Motorists could soon be given £6,000 by the government if they agree to scrap their existing petrol or diesel car and buy a new electric vehicle, according to reports.
The plans, which could be announced as early as July, would be part of Prime Minister Boris Johnson’s plans to relaunch the economy – following in the footsteps of a similar proposal set out in Germany’s €130bn coronavirus recovery plan.
It could mean that the price of the British-build Nissan Leaf electric vehicle falls from £26,845 to just £20,845 and would see a new VW ID.3 zero-emission hatchback cost around the same as an entry-level petrol-powered Golf.
Would you buy an electric car if they were £6k cheaper? Prices of EV models like the Renault Zoe, Nissan Leaf and Tesla Model 3 could be lower if you scrap an old petrol or diesel motor, according to new reports
The Telegraph, which broke the story on the Sunday night, said the £6,000 subsidy for pure electric vehicles could be announced as part of Boris Johnson’s major speech to relaunch the economy that it says is pencilled in for Monday 6 July.
The deal would operate in a similar way to the Government-backed scrappage scheme in 2009, which was launched after the financial crisis to reinvigorate car sales and consumer spending.
That scheme – reducing the price of any new car by £2,000 when motorists scrapped their old one – saw around 400,000 new cars being bought in the UK while it was available.
The decision is designed to help the car industry recover from the coronavirus, with the lockdown forcing motor dealerships to close for two months and saw registrations of new cars plummet by 97 per cent in April and 89 per cent in May to the lowest levels since the end of the Second World War.
The Prime Minister would also see the move as a positive break for UK manufacturing, with the popular Nissan Leaf build at the Japanese firm’s factory in Sunderland and Mini Oxford producing the all-new Mini Electric.
Jaguar Land Rover has also set out plans to increase its electric vehicle offering, having already brought plug-in hybrid models to the market – though the firm’s only pure-electric car so far is the Jaguar I-Pace SUV, which is built in Graz, Austria.
Such a move would bring price parity for electric cars compared to models with internal combustion engines for the first time in the UK.
The move would be a boost for UK manufacturing as well as the wider automotive industry, with cars like the Mini Electric build in Britain. Pictured, the new zero-emission Mini with a range of 124 miles driving through the Plant Oxford factory
One of the UK’s best-selling electric cars – the Nissan Leaf, pictured – is also built in the UK, at the firm’s plant in Sunderland
With a £6,000 subsidy, the price of the new Volkswagen ID.3 (pictured) would fall to around the same price as a petrol-powered entry-spec Golf hatchback
For instance, the price of a Nissan Leaf drop to around £20,000, which will be on par with the Nissan Qashqai, starting from £20,565 in the UK.
The all-new £24,400 Mini Electric would fall to just £18,400 – a like-for-like fee as a petrol Mini Cooper.
Tesla’s most affordable Model 3 would also decrease from around £40,000 to £34,000.
Volkswagen’s new ID.3 is also due to hit showrooms in 2020, priced at around £27,500. A £6,000 subsidy when a motorists scraps their old car would see this price fall to the same level as the cheapest Mk8 Golf hatchback with an internal combustion engine.
It is already know the government and the UK trade body, the Society of Motor Manufacturers and Traders, have been in communication regarding the relaunch of a scrappage scheme to help boost demand for new cars following the pandemic.
However, a leaked letter seen by The Guardian sent from SMMT chief executive Mike Hawes to Chancellor Rishi Sunak said that any ‘market stimulus package’ would need to encourage the purchase of diesel and petrol cars on an equal footing with cleaner vehicles – despite the government’s push for drivers to switch to electric cars.
In a letter seen by the paper that was sent to the chancellor and the business secretary, Alok Sharma, the SMMT boss said a scheme would need to ‘support the entire market, not just disproportionately favouring specific segments or technologies, recognising the diverse nature of UK automotive manufacturing’.
