An overwhelming majority of car makers have craved the return of incentives to boost demand for electric cars in the UK with ever-greater desperation since the start of 2024.
The government’s ZEV mandate, introduced 18 months ago, meant manufacturers faced significant fines for not selling enough EVs, and barely an interview with a top UK exec from a legacy car maker has gone by without them saying they need government help to hit those targets because there is not enough true market demand for EVs.
To date, car makers have complied with the mandate and avoided fines. Yet it has come at a huge cost, with their own discounts to tempt buyers into new EVs totalling £6.5 billion, according to Society of Motor Manufacturers and Traders data.
Against £6.5bn of discounts, the £650 million now put aside by the government for the Electric Car Grant (ECG) looks like loose change. No wonder one senior industry official said the scheme would “divide opinion”, and not only for the sums involved.
The ECG is banded with discounts of £3750 or £1500, depending on complex criteria around the intensity of CO2 in the national grid of the country of manufacture of both an EV and its battery, as detailed by correspondent Nick Gibbs.
If all the discounts were only the smaller £1500, the ECG would cover subsidies towards just over 430,000 new EVs. Some 225,000 EVs were sold in the first half of this year in the UK, and given that the ZEV mandate’s target ramps up each year, the ECG money is likely to run out well before the 2028-29 financial year until which the scheme is currently due to run, even allowing for a significant number of EVs being excluded from it.
Many of those who have welcomed the grant for now have used the opportunity to call for further investment and support, to build better infrastructure and support the growing number of EVs already on the road.
More fun and games are to come, then, but in the short term the ECG will at least have the desired effect by providing a boost to EV sales in the UK. The government will call it a success as a result, while car makers will get a helping hand towards ZEV mandate compliance.
“There is no country where EVs don’t depend on incentives,” said Jato’s senior analyst Felipe Munoz, in reference to concerns about price, range, infrastructure and residual values. That’s true even in the EV utopia of Norway, and it’s true in China where, said Munoz, EV/PHEV buyers “are getting their licence plate faster and at lower rates”. He added: “Without the active role of the governments, EVs can’t go on by themselves.”
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