Drivers will get taxpayer-funded grants to buy electric cars under £650m scheme

Drivers will be able to get up to £3,750 off an electric car under a new government scheme.

The Department for Transport announced £650million worth of grants to encourage motorists to switch to electric.

The automotive industry has been calling for incentives for private buyers to take the plunge ever since the Tories scrapped a plug-in grant worth up to £1,500 in 2022.

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Labour has a manifesto commitment to phase out the sale of new petrol and diesel cars by 2030. However, the high price tag for electric cars - plus a lack of public charging points - has seen sales go backwards. That was despite manufacturers pumping £4.5billion last year into discounts on incentives as they tried to meet government targets. The market has picked-up, with one in four new cars sold last month electric.

Drivers can already benefit from generous tax breaks but only if an electric car is bought on a company scheme.

The new Electric Car Grant will apply to new vehicles with a price tag of £37,000 or less. The threshold will exclude expensive models, including Elon Musk’s Tesla. According to website Autotrader, the average price of a new electric car from a volume manufacturer is £35,865, with 44% of the 153 EV models less than £37,000. That still means most models won't qualify.

The grant money will go not direct to buyers direct but manufacturers. To qualify, car makers will need to show they have reached the “highest manufacturing sustainability standards”. It is unclear at this stage which manufacturers will be included but it is believed it will exclude cars assembled in China.

Those car firms deemed to have the greenest manufacturing will be able to apply for the maximum £3,750 per vehicle grant, but those in band two will get a much lower amount of up to £1,500. Funding available until the 2028/29 financial year.

Buyers won't need to fill in any additional paperwork to receive the grant as all administration is handled between the manufacturers, dealerships, and the government.

Whether the money will be enough to persuade a rush of new buyers, only time will tell. And it comes as another incentive for going electric - lower road tax - was scaled back. From this April, electric owners will pay £10 for the first year, but then £195 per year after that.

Transport Secretary Heidi Alexander said: “This EV grant will not only allow people to keep more of their hard-earned money - it’ll help our automotive sector seize one of the biggest opportunities of the 21st century. And with over 82,000 public charge points now available across the UK, we’ve built the infrastructure families need to make the switch with confidence. This is our Plan for Change in action. We’re backing British drivers, British jobs and British growth.”

Mike Hawes, chief executive at trade body the Society of Motor Manufacturers and Traders, said, “Today’s announcement of the return of government support for the purchase of electric vehicles is a clear signal to consumers that now is the time to switch.

“Rapid deployment and availability of this grant over the next few years will help provide the momentum that is essential to take the EV market from just one in four today, to four in five by the end of the decade. This announcement is a welcome response to consistent calls from the industry for more support, which will be in addition to the substantive subsidies already provided by manufacturers.”

The price difference between an electric and a petrol or diesel car is still around 22%, although that is down from 36% a year ago.

Ian Plummer, commercial director at AutoTrader, said: “We saw tax rises in April that have made it more expensive for people to drive electric vehicles, so any incentives to help people buy one are welcome. “Although more consumers than ever are looking to make the switch, many are still put off by the high upfront cost.

“There are now more EV models available than ever, varying in size and cost, so consumer choice is there. And as charging gets easier and with potential incentives for those without driveways, this should help reduce any lifestyle barriers people might have, providing even more peace of mind to make the switch.”