Poston toby 400

The government has closed the plug-in car grant (PiCG) scheme to new orders with effect from 14 June, saying it will now refocus £300 million of grant funding towards boosting sales of plug-in taxis, motorcycles, vans and trucks, and wheelchair accessible vehicles, as well as making further investment in expanding the charging network.

While the government has always been clear the PiCG was temporary, it had previously confirmed funding until 2022-23.

All existing applications for the grant will continue to be honoured and where a car has been sold in the two working days before the announcement, but an application for the grant from dealerships has not yet been made, the sale will also still qualify for the grant.

Growing the EV market

Since its inception in 2011, the PiCG has provided over £1.4 billion and supported the purchase of nearly half a million clean vehicles.

In making the announcement, the government said the scheme has succeeded in creating a mature market for ultra-low emission vehicles, helping to increase the sales of fully electric cars from less than 1,000 at launch to almost 100,000 in the first five months of 2022 alone. Battery and hybrid electric vehicles (EVs) now make up more than half of all new cars sold. However, a new public evaluation report found that while the PiCG grant was vital in building the early market for EVs, it has since been having less of an effect on demand, with other existing price incentives such as company car tax, continuing to have an important impact.

The report also found the plug-in van market will benefit from grant incentives more to support businesses and their fleets in making the switch.

Symbolic moment

Responding to the announcement, Toby Poston, director of corporate affairs at the BVRLA (pictured), said: “This move has been well signposted and it is right that the Government prioritises its electric vehicle subsidies towards vans and charging infrastructure, where they are needed most. “

However, he cautioned: “Although the grant was small and only a handful of electric vehicles were eligible, its withdrawal will be a symbolic moment that could damage confidence in the fragile EV market.

“Most demand for EVs is being driven by the favourable BIK tax rates available to workers in company car or salary sacrifice schemes. As inflation surges and business and consumer confidence falls, government needs to maintain these incentives if the country is to have any chance of hitting its ambitious decarbonisation targets.”

Recent research by Volkswagen Financial Services UK (VWFS) shows that EV sales in 2021 outstripped volume levels for the past five years combined.

Sales of battery electric cars increased by 154% versus the total car market increase of 23%, which means VWFS’s EV tracker indicated the UK is 60,000 vehicles ahead of the necessary adoption curve timescale to meet the Climate Change Committee’s target of 55% of all light duty vehicles being battery powered in ten years’ time.

Despite this surge in uptake, Mike Coulton, EV consultant at VWFS described the decision to pull the PiCG as “hugely disappointing” as many people need financial incentives to make the switch to electric an affordable option, and may find their budgets under pressure due to the current cost of living squeeze.

“Maintaining or even increasing the PiCG for the least expensive EVs to make them more affordable, and encourage manufacturers to produce electric cars at a lower price-point, could have been a strong incentive to help adoption for this sector of the market. This in turn would help to remove older and dirtier ICE vehicles in the same way that scrappage schemes have successfully done in the past.

“That said, the government’s focus on further improving public charging, whilst still incentivising adoption in other areas of the vehicle market such as LCVs is to be welcomed and encourage,” he said.

Coulton also called for further clarity on other issues such as BIK rates beyond 2025, and a realignment of the AER rates to reflect the costs of charging an EV away from home, for those who cannot make use of a cheaper overnight electricity tariff.

Policy changes

The BVRLA is advising that vehicle manufacturers (on behalf of the dealership network) are able to claim for any orders that were placed by customers in the two days prior to the PiCG end which had not been placed on the portal, providing there is a signed purchase agreement with the dealer.

This two-day leeway period means that orders placed by customers between 00.01 on 10 June 2022 and 23.59 on 13 June 2022 before the grants scheme ended, that had not yet been logged on the rant portal, will be paid. The guidance on has been updated to reflect the announcement and there is a revised list of vehicles eligible for the grants. More details relating to the two-day leeway period and how to manage claims are on the BVRLA website.

In its statement, the BVRLA said it was concerned about drivers that have already ordered EVs in good faith, expecting to get the benefit of the grant, warning that the supply issues that continue to beset the automotive industry mean that many vehicle orders are being delayed or even cancelled.

It is calling on the government to review its decision to remove grant eligibility for vehicles delivered more than 12 months after an order was entered on the grant register.

Auto Finance E-bulletins

Sign up to receive an e-bulletin when we post new Auto Finance articles

You can unsubscribe at any time with one click.