The Department for Transport has planned to reduce the grant from £3,000 to £2,500 with a restriction to cars under £35,000.
The decision was criticised by the motor industry with one group, the Society of Motor Manufacturers and Traders (SMMT) stating it is "the wrong move at the wrong time.”
The decisions to cut the grants goes against the government’s policies of becoming carbon neutral and gives a mixed message. The decision will stifle the progress we are making towards becoming carbon neutral with traffic accounting for 22% of the UK’s emissions. The decrease in the grant will have consumers pay the increased price, likely reducing the demand for electric cars as their demand is price elastic, slowing the progress we are making towards hitting the targets.
Additionally, in 2030, the government will enforce legislation involving banning the sales of new petrol and diesel cars. A reduction in a grant for electric cars will have more consumers stick to purchasing older, cheaper petrol and diesel vehicles rather than the more climate-friendly electrical variants.
However, due to electric cars being more expensive than traditional petrol and diesel cars, likely, the majority of consumers may not have the cash to afford them, even with the grant. Hence, the change in the grant may not make a large difference in the ratio of electric cars to petrol/diesel cars on the road. The government justified this by stating that higher-priced vehicles are typically bought by drivers who can afford to switch to electric vehicles without a subsidy.
The inferior travel distances which electric cars provide due to limitations in their batteries, combined with a lack of infrastructure in some areas may also be another contributing factor to why consumers have not made the change. However, as future consumers become more climate weary and as technology develops, consumer preferences will likely change, making electric cars the majority on the roads.
Companies such as GM as well as Ford, who have doubled investment into electric cars, are already accommodating to these changes early in an attempt to not fall behind, showing that even the big car companies think that electric is the way to go.
Overall, the decision to cut the grant may not decrease the number of consumers who switch to electric, and, during the COVID-19 pandemic, the government will have to make cuts to certain areas of their spending to accommodate for the COVID bill.