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Are Electric Car Prices About to Rise in the UK?

Since electric and hybrid cars became a viable alternative for Britain’s roads, government and incentives have been in place to encourage drivers towards this new, more environmentally friendly technology. With a ban on sales of new diesel and petrol cars planned from the year 2040, government grants are designed to help motorists replace their new and used cars with greener models as part of an initiative to create a cleaner environment. However, MPs are urging government to be more ambitious, they said the current target of 2040 should be brought forward to 2032.

Electric VehiclesBut, as chancellor Philip Hammond prepares to announce the 2018 Autumn budget, there are fears that government subsidies for electric and hybrid vehicles will be among those affected by cuts. Many drivers of diesel cars were initially encouraged to buy them with the offer of cheaper fuel and government grants. Now that diesel is no longer perceived as a greener alternative to petrol, and usually just as expensive, these motorists feel let down.

The question is, are things heading the same way for hybrid and electric vehicles owners?

Under the current scheme, buyers of electric cars can take up to £4,500 off the purchase price thanks to government grants, while hybrid car sales benefit from a discount of up to £2,500. But economic constraints mean that the maximum discount on a fully electric vehicle is likely to go down to just £3,500. The £2,500 grant for plug-in hybrid electric vehicles (PHEVs) is known as the plug-in grant, following the Budget, this subsidy will only apply to the most efficient category one PHEVs. To qualify for this category vehicles must be able to travel 70 miles on battery power and produce less than 50g of carbon dioxide per kilometre travel.

Currently, no PHEVs on sale in the UK meet the Category 1 criteria for hybrids, so the new ruling will effectively be abolishing the plug-in grant. Good news for the motor trade, as PHEV dealers might well see a spike in sales over the next couple of weeks as drivers scramble to purchase hybrids in Categories 2 and 3. In August 2018, one car in every twelve sold was an electric model, while sales of electric and hybrid cars increased by 23% compared with figures from 2017.

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The new Budget may also introduce a cap on the maximum value of a vehicle that can be subsidised, limiting it to cars with a list price of less than £60,000. This means high end luxury electric and hybrid cars, including Jaguar’s I-Pace and the Porsche Cayenne E-Hybrid would no longer be eligible for the grant.

Both green groups and the motor trade are lobbying the government to keep the grants in place. Besides environmental concerns, it’s argued that research, development and production of new vehicle technologies is important for industry in the UK.

Even without a grant there will still be advantages to buying an electric or hybrid car, including free parking and charging at many locations, along with a cheaper insurance policy in most cases. However, removing or reducing the government subsidies could seriously harm sales of electric vehicles and PHEVs, as well as damaging the UK’s credentials as a country serious about reducing environmental pollution.