New electric car grant worth up to £3,750 announced – how the scheme works

Motorists buying a new electric car could benefit from a discount of up to £3,750 after the government announced a new £650 million electric car grant today.

The grant targets lower-cost electric vehicles (EV), applying to qualifying cars costing £37,000 or less. The RAC believes dealerships will offer the discounted EVs “within weeks".

Manufacturers will be able to apply for the grant from 16 July and the government says drivers will start to benefit from the discount as soon as this application is successful.

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Eligibility will depend on the carmaker meeting high sustainability standards while the value of the grant will vary from £1,500 to £3,750.

The new subsidy will be welcomed by drivers who want to switch from petrol or diesel to an electric vehicle, but are deterred by the typically higher cost of a new EV.

The former Conservative government previously offered EV grants – they were originally worth up to £5,000 when introduced in 2011 but were cut to £1,500 when the scheme came to an end in June 2022.

Funding for the new grant is available until the 2028/29 financial year.

We explore how much you could save on an EV via salary sacrifice in a separate article.

Transport secretary Heidi Alexander said the new grant will “not only allow people to keep more of their hard-earned money – it’ll help our automotive sector seize one of the biggest opportunities of the 21st century”.

Last week, the government announced a new package to support charging stations at home for households with an electric vehicle.

The new scheme will provide £25 million for local authorities to expand access to cheaper at-home charging in a bid to lessen the up-front costs of owning an electric car.

The scheme will help connect at-home charging stations to the same supply as household energy using cross-pavement technology, meaning drivers can use cheaper domestic electricity rates, though some will already be benefitting from the best EV energy tariffs.

The government hopes that cheaper vehicles and more accessible charging solutions will spur more drivers to switch to an electric vehicle and help phase out the sale of new petrol and diesel vehicles by 2030.

Edmund King, president of the AA, welcomed the announcement of a new electric car grant – he said it is “to be celebrated,” and urged drivers to “to take full advantage of this offer.”

King pointed out that according to the AA’s research, price is a large barrier to EV ownership, saying the AA “have campaigned for incentives to help overcome this issue, and are pleased our calls have been heard”.

This is echoed by John Cassidy, managing director of sales at Close Brothers Motor Finance, who said motorists have been “crying out for incentives to switch to electric vehicles”.

“The return of grants marks a huge step in the right direction, and removes one of the key barriers halting widespread adoption,” he added.

Cassidy also expects the move will be welcomed by manufacturers who have struggled to meet zero emission vehicle mandate targets, saying they will be “breathing a sigh of relief”.

He added that to ensure the scheme’s success, the government “must make sure critical charging infrastructure is delivered to meet both demand and their own targets.

“It’s crucial that this investment is part of a multi-faceted approach to enable this shift and make the Government’s ambitions far more achievable,” he concluded.

Will EVs be cheaper under the new electric car grant?

The new grant is applied for by car manufacturers, not individuals, meaning it is up to the car seller to make sure the subsidy has been applied.

The grant is only available for cheaper electric cars which cost £37,000 or less, meaning some of the most popular EVs, like the Tesla Model 3, or the China’s BYD Seal will not be eligible for the discount.

Despite this, drivers keen to utilise the subsidy will still likely have a wealth of options to choose from – there are currently 33 types of new electric cars available from under £30,000 according to the Department for Transport.

The third-highest selling electric car in the UK at the moment is the Renault 5 E-Tech, according to CarWow. Prices for this EV start at around £23,000.

Getting closer to the top of the price range, prices for the Kia EV3 Air start at around £33,000.

Meanwhile, the Citroen e-C3 costs around £22,000, while the price tag for a new Dacia Spring is around £15,000.