If your employees are part of a growing trend of individuals considering taking an alternative fuel vehicle (AFV), then a recent announcement by the Department for Transport may make them/you think again.
First introduced in 2011, the plug-in car grant (PICG) has provided a discount to the price of ultra-low emission vehicles (ULEV) and thereby assisted in generating interest and increasing uptake from the UK driving population.
Category 1 cars (CO₂ emissions of less than 50g/km and a zero-emission range of ≥ 70 miles) receives 35% off the purchase price, up to a maximum of £4,500 (it used to be £5,000 when the scheme first launched).
Category 2 cars (CO₂ emissions of less than 50g/km and a zero-emission range between 10 and 69 miles) and Category 3 cars (CO₂ emissions of 50 to 75g/km and a zero-emission range of at least 20 miles) both benefit from a grant for 35% of the purchase price, up to a maximum of £2,500.
By 12th November latest, the Category 1 grant will be reduced by 22% to £3,500 and the Category 2 & 3 grant will be removed altogether.
This will result in virtually all currently available hybrid cars having no grant whatsoever, adding at least £50 per month to any financing arrangement – and it is hybrid models that have seen the highest uptake in the UK.
The government cites the success of the scheme in generating uptake and the continuing reduction in electric vehicle pricing as the rationale to the grant restriction/removal. However, it can be readily argued that capital costs for such ULEV’s have not reduced by anywhere near the level of the grant restriction/removal.
Generating demand is pivotal for long term success, particularly given the “Road to Zero” pledge, which sets out 50% of all new cars must be ultra-low emission by 2030.
Last year, 53,203 new ULEVs were registered in the UK, up 27% from 41,837 units in 2016 but they accounted for just 1.7% of all new vehicle registrations – up from 1.2% one year previously and 0.9% two years before.
To achieve the Government’s “Road to Zero” pledge, registrations would have to rise 30% year-on-year for the next 12 years. It is difficult to foresee this being achievable following the grant overhaul.
This action is leading many (including ourselves) to criticise the move, believing it will only serve to suffocate future growth in the market. In light of today’s call from a committee of MP’s to bring forward the ban on sales of new petrol/diesel cars & vans to 2032, makes this grant change all the more foolhardy.
RAC head of roads policy Nicholas Lyes comments: “The reduction of the plug-in car grant is a major blow to anyone hoping to go green with their next vehicle choice and makes little sense when we need to focus our efforts on lowering emissions from vehicles.”
Tim Porter, managing director of Lex Autolease, remarks: “We need to see an almost a 23-fold increase in ultra-low emission vehicle uptake, and incentives like the plug-in car grant are key to making this possible.”
John Pryor, ACFO chairman (the UK’s leading representative organisation of fleet decision makers), said: “The Government’s decision to reduce financial support for plug-in vehicles is, quite frankly bonkers. Demand for plug-in vehicles is already extremely limited and the decision to reduce the amount of financial support available through the Plug-in Car Grant is likely to reduce demand still further.”
These changes are likely to have a significant impact, including those running business vehicles and fleets.
To find out more about how this change in legislation is going to cost you more money and more importantly, what to do about it, contact ERA today.
About the Author: Sean Bingham
With over 30 years of commercial fleet experience, Sean has extensive hands on experience with key topics related to fleet management including tax legislation, acquisition and environmental impact.