Government electric car grant: the complete guide

Time's running out to get £4,500 off a new electric car, with the government plug-in car grant

John Evans Dominic Tobin Murray Scullion
Apr 23, 2018

Government-backed plug-in car grants are 'winding' down according to the Labour party. So if you want the Government to give you £4,500 towards the cost of a new electric car, you need to act soon.

The grant is only guaranteed until the end of April, and there is a planned reduction in funding. Peter Malynn, from the office of Richard Burden, Labour MP for Birmingham, Northfield, said: 'The Government is non committal on renewal. In the budget, there is a planned reduction in funding, and we’re interpreting that as the Government wants to wind the scheme down.'

Jesse Norman, Parliamentary Undersecretary for the Department for Transport, is expecting Government subsidies to fall because electric cars are growing in popularity and the market is mature. He recently told the House of Commons: 'As the industry becomes more mature - we are seeing greater signs of that; the new Nissan Leaf has started to have stable resale values, which is an important sign of maturity-we would naturally expect levels of Government subsidy to fall.' 

The subsidy has helped to boost electric and hybrid car sales, which rose by 33% last year.

Fully electric cars, such as the Nissan Leaf, Renault Zoe, BMW i3 and Tesla Model S get the full £4,500 grant, while plug-in hybrids, including the Volkswgaen Golf GTE and Mini Countryman PHEV get £2,500 towards the purchase price, as long as they cost less than £60,000.

Electric motorbikes and mopeds are eligible for £1,500 grants. If you’re buying an electric van, you could get a discount of up to £8,000. 

The incentive is needed because electric cars are still more expensive than an equivalent petrol- or diesel-powered model. That’s mainly down to the cost of the batteries that the cars use. These are predicted to fall in price in coming years, but until then, a grant is needed to make them competitive.

For example, an electric Volkswagen e-Golf (below) costs £32,730 before the grant, over £10,000 more than the popular Golf 1.6 TDi SE Navigation (£22,335). The e-Golf qualifies for the full £4,500 grant, and if you factor in fuel savings, the e-Golf starts to look like a viable alternative.

But not every electric car is eligible for the full grant. And some don’t qualify for anything. The grant isn't available for used cars either. 

     

Which cars qualify for the electric car grant?

Given that its official name is the plug-in car grant, it’s unsurprising that the only cars eligible are those that you plug in to recharge.

That means that most electric cars, which are powered only by their electric motors, will qualify. The grant is also available for some plug-in hybrid vehicles (known as PHEVs). These have a petrol or diesel engine, but also a large battery pack that can power the car for 20 miles in some cases.

Among the options are the Audi A3 e-tron, Mercedes C350e, Mini Countryman PHEV, Mitsubishi Outlander PHEV and Volvo XC60 T8. All can be recharged by plugging them in.

Other hybrids, including the standard Toyota Prius and Kia Niro don’t qualify because they can’t be plugged in.

See the full list of cars that qualify for the electric car grant at the bottom of this article.    

Who pays for the electric car grant?

You. It’s funded from taxpayers’ cash. The grant is distributed by the Office for Low Emission Vehicles, which is part of the Department for Transport. 

      

How much is the electric car grant worth?

The most you can get is 35% of a car’s purchase price - up to a maximum of £4,500, but this only applies to cars that meet certain criteria, including the requirement for a a range of at least 70 miles on a single charge.

A reduced grant of £2,500 is available for plug-in cars with less range, and £1,500 is offered towards the cost of electric motorbikes and mopeds.

If you’re looking to buy an electric van, you could be eligible for £8,000 towards the cost 

    

How is the electric car grant calculated? 

Plug-in vehicles must meet certain criteria in order to qualify for a grant. Cars are put into three categories, depending on their range from a single charge and carbon dioxide emissions, which determines how much of an incentive they qualify for.

The figures used come from the standard European test that every new car model must undertake. They aren’t representative of real-world conditions (cars generally have a shorter range and higher CO2 emissions in normal driving), but are currently the only common standard.

In some cases, a car’s recommended retail price (RRP) affects its eligibility for a grant. The criteria for each category are summarised in the table below, with a more detailed explanation further down.

