The UK government is abolishing the plug-in car grant, in place since 2011, for all vehicles other than pure electric cars or those that can offer more than 70 miles of zero-emission range.
Currently, electric cars or those that can travel on 70 miles (112 km) of electric (called Category 1) receive a £4500 (Rs 439,098) subsidy towards the cost of the vehicle. Category 2 and 3 cars, typically plug-in hybrids, receive £2500 (Rs 243,961).
In the revised system, which will begin on 12 November, plug-in hybrids will no longer receive any support and the Category 1 subsidy will be reduced to £3500 (Rs 341,545). The UK government said the decrease reflected “the recent reductions in the price of electric vehicles”
It said that it would support the next 35,000 electric cars sold, but did not elaborate on longer-term plans to encourage ultra-low emission vehicles.
In its announcement, the government said it “has helped the plug-in hybrid market become more established, and the government will now focus its support on zero-emission models like pure electric and hydrogen fuel cell cars”.
It claimed it has helped support the purchase of over 160,000 cars since 2011.
The statement added: “With plug-in hybrid models like the Mitsubishi Outlander becoming popular among consumers the government is focussing its attention to zero-emission models such as the Nissan Leaf and BMW i3.”
The news is expected to welcome fierce criticism from the industry, with long-held fears that the removal of a subsidy will mean that alternative-fuelled vehicles sales will crash.
Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: “We understand the pressure on the public purse, but given the importance of environmental goals it’s astounding that just three months after publishing its road to zero strategy, government has reduced the incentive that gives consumers most encouragement to invest in ultra-low emission vehicles.
“Removing the grant for plug-in hybrids is totally at odds with already challenging ambitions for CO2 reduction and sends yet more confusing signals to car buyers."
Hawes said PHEVs made up less than 2 percent of the UK car market, and noted that "as we’ve seen in other markets, prematurely removing upfront purchase grants can have a devastating impact on demand". He added: "without world-class incentives, government’s world-class ambitions will not be delivered.”
Nicholas Lyes, the RAC’s head of roads policy, said the move was “a major blow to anyone hoping to go green with their next vehicle.”
He added: “With up-front costs still a huge barrier for those hoping to switch to an electric vehicle, this move from the Government is a big step backwards and is in stark contrast to countries like Norway where generous tax incentives have meant that it has one of the highest ownership levels of ultra-low emission vehicles of anywhere in the world.”
Year-to-date, alternatively fuelled vehicles make up 6 percent of the UK car market or 114,574 cars. However, electric vehicles make up a very small minority of that number.