Expert Blog

The plug-in car grant changes - and what they mean

The Government is caught in a strange paradox when it comes to plug-in cars. It wants more of them on Britain’s roads: they are, of course, cleaner and greener than the traditional, fossil-fuelled alternatives. But it also doesn’t want more of them on Britain’s roads: the Exchequer has to pay out grants for most that are sold, and lose revenue from fuel duty in the process. It’s turned into a constant battle between two political instincts. Environmentalism versus deficit reduction. Which one will win?

Except these two competing instincts may finally have reached a compromise. As of 1 March, the plug-in car grant is changing. Instead of being a blanket £5,000 payment to those who buy eligible new cars, as it has been since 2011, the payment will now be tiered according to the environmental performance of the cars. This will make the grant worth less than it was before, which will keep the Government’s accountants happy. But it’s still a grant designed to encourage the uptake of plug-ins, which will keep the Government’s environmentalists happy. Perhaps everyone wins.

Under this new system, there are three tiers – or categories – of plug-in car. Here’s the official description of each:

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

Eligible cars from category 1 will be given a £4,500 grant, whilst those from categories 2 and 3 will get £2,500. The Government is also introducing a price cap of £60,000 for category 2 and 3 cars; any costing more than that won’t receive the grant. We’ve included a list of all eligible cars, and which categories they fall under, at the bottom of this post.

The question hovering over this new policy is: what effect will it have? Since the plug-in car grant was first introduced in 2011, sales have soared. According to figures from the Society of Motor Manufacturers and Traders, 28,188 eligible vehicles were registered last year, which was 94 per cent higher than the 14,532 in 2014, which was 304 per cent higher than the 3,586 in 2013, which was… well, you get the point. The simplicity of the grant – money off the car you buy, when you buy it, with the paperwork done by the dealership – has surely made plug-ins more popular than they would have been otherwise.

But now that the grant is worth £4,500 or £2,500, rather than £5,000, will the growth of plug-ins be slowed? Or will even more people buy them, in anticipation of the day when there won’t be any grant at all?

Because make no mistake: one day, there probably won’t be any grant at all. The Government has already set a time limit, of sorts, on the system that’s being introduced in March. The grant levels will be reviewed when a further 17,000 Category 1 vehicles have been sold, and a combined 17,000 Category 2 and 3 vehicles. If you’re already considering a plug-in vehicle, it could be best to get in there now, before other people take all the money that’s on offer.

In the meantime, we shall continue doing what we promised at the start of the year, and keep an eye on this year’s car registration figures. The Government’s hope is probably that the number of plug-ins reaches a critical mass on our roads. At which point, the manufacturers might be encouraged to offer a greater range of models, including some cheaper ones, and the public won’t need grants to buy them. And, again, everyone might win – the environmentalists and the deficit reducers.

Currently eligible vehicles

Category 1

  • BMQ i3
  • BYD e6
  • Citroen CZero
  • 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

Category 2

  • Audi A3 e-tron
  • BMW i8
  • BMW 225xe
  • BMW 330e
  • Mercedes-Benz C350 e
  • Mitsubishi Outlander
  • Toyota Prius Plug-in
  • Vauxhall Ampera
  • Volkswagen Golf GTE
  • Volvo V60 D6 Twin Engine
  • Volvo XC90 T8 Twin Engine

Category 3

  • Mercedes-Benz S500 Hybrid
  • Porsche Panamera S E-Hybrid

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