The UK government announced a new £650 million Electric Car Grant to slash the purchase price of new EVs by up to £3,750.
The incentive applies to brand-new cars priced under £37,000 – making nearly half of all electric models currently sold in the UK more affordable for buyers.
Starting July 16, car manufacturers can apply to include their vehicles in the grant program. They’ll apply the discount directly to the list price, meaning drivers save thousands without filling out paperwork.
Upfront costs remain the biggest barrier stopping drivers from switching to electric – particularly private buyers rather than fleet customers. Most electric cars still carry higher list prices than equivalent petrol or diesel models, despite lower running costs and environmental impact.
Transport Secretary Heidi Alexander said the grant lets people “keep more of their hard-earned money” while helping the automotive sector capitalize on opportunities.
“With over 82,000 public chargepoints now available across the UK, we’ve built the infrastructure families need to make the switch with confidence,” Alexander added.
Green Manufacturing Requirements
The scheme runs through the 2028/29 financial year and rewards the “greenest” manufacturing processes.
Manufacturers must commit to verified science-based targets for reducing production-related emissions. The program divides vehicles into two discount tiers based on their manufacturing environmental impact.
Band one cars qualify for the full £3,750 discount. Band two vehicles receive £1,500 reductions.
The £37,000 price cap targets “accessible” vehicles for everyday drivers rather than luxury models.
The announcement follows months of industry pressure. Car makers warned they’d miss the 28% market share target set by the ZEV mandate, despite rising EV sales. They’ve demanded action to boost private purchases instead of relying on fleet and business buyers.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, called the grant “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.”
Industry Response
Dan Caesar, CEO of lobbying group Electric Vehicles UK, welcomed the incentives as addressing cost misconceptions that create hesitancy among buyers.
“A generous grant, of this nature, gives a new group of interested buyers, that might have thought that going electric was beyond them, a gentle nudge into what is great tech,” Caesar said.
Ginny Buckley, chief executive of Electrifying.com, called the incentives “long-overdue” and noted they target cars that fit everyday needs – from school-run vehicles to budget options.
Despite a new EV being registered every 60 seconds in June, private buyer sales have stalled.
Electrifying.com’s survey of 11,000 UK drivers found 76% cited upfront cost as the biggest barrier to switching.
“These returning incentives are the spark the private market needs to reignite momentum and give even more drivers the confidence to go electric,” Buckley added.
Dr Andy Palmer, founder of Palmer Energy Technology who helped bring the Nissan Leaf to market, said manufacturers should use increased sales to reduce list prices and eventually eliminate the need for incentives.
He pointed to China, where price parity with petrol models already exists and EV market share reaches approximately 50%.
The previous Plug-in Car Grant operated from 2011 to 2022. It initially offered up to £5,000 savings but gradually decreased to £1,500 before ending.
Infrastructure Investment
The grant announcement follows the government’s recent £63 million package to improve England’s public and private charging infrastructure.
Vicky Read, CEO of industry body ChargeUK, called the news “brilliant” for drivers and the UK’s electric transition.
“Hot on the heels of the weekend’s announcement on measures to support charging, including meeting ChargeUK’s calls for improvements to signage on main roads, today’s package is another vital boost to the charging industry, helping it invest with confidence.”
The combined initiatives aim to address both cost barriers and infrastructure concerns that have slowed private EV adoption compared to fleet purchases.