Category

CO2 emissions

Electric range from one charge

Grant

Grant cap

Cars: category 1

Under 50g/km

At least 70 miles

35% of RRP

£4,500

Cars: category 2

Under 50g/km

10 to 69 miles

35% of RRP

£4,500

Cars: category 3

50 to 75g/km

At least 20 miles

35% of RRP

£4,500

Motorbikes

0g/km

At least 31 miles

20% of RRP

£4,500

Mopeds

0g/km

At least 19 miles

20% of RRP

£4,500

Vans

Under 75g/km

At least 10 miles

20% of RRP

£4,500

   

Plug-in grant Category 1
Maximum grant £4,500

Vehicles in category one qualify for the full grant. In theory, this is worth up to 35% towards the cost of the car, but there is a maximum cap of £4,500. This means that any electric car costing more than £12,857 - the vast majority - will get the flat £4,500 grant.

These are the qualifying requirements:

  • Electric range of at least 70 miles on a single charge
  • Average carbon dioxide emissions below 50g/km
  • No limit on the car’s price

The majority of vehicles in this category are pure electric cars, with no petrol or diesel engine,  so they have no carbon dioxide exhaust emissions.

There is also the hydrogen-powered Toyota Mirai, as well as all versions of the BMW i3 (above), including the so-called range-extender car, which has a small petrol engine that can recharge the battery on the move. More eligible cars

      

Plug-in grant Category 2
Maximum grant £2,500

Category 2 is only for cars, and is worth £2,500 towards the cost of a new model.

The requirements to qualify are as follows:

  • Electric range of between 10 to 69 miles on a single charge
  • Average carbon dioxide emissions below 50g/km
  • Maximum RRP of £60,000

In this category, the grant is only available for cars that cost less than £60,000. It’s calculated on the recommended retail price, so you won’t get the grant even if a new car discount brings the price of below £60,000.

All of the cars in this category, including the Toyota Prius plug-in, Hyundai Ioniq PHEV and Volkswagen Golf GTE are plug-in hybrid vehicles, so they have a petrol or diesel engine that provides power when the batteries run out, meaning that you won’t have to stop to recharge, but you will be paying much more per mile for your fuel. More eligible cars

         

Plug-in grant Category 3
Maximum grant £2,500

At the moment, cars that fall into category 3 are eligible for exactly the same £2,500 grant as those in category 2, but this is expected to change at some point in the future.

This applies to cars with only a limited amount of range, that comply with the following criteria:

  • Electric range of at least 20 miles
  • CO2 emissions between 50 to 75g/km
  • Maximum RRP of £60,000

At the moment, there are just two cars in Category 3: versions of the Mercedes E350e (above), in AMG Line trim and the Mini Countryman PHEV

    

Plug-in grant Motorbike category
Maximum grant £1,500

Pure electric motorbikes that use battery power only are eligible for a grant worth 20% of their recommended retail price, up to a maximum of £1,500. They must be able to travel for at least 31 miles before needing a recharge.

    

Plug-in grant Moped category
Maximum grant £1,500

Fully electric mopeds, without a petrol or diesel engine qualify for a grant of 20% of their recommended retail price, up to a maximum of £1,500 - the same as electric motorbikes. However, mopeds don’t need the same range: they only need to go for at least 19 miles between charges, which is good enough for city riding.

    

Plug-in grant Van category
Maximum grant £8,000

The largest plug-in grants are available for electric vans, worth 20% of their recommended retail price - up to a maximum of £8,000. Given their size and weight, the requirements are less arduous than for cars. To qualify, vans need to be able to travel for at least 10 miles on electric power without needing to recharge, and have CO2 emissions of less than 75g/km. The Renault Kangoo ZE (above) is one of the vans that meet the criteria.

    

Can I get an electric car grant for used cars or pre-registered cars?

No. The grant is only available for the first owner of brand new cars, ruling out any used cars, including pre-registered vehicles, which normally count a dealership as the first owner.

    

How do I claim the grant?

