Electric car subsidy gets green light

The ultra-low carbon vehicle subsidy for electric or plug-in hybrid cars, which starts in January 2011 and will continue until 2014, has survived the budgetary cuts.

The grant will reduce the up-front cost of eligible vehicles by 25%, capped at £5,000.

However, the money ring-fenced by Treasury for the first 15 months of the scheme is £43m, which means between January 2011 and March 2012, subsidies will be available for 8,600 qualifying cars.

This is far below the £230m - enough to subsidise the purchase of some 46,000 cars - the previous Government had earmarked for the three-year subsidy.

The Department for Transport confirmed that the amount of money put into the scheme will be reviewed in early 2012 and again after that, but would not confirm whether this would rise or fall.

This and the short-term nature of the subsidy has led to concerns being raised.

“ACFO also has concerns about the short-term nature of the grants commitment,” said ACFO director Stewart White. “There are very few models which will qualify for the grant at present. Availability to 2012 will still be low, and it may well take most of that period to persuade boards to venture into these types of cars and vans. By which time there could be a material reduction in the grants – which will cut demand – which will take us back to square one.”

ACFO is calling on the Government to commit to grants for at least one full vehicle life-cycle (seven to10 years for full electrics).

“Business in general does not rush in to major policy changes – especially where there can be a material HR dimension to the change,” said White.

“Government seems not to understand this.”