Coalition government confirms electric car buyer incentive

Government confirms £5,000 incentive for electric car buyers

The coalition government has confirmed (28th July 2010) that it would stand by the commitment made by the Labour government to pay an incentive to all buyers, both private and fleet, of £5,000 when they purchase a pure electric or plug-in hybrid electric vehicle.

The consumer grant will reduce the retail price of eligible vehicles by 25 per cent, capped at £5,000, which effectively means that all electric and plug-in hybrid cars will qualify for the full £5,000 payment. It will come into effect on 1st January, 2011.

This news comes as some relief to both buyers and the industry as a whole. Buyers will be much more likely to be tempted into one of these ultra-low carbon cars if they are paying £5,000 less than the retail price. In the case of the all-electric Nissan Leaf, for example, which launches in the UK next February, it means that the retail price will reduce from £28,350 to £23,350 – a much more attractive purchase proposition. It brings the Leaf into hybrid Toyota Prius territory – at just £3,845 more than the Prius, the Leaf offers zero emissions and much lower running costs.

For the industry as a whole, it means that manufacturers can plan where they both launch and produce electric cars. It will come as good news to General Motors who are deciding where to build the plug-in hybrid Vauxhall / Opel Ampera. The £5,000 buyer subsidy makes the UK  a front runner, although GM are still looking for £30m in government support to clinch Ellesmere Port as the preferred location.

Announcing the price some months ahead of launch, means that potential electric car buyers can make their purchase decision based on a long gestation period when they can weigh up all the pros and cons of electric cars. As soon as the government confirmed the buyer subsidy, Nissan announced the retail price of the electric Leaf and will start to take orders in September for delivery after the February 2011 launch date.

By making this announcement, the government has made an exception of the electric car industry by bringing forward its decision ahead of the spending review in the autumn. The government has said that the level of the buyer subsidy has been agreed until 31 March 2012. The level will be reviewed in January 2012. After taking into consideration a number of key factors such as the costs of vehicles and the development of the early market, the level will then be set for subsequent years.

£43m has been made available up to the end of March 2012. The final budget beyond 2011/12 will be confirmed at the spending review.

Transport secretary Philip Hammond said, ‘The coalition government is absolutely committed to low carbon growth, tackling climate change and making our energy supply more secure. We are sending a clear signal that Britain is open for business and that we are committed to greening our economy. This will ensure that the UK is a world leader in low emission vehicles.’

Business minister Mark Prisk said, ‘The consumer incentive will help Britain become one of the leading centres for the design, development and manufacture of ultra-low carbon vehicles.  It sits alongside public and private sector investment in innovation and infrastructure, leading to the creation of new highly skilled low carbon jobs.’

Despite business secretary Vince Cable’s assertion that he’s not going to support the motor industry to the same degree as his predecessor, the coalition has approved the former government’s £20.7m grant for Nissan to produce the Leaf in the UK, and a £360m guarantee for Ford to develop a new generation of low-emission engines.

The government has now confirmed another subsidy to the industry and it remains to be seen whether Cable will make a complete U-turn and provide GM with the support it says it needs to build the Ampera at Ellesmere Port.