Is it time to go electric? The UK car industry certainly thinks so and is readying for a surge in demand as a new subsidy scheme cuts the price of some electric cars by up to £3,750.

With purchase prices – not to mention range anxiety – contributing to weak consumer uptake, the government grants are designed to bring the upfront cost closer to a petrol car. Making them cheaper will also give “thousands more drivers access to savings of up to £1,500 a year in fuel and running costs compared to a petrol car”, officials say.

Robert Forrester, the chief executive of the car dealership group Vertu Motors, says: “With the average new electric vehicle now costing close to £49,000, the market has drifted away from the everyday motorist.

“This grant helps correct that, opening access to a wider range of customers by making sub-£40,000 EVs more appealing and financially viable.”

The scheme

The £650m electric car grant (ECG) is a reboot of a previous state-backed money-off scheme to incentivise drivers to switch, before a ban on the sale of new fully petrol or diesel cars and vans from 2030.

There are two tiers pegged to how green the manufacturing process is. The greenest vehicles in “band one” qualify for a £3,750 discount while for “band two” vehicles the figure is £1,500.

All eligible vehicles must have an RRP below £37,000. The grant only applies to new cars.

The good news is that consumers don’t have to fill in any extra paperwork when they make a purchase. It is the manufacturer that applies for the grant, with the allocated funds deducted from the car’s list price.

Tom Jervis, the consumer editor at Auto Express, says that while the grant is aimed at EVs costing under £37,000 “price alone isn’t enough”.

“Eligibility also depends on manufacturer commitment to emissions targets, the environmental impact of the battery and production process, and where the car and battery are built,” he says. “It is based on lifecycle carbon costs, meaning the country of assembly and battery production play a major role.”

The price and environmental conditions attached to securing a grant mean that some well-known brands, including Tesla, are not part of the scheme.

To qualify the manufacturer must have a science-based target for cutting greenhouse gas emissions. These are verified by the Science Based Targets initiative, an independent body that assesses corporate sustainability plans.

Vehicles made in countries where the electricity grid is more reliant on fossil fuels will get a higher score than those made in one powered by renewables or nuclear. This focus on emissions essentially excludes vehicles made in China with its reliance on coal-fired power stations.

Which cars are eligible?

Although the scheme was launched formally in the middle of July, the full list of qualifying cars is still some way off. That’s because manufacturers need to apply to be considered for funding.

This week, the government announced the first. On the list are 19 models from four carmakers: Citroën, Renault, Nissan and Vauxhall. They include the Citroën ë-C3 – Auto Express’s 2024 car of the year – Renault Megane, Nissan Micra and Vauxhall Grandland Electric. They are now available at the band two discount of £1,500 each.

The Department for Transport (DfT) has a dedicated page on the gov.uk website which it is updating on a rolling basis with the list of approved vehicles. It says it expects to approve more models over the coming weeks.

The £37,000 cut-off point narrows the choice significantly in a market where about 70% of new EVs cost over £40,000. It rules out upmarket models, including the UK’s bestselling EV, the Tesla Model Y, and every other Tesla on sale. No Audi, BMW or Mercedes EV would now be eligible either. The scheme’s design also favours European over Chinese-built cars.

“Countries with high-carbon electricity, like China, are penalised in the grant calculations, meaning Chinese-built EVs like the MG4, BYD Dolphin, and Leapmotor models are expected to only qualify for the £1,500 tier – if they qualify at all,” says Jervis. “South Korean brands like Hyundai and Kia are in a grey area – reliant on fossil-fuel-heavy grids but potentially meeting other sustainability metrics. Their eligibility will likely vary by model.”

He adds: “The scheme is unapologetically tilted in favour of European production with cleaner assembly and battery footprints, and this has given many manufacturers confidence that they will qualify.”

The latest Nissan Leaf, which is being produced at the Japanese manufacturer’s Sunderland plant, is thought to be a shoo-in for scheme qualification when it arrives in showrooms later this year.

Auto Express has compiled a list of the 52 cars its writers think could qualify if they meet the sustainability criteria.

A recent poll by online marketplace Carwow found that four in 10 drivers thought the scheme excluded too many of the EVs now on sale.

The objective is to make budget EVs more attractive to the public as opposed to executives who lease them, or acquire them as company cars, or through salary sacrifice schemes.

Carwow’s Iain Reid says: “Crucially, the grant applies to both outright purchases and leasing deals, making electric vehicles more accessible to a wider range of private drivers.”

Discounts by carmakers

If you have your heart set on a car marque unlikely to make the cut the good news is that the scheme has triggered a wave of price cuts by manufacturers who don’t want to be left behind.

The Chinese brand Leapmotor has, for example, launched what it calls a leap-grant, with adverts that pose the question: “Why wait for the government?” It has cut the price of its cheapest model, the To3, by £1,500 to £14,495 and is billing it as the “UK’s most affordable 5-door electric city car”. It has also cut the price of its C10 SUV by £3,750, bringing it down to £32,750.

Other manufacturers have taken action to make sure models come under the price threshold for the scheme. Jervis says: “Both the Vauxhall Grandland and Renault Scenic were slightly above the cut-off when the grant was first announced, but the entry point for the Scenic range has dropped by £200 and the Grandland by £400 to put both electric SUVs at £36,995.

“Getting the entry models under £37,000 is crucial for brands, as that brings the entire lineup using the same battery into eligibility.”

He says Chinese carmakers GWM Ora and MG have also cut prices by up to £3,750, “likely because they fear they won’t qualify – in order to stay competitive. Volvo, Hyundai and Kia all launched offers too, and we are likely to see more brands follow suit over the next few weeks.”

Buy now or wait?

With the scheme scheduled to run until 2027–28 – or until the funding is exhausted – early signs point to strong demand.

Carwow’s Reid says: “Traffic to our EV grant information pages surged 160% immediately after the announcement. The government’s previous plug-in car grant, which ended in June 2022, helped increase electric car sales by 70% within a year. Our advice is to start researching and test-driving now. On average, the car-buying journey takes around 190 days, so being prepared means you can act fast once the grant applies to your chosen model. There’s a definite first-mover advantage and today’s mix of official and brand incentives may not stick around for long.”

Now is a “very good time to go and buy an electric vehicle”, says Vertu Motors’ Forrester. “It’s coming at a time when we are, for the first time, seeing cheaper electric vehicles on the market.”

He adds: “I think there’ll be a limited number [of cars approved for grants] because a lot of manufacturers don’t think they will comply and are discounting to overcome the competitive disadvantage. Whether you get a grant or not, doesn’t really matter, does it? The price has come down.”