£5000 Incentive Grant to be Offered to Electric Vehicle Consumers

The UK Government has recently announced that it plans to put its money where its mouth is concerning the environmental intensity of personal vehicles and will be offering a 25% discount (up to £5000) for consumers purchasing an electric vehicle (or plug-in hybrid) from the start of 2011. This policy complements the investment it is putting into research, development and deployment of low emissions transport technology in an attempt to decarbonise the transport sector. The incentive should come online with the roll out of mass market EVs in the UK such as the Nissan Leaf and also the Renault ZE range which is earmarked for a 2011 launch.

Perhaps one of the biggest concerns consumers have expressed regarding EVs is both their limited range but also the high upfront costs associated with the battery technology. This will be recouped in reduced operating costs throughout the vehicle lifespan but the initial price premium (in comparison with conventional cars) is likely to be a significant barrier to uptake. Better Place has attempted to get around this obstacle by partnering with vehicle manufacturers who will sell the EVs without the battery pack which is instead leased by Better Place to the consumer. This will decrease the upfront costs and incorporate the battery price into operating costs that are heavily discounted by the consumer.

This market incentive will produce a similar effect and is likely to bring some of the EVs into similar price ranges with comparable conventional vehicles. By reducing the upfront costs it is hoped that consumers will give more thought to the implications of operating an electric (or plug in hybrid) vehicle and that market adoption will increase as a result. The grant will be taken off the purchase price of the vehicle at the point of sale. This will further assist the take-up of the grant in comparison to other incentives which have been offered as tax deductions or applied for in a more complicated manner providing a disincentive for consumers to consider them.

The grant will also help drive electric vehicle technology forward. It has been designed so that the only vehicle that will currently qualify under its eligibility criteria is the Tesla Roadster. This has not been motivated by a desire to increase the quantity of the electric sports cars on the roads but to give manufacturers goals to aim for if they want their vehicles to qualify for the grant. It is unlikely that any manufacturer will desire to rollout an electric or plug-in hybrid vehicle that does not meet the minimum criteria in the future.

As with all of these Government schemes its success will be judged by how successful its uptake will be. The EV Incentive Grant has a tough road to follow as a result of the success witnessed by the Car Scrappage Scheme that was widely adopted by consumers. It will be important for the government to compliment this policy with a widespread advertising campaign along with educational material to inform potential consumers of the benefits of EVs both in a financial, practical and environmental sense.