You don’t need to do anything. The supplying dealer does it on your behalf and automatically reduces the price of the car by the value of the grant.

    

Can I get the electric car grant if I’m buying on finance?

Yes, the grant will be deducted from the total price, which will reduce your monthly payments.

    

Can I be paid the electric car grant in cash?

This isn’t an option. As it’s designed to boost sales of plug-in cars, the grant is only used to adjust the price: you never actually see the money, let alone get it in your pocket.

   

Does the plug-in grant make electric cars as cheap as a petrol or diesel models?

It certainly closes the gap, but you’ve also got to factor in how much it will cost you to run the car.

For example, the plug-in grant brings the price of the Volkswagen e-Golf down to £27,690.

That’s still £5,625 more expensive than the comparable diesel Golf SE Navigation, but you’ll be able to claw back some of that in running costs, including tax - there's no car tax due on the e-Golf.

If you drive around 8,000 miles a year, you’ll spend around £825 a year on fuel for the diesel Golf but only £160 on charging the e-Golf, based on a rate of 2p per mile suggested by Pod Point, which makes electric chargers. If your annual mileage is greater, then the savings will increase.

However, the e-Golf is expected to lose more of its value. After a typical three-years of ownership, it may be worth just a third of its new price, compared with around 40% for conventionally-powered Golfs.

If you take out personal contract purchase (PCP) finance, this difference in the cars' used values is factored into your monthly payments, making it simpler to compare the cost of running them.

In other cases, the grant can make electric cars cheaper than their diesel equivalent, After the £4500 grant has been deducted, the pure-electric Renault Zoe costs £14,245 compared with £15,755 for a Renault Clio Play dCi 90. This price doesn't include the cost of the Zoe's batteries so you’ll need to hire them, which costs roughly as much as the fuel for the diesel Clio.

Electric Golf vs diesel Golf over three years

Model

Manufacturer price (includes grant)

Fuel cost (8,000 miles/year)

Car tax

Value lost over 3 years

Total cost of ownership

Volkswagen e-Golf

£27,690

£480

£0

£15,840

£16,320

Volkswagen Golf 1.6 TDI SE Nav

£22,065

£2,475

£420

£12,639

£15,534

Sources: Equa Index, Pod Point, Cap hpi

 

    

Has the electric car grant boosted sales of plug-in cars?

It’s a slow process but in the past 12 months, registrations of cars qualifying for the plug-in grant have increased 6.5%, from 13,388 to 14,259 – or to just 1.1% of the total market.

    

Electric car grant changes

The grant was first launched in 2011, when the government was offering £5,000 off the price of plug-in cars.

There was no price limit, so taxpayers were subsidising buyers of cars that included the £100,000 BMW i8 and £90,000 Porsche Panamera S E-Hybrid (above).

It was also a major boost to plug-in hybrid cars such as the Mitsubishi Outlander PHEV, which aren’t as green as fully electric cars, but had enough battery range to qualify for the grant.

In March 2016, the scheme was revamped. The maximum incentive was cut to £4,500, categories were introduced, which meant that plug-in hybrids generally lost half of their subsidy and the price cap was introduced for categories 2 and 3.

    

How long is the electric car grant scheduled to last?

The government has guaranteed that the grant will continue until at least April 2018 but the value of it may be reduced if prices of electric cars come down and demand increases.

The cost of plug-in vehicles is already falling. Volkswagen’s updated Golf GTE plug-in hybrid was almost £3,500 cheaper when it was launched last April, as the cost of batteries - the reason for electric cars’ price premium - comes down.

If the government wants to ensure that the price of electric vehicles is competitive, then it’s likely to have to extend the grant beyond 2018 - but not for long. Renault predicts that by 2020, it will be selling electric cars for the same price as petrol and diesel models.

   

Cars eligible for the electric car grant  

Category 1 cars (grant worth up to £4,500)

    

Category 2 cars (grant worth up to £2,500)

    

Category 3 cars (grant worth up to £2,500)

   

Vans eligible for the plug-in grant

       

Latest jargon busters

  1. What is PCP?

  2. What is interior fabric protection?

  3. What is paint protection?

What our customers say