The Government is more likely to favour a scheme targeted at zero-emissions models as it would be seen to fit with the commitment to ban the sale of all new petrol, diesel or hybrid cars by 2035 and significant investments in boosting electric car uptake.
This includes a £1billion package for green transport solutions announced in the Budget earlier this year, which included £500million to support the rollout of new rapid charging hubs and the extension of the Plug-in Car Grant.
It is unclear if the PICG – already cutting the price of EVs by £3,000 – would continue to be available if the scheme was launched. If so, the retail price of a qualifying electric model would be £9,000 lower than the quoted RRP.
The SMMT has already sent a letter to the government regarding a new scrappage scheme, but said the incentive should be aimed at petrol, diesel and hybrid cars as well as electric vehicles
The price of a Mini Electric could fall to around the same level as a petrol Mini Cooper, finally bringing some price parity between electric and internal combustion engine models
The move would also mirror similar plans put in place in Germany last week.
Included in Angela Merkel’s €130 billion (£116.7 billion) stimulus package to speed up Germany’s recovery from the coronavirus is a government and industry-combined incentive of €9,000 towards plug-in passenger cars costing less than €40,000.
Manufacturers are already offering to reduce the price of a new plug-in vehicle by €3,000 in the country, and the government will add another €6,000 to make electric cars more appealing to customers.
In Germany from 2021 there will also be a new staggered tax on vehicles that emit more than 95g/km CO2 – aimed at gas-guzzling SUVs – and all petrol stations in the country will also need to have electric car charging points.
Do scrappage schemes work? ICCT says they have few economic benefits and won’t reduce CO2 emissions unless targeted at EVs
The ICCT said scrappage schemes in the past have failed to help economies recover from financial crises
New analysis by the International Council on Clean Transportation (ICCT) suggests that vehicle scrappage schemes have few economic benefits and do not reduce CO2 emissions unless they are targeted at low emissions vehicles.
It reviewed schemes launched in the UK, Europe, US Japan and China in response to the 2007-2008 global financial crisis.
It found that the schemes subsidised car sales that would have taken place anyway and stripped away sales from later years, reducing the economic effectiveness and long-term benefit of the programs.
In Europe, it found that schemes from a decade ago prevented the loss of jobs in the industry but – when looking at the economy as a whole – appeared to divert private investments from other economic sectors such as the retail sector and at the cost of loss of employment in other sectors.
These previous schemes also only provided relatively small savings in CO2 and air pollutants were achieved with previous vehicle replacement programs – and at high cost.
The UK government last introduced a scrappage scheme under then PM Gordon Brown in 2009 to help the motor industry recover from the financial crisis
In the UK, the scheme was found to have very little impact because the average new petrol or diesel vehicle in 2009 (when the scrappage scheme was active) emitted around the same amount of CO2 as a vehicle of the year 2005 – though significant improvements have been made since.
Itsays there would be a noticeable positive effect on the climate if a purchase premium were paid exclusively for battery vehicles, cutting emissions of new registrations by up to 79 per cent.
Commenting on the reported £6,000 grant to encourage drivers to buy an electric car, Edmund King, AA president said: ‘Offering £6,000 to swap a petrol or diesel car for an electric car would be a fantastic move, and should it get the green light people should take up the deal.
‘At the start of the year we said that scrapping VAT on electric vehicles would be the most influential move to persuade drivers to go electric. A grant like this would be just as good and would help both car manufacturers and air quality.’
He added: ‘In order to help aid the economic recovery to covid-19, investment should also be made in gigafactories.
‘This would mean batteries could be developed, built and recycled in the UK to to keep our carbon footprint down, while producing highly skilled jobs. We also need more charging points to help convince drivers that they can always get home.’
In 2019, electric cars accounted for just 1.6 per cent of all passenger vehicles sold in the UK.
However, that market share looks set to rise in 2020, with Tesla’s Model 3 being the most registered car in the UK in the previous two months during the lockdown.
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