ANALYSIS
Cash injection
The Electric Car Grant, the belated successor to the Plug-in Car Grant, is up and running. But not everyone is happy. By Natalie Middleton
It’s over three years since the Conservatives closed the Plug-in Car Grant in June 2022 and now, following repeated calls for its revival, Labour’s Electric Car Grant (ECG) is here.
The £650m scheme aims to make EVs more affordable, offering discounts of up to £3,750 on brand-new electric cars. It’s available to both private individuals and businesses buying an eligible vehicle – and there is no fleet order cap. As with the former Plug-in Car Grant, the discount is applied at the point of purchase directly from the dealership or manufacturer. But, unlike the old grant, it’s targeted at affordable cars, priced at or under £37,000.
Not only is the ECG intended to support the transition to zero-emission vehicles, it’s also set up to incentivise sustainable automotive manufacturing. Grants are only available for new cars that meet the “highest manufacturing sustainability standards”. Applications must also provide evidence of which country the vehicle is assembled in – and brands from East Asia, including China, South Korea and Japan, are not expected to qualify.
There are two levels of support: models meeting the top eco standards qualify for the full £3,750 discount, while cars that are not quite so green get £1,500 off. Funding is available until 2028/29 and the Government has said this will remain under review and “the scheme will be subject to amendment or early closure with no notice should funds become exhausted”.
Already, some 35 models, spanning brands including Cupra, Ford, Peugeot, Volkswagen, Citroën, Renault/Alpine and Vauxhall, along with Nissan, have scored grant funding. So far, Ford's Puma Gen-E and e-Tourneo Courier are the first models to attract the full £3,750 grant. Carmakers are also stepping in with their own incentive schemes for private buyers; MG for example is offering a grant of £1,500 for retail buyers of the MG4 EV and the MGS5 EV.
It’s the latest big news for the UK EV sector, following the Government’s announcement in July of a £63m investment package that includes a £25m scheme to support home charging via cross-pavement solutions for households without driveways, a £30m grant scheme to help businesses install charging points at depots nationwide, an £8m fund to power the electrification of ambulances and medical fleets across over 200 NHS sites and new rules that will allow EV charging hubs to be signposted from motorways and major A-roads.
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There are two levels of support: models meeting the top eco standards qualify for the full £3,750 discount, while cars that are not quite so green get £1,500 off
Many stakeholders across the EV sector said the new grant would transform EV take-up and make them more accessible. Quentin Willson, founder of the Faircharge campaign, said the support was long overdue. “The independent EV sector has been ploughing a lonely furrow highlighting the advantages of EV ownership and countering the myriad of misinformation and myths,” he commented. “We’re delighted to see that this government has listened and taken action.”
Charging firms also applauded the news. Vicky Read, CEO of the ChargeUK trade body, said the package was “another vital boost to the charging industry, helping it invest with confidence”.
But Mike Thompson from Leasing Options said the rollout of the scheme so far has been “messy” and added that a lack of clear eligibility criteria was “causing many would-be EV owners to delay purchases in the hope of securing one of the higher grants”. He added: “It’s disappointing that what should have been a beacon of positivity for making EV ownership more affordable has been undermined by the Government’s lack of organisation and clarity. “Many leading brands such as BYD and MG are rumoured to be excluded from the scheme due to manufacturing process requirements. While the motivation to avoid sustainability concerns is understandable, this has only made a scheme that should have been simple unnecessarily complicated – particularly as these brands produce some of the more cost-effective EVs available.”
And the BVRLA, which has repeatedly called for urgent action to bolster precarious used car values, warned of the ramifications for the used sector. “This generous grant will boost uptake in the retail market but could have serious repercussions for the used market, where rampant depreciation already has red warning lights flashing,” said chief executive Toby Poston. “Further stimulating new EV registrations without supporting the used market risks creating an even greater supply/demand imbalance, putting even more pressure on fast-deflating second-hand values. The resulting losses will erode confidence and result in higher finance costs for new EVs, eliminating much of the benefit from the original grant.”
Cox Automotive also has big concerns. Latest residual value analysis from the car data specialist reveals that EVs up to 24 months old only held 46% of their original cost new (OCN) in July 2025. This is a stark comparison to 2022 where vehicles of the same age retained 85% of OCN.
Philip Nothard, insight director at Cox, said: “Heavy discounts on new EVs have already dampened demand for nearly new models available in the used car market. While driving down the cost of new vehicles will undoubtedly increase the EV adoption in the new market, these incentives fail to recognise the impact they will have on the used market. Residual values for cars up to two years old are now at a greater risk of further depreciation if adequate support is not extended to used vehicles.
“The used market is a crucial source of profitability for the automotive sector, so the strength and consistency of the industry is crucial to the success of the Government’s net zero ambitions,” added Nothard. “To ensure this, the Government needs to consider more support for the used EV sector to put the brakes on the rapid pace of depreciation.”
