Plug-in Car Grant application is handled by the dealer you purchase your car from, so make sure you give them time to sort out the paperwork.
The scheme requires no paperwork to be completed by the purchaser (but you may be asked to complete a survey questionnaire) and the grant is deducted from the purchase price by the dealer so customers never have to pay the full list price.
This is the official list of cars eligible for Plug-In Grants – at the current rate of £5,000 for applications received up to February 29th, and the new lower rates by category after that date.
• BMW i3
• BYD e6
• Citroen C-Zero
• Ford Focus Electric
• Kia Soul EV
• Mercedes-Benz B-Class Electric Drive
• Mitsubishi iMiEV
• Nissan e-NV200 5-seater and 7-seater
• Nissan LEAF
• Peugeot iON
• Renault Fluence
• Renault ZOE
• Smart fortwo electric drive
• Tesla Model S
• Toyota Mirai
• Volkswagen e-up!
• Volkswagen e-Golf
• Audi A3 e-tron
• BMW i8*
• BMW 225xe
• BMW 330e
• Mercedes-Benz C350 e
• Mitsubishi Outlander PHEV
• Toyota Prius Plug-in
• Vauxhall Ampera
• Volkswagen Golf GTE
• Volvo V60 D6 Twin Engine
• Volvo XC90 T8 Twin Engine**
*The recommended retail price for these cars is above £60,000, so they will not be eligible for the plug-in car grant from 1 March 2016. However, they remain genuine ultra low emission vehicles.
**Variants with a recommended retail price over £60,000 will no longer be eligible for the plug-in car grant from 1 March 2016. Variants with a recommended retail price below £60,000 will remain eligible for the plug-in car grant from 1 March 2016, provided that the full purchase price (including number plates, vehicle excise duty and VAT) is also below £60,000.
Let us know what you think of the plug-in car grant changes in the comments section below...