As we move towards a fossil fuel-free future, incentives on electric vehicles should be getting better, not more erratic.
Electric vehicles are a key factor in the planet’s fight against climate change, with many governments around the world pinning their decarbonisation hopes on the widespread adoption of EVs.
Here in the UK, the Government wants to ban the sale of new diesel and petrol cars by 2035, which is five years earlier than its previous target. In order to ban traditional ICE vehicles, however, it’s imperative that we get people into electric vehicles sooner rather than later – and the key way to do that is through incentives.
The UK has far from been the most generous country when it comes to incentives for new electric vehicles. In China, for example, until recently consumers received 55,000 CNY (£6,200) towards the cost of a new electric car, that has since been reduced to 25,000 CNY (£2,860), but Chinese consumers still get the added benefit of paying no sales tax on top of the vehicle’s purchase price. That’s in addition to other advantages such as the ability to drive on days where traditional vehicles are banned to curb emissions.
Closer to home, Norway has even better incentives for consumers. That includes no annual road tax, up to 50% off parking and ferry fees, access to bus lanes, company car tax reduction to 40%, the absence of import taxes and exemption from paying 25% VAT.
In the UK, the goalposts continue to shift. While the Government has just axed premium car tax for electric vehicles above £40,000 and those buying EVs from April 2020 will pay nothing in Benefit in Kind tax, there have been cuts in other areas which make little to no sense.
When incentives began in the UK, they were hardly generous, offering just £5,000 off the cost of a brand-new electric vehicle. That was then cut to £3,500 in 2018, at the same time the Government excluded vehicles that offered less than 70 miles of fossil fuel-free range, and now that incentive stands at just £3,000. What’s more, electric vehicles above £50,000, of which there are plenty, won’t be eligible for the grant at all.
When you compare the UK’s lacklustre incentives to other nations around the world, it’s clear to see why UK consumers are less keen on switching to EVs. In China, EVs made up 4.7% of all new car sales in 2019, equating to around 1.21 million cars. That figure is even more impressive in Norway, where 55.9% of all cars sold in 2019 were EVs. How does the UK fare? Just 3.15% of car sales in 2019 were electric – which equates to just 72,834 vehicles.
The problem with the UK’s approach to EVs isn’t restricted to incentives on the car purchase itself, the Government has also announced reductions to incentives for those wanting to install an electric vehicle chargepoint either at home or at the office.
When the Electric Vehicle Homecharge Scheme (EVHS) and Workplace Charging Scheme (WCS) first began, the UK Government covered up to 75% of the cost towards installing an EV charger. Like the other incentives, that was subsequently reduced to £500, before hitting £350 in 2020.
Unlike the incentives towards buying a brand-new electric vehicle, this reduction could have a greater effect on EV adoption. One of the key selling points of EVs is the fact that the cost of charging is negligible, leading to a lower total cost of ownership. That’s typically only the case if owners decide to charge at home, as public chargers can often cost more than the price of petrol when comparing cost per mile.
In order for UK consumers to bother with installing a charger at home, they need confidence that their electric vehicle is going to be cost efficient. With the purchase price of the vehicle already higher than one with an internal combustion engine, consumers are relying on the fact that the running costs are lower. However, once you factor in the cost of installing a charger, the maths can quickly be undone.
That’s why it’s important that the UK Government continues to incentivise people to install chargers at home, not least because it will open up public chargers for those who simply have no other option. However, this is where the Government’s strategy is actually positive.
In May 2020, the Government finally stumped up some extra cash for on-street chargepoints in residential areas. In fact, it doubled the money available to local authorities who want to expand their charging footprint.
Can the Government do better?
For all the faults of the UK Government’s strategy towards electric vehicles, at least it offers some form of incentive. While the market share of EVs in the UK is still low, there are some positive signs on the horizon.
According to the Society of Motor Manufacturers and Traders (SMMT), plug-in electric vehicles command a 6.8% share of vehicles sold in the UK so far in 2020. Of course, sales of all vehicle types have dropped off a cliff edge thanks to the coronavirus lockdown, but demand in EVs is clearly on the up.
However, there are warning signs in the rest of the world that if you cut incentives too far, consumers will turn their back on EVs. When China announced its incentive reduction last year, sales plummeted 16%. I’m hopeful that the UK Government won’t go too far and kill demand for EVs at a time we need them more than ever.
This article originally appeared in Electrical Review’s June 2020 issue.