Ministers are actively looking at how to make electric vehicles (EVs) more affordable for drivers amid growing concerns over the faltering car industry, The i Paper understands.
The Department for Business and Trade and Department for Transport are understood to be pushing the Treasury to deliver incentives to help consumers make the switch to electric cars.
It comes after warnings from car manufacturers that the UK will miss its zero-emissions vehicles mandate to phase out the sale of new petrol and diesel cars and vans by 2030.
A senior government source with knowledge of the discussions told The i Paper that ministers have taken on board concerns from the industry and measures are being examined to help boost consumer demand.
“We realise that it is currently too expensive for people to buy EVs at the moment. A decision hasn’t yet been taken on what that might look like,” the source said.
“Ultimately, it’s up to the Treasury to make a decision on what it will be, but it is something we are alive to.”
The source added that it was likely that the changes due to be brought in would be a mixture of softening the rules around EV sales along with introducing incentives to increase consumer demand.
Among the options the Government is expected to look at to provide incentives are offering cheaper loans to buy EVs, including possibly interest free borrowing, tax breaks similar to those offered to employees leasing cars via their employers or other direct subsidies for drivers making the switch.
Other areas that could be looked at to make owning an EV cheaper is to cut VAT on public charging points, which currently stands at 20 per cent as opposed to home charging, which is just 5 per cent.
Rapid public charging points are much more expensive than charging at home. And the costs of running an electric car will increase from April next year as EVs will no longer be exempt from road tax. New models are still frequently more expensive than petrol or diesel cars of a similar size, although prices have started to fall.
There is already some Government help available, such as discounts on fleet vehicles and limited grants for charge points. Grants that offered up to £1,500 off new electric vehicles in England, Wales and Northern Ireland under the last Conservative government ended in 2022.
Business Secretary Jonathan Reynolds has committed to publishing a “fast track” consultation to review the rules around EV manufacturing, which is due “imminently”.
The decision to review the ZEV mandate followed intense lobbying from the automotive sector, which warned of job cuts and plant closures unless the Government changed course.
The ZEV mandate requires major car manufacturers to have zero-emission – in effect purely electric – vehicles making up 22 per cent of their sales fleet this year, increasing to 28 per cent in 2025 and rising further in subsequent years, until all new sales will be electric by 2030.
If the manufacturer does not hit the target, it will be fined £15,000 for every vehicle that it sells that does not comply with the mandate.
Stellantis, the owner of Vauxhall, blamed the mandate for its decision to close its Luton plant last week, putting at risk 1,100 jobs, despite pledging to use the site to build its next model of electric vans in February.
Ministers are expected to consider potential “flexibilities”, such as reducing the size of the financial penalties placed on car makers, but they have said the 2030 target is set in stone.
The rules were introduced by the former Conservative administration.
