Some electric cars are eligible for a £3750 discount, what are the impacts?

Summary:

The Department for Transport confirmed Ford’s Puma Gen-E or e-Tourneo Courier would be discounted to support the transition from petrol and diesel vehicles to electric vehicles (EVs)

The grant scheme applies to new eligible car models costing up to £37,000. The more environmentally friendly they are, the bigger the reductions.

Carmakers can apply for models to be eligible for grants, which are then automatically applied at the point of sale.

However, some believe the issue is not to be the overall price, but the upfront costs and the UK’s lack of charging points.

The grant is funded through the scheme that is worth £650m, for the next three years.

POLITICAL

It aligns with broader policies like the ban on new petrol/diesel car sales by 2030

However, some believe that this is not the best use of taxpayers’ money, and lowering the cost of EVs might not be what the government should spend lavishly on at this moment of crisis.

The scheme also deliberately excludes some Chinese-made models, which might increase geopolitical tension between the two nations.

ECONOMICAL

As mentioned, this costs taxpayers’ hard earned cash. The £650m invested can be used to improve healthcare, provide welfare payments, enhance defence. All of which are perhaps more pressing issues.

EV companies can also increase the price of their EVs to boost their profit, rendering the whole grant fruitless.

If EV companies do not increase the price, it will be cheaper to purchase an EV. As prices of EVs decrease it contributes to disinflation. In other words, it reduces the rate of inflation, helping the Bank of England to reach their target of 2%.

SOCIAL

Reducing upfront costs addresses a key barrier, price. This is especially for private consumers.

The grant is also expected to boost the automotive sector and broader economy, supporting 133,000 jobs directly and 320,000 indirectly, addressing the unemployment issue.

However, there are still not enough charging points (82,000) in the country to provide for all 1.3million electric cars.

TECHNOLOGICAL

If EV companies do increase their prices leading to an increase in profit, they can reinvest the profit into R&D. This can potentially boost EVs’ environmental-friendliness. As mentioned, the more the EV is deemed environmental-friendly, the bigger the reduction in price.

LEGAL

By providing grants like this, it might be decreasing the competition among the sector. As cars above a certain price threshold are not eligible for the grant, luxury EV companies e.g., Tesla, might start to lose customers as they turn to the discounted ones

ENVIRONMENTAL

As the cost of EVs falls and more start to purchase them, carbon emissions are decreased as there are less petro/diesel cars. This contributes to the goal of lessening global warming.q