Grant scheme worth £650,000,000 to knock thousands off price of EVs

Metro

14-07-2025

Many people are put off buying an EV due to the extra upfront cost (Picture: Shutterstock/William Barton)
Electric car prices will fall closer in line with petrol and diesel cars with a government subsidy scheme worth £650 million, the Transport Secretary has said.
Grants of up to £3,750 will be made available from today, applying to new EVs worth less than £37,000.
Upfront cost is a major barrier for many people considering an EV for their new car, with electric options often costing around £10,000 more than their petrol equivalent.
That poses a challenge for the government, after Labour vowed to phase out the sale of new petrol and diesel cars over the next five years in their 2024 election manifesto.
Writing for Metro, Transport Secretary Heidi Alexander did not say the grant scheme would bring the price of EVs and petrol cars into line but said it would make them 'more competitive'.
The move will 'make owning an electric car a reality for thousands', she added.
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According to the Department for Transport, two in five second-hand electric cars are now sold for under £20,000 while there are 34 electric cars makes on offer for under £30,000 new.
Research from the Energy & Climate Intelligence Unit also suggests petrol cars cost an average of £677 extra in fuel costs per year compared to their electric equivalent.
But car magazine Auto Express said most EV models will not qualify for the subsidy, as 70% are priced at £40,000 or more.
Transport Secretary Heidi Alexander writes for Metro
Ever since we've been in office, we've been on the side of drivers.
We're investing a record £1.6 billion to tackle potholes once and for all, bringing down the driving test backlog so young drivers aren't left in limbo, and freezing fuel duty until spring 2026 to save drivers up to £60 a year.
But we know that for many families, making the switch to an electric car still feels out of reach. Many people still think upfront costs are high, not everyone has a driveway and drivers sometimes worry about where to charge, or how often they'll need to.
That's why today we're taking action to make buying an EV easier and cheaper. The steps we're taking will make the price of electric cars more competitive with petrol cars, while also helping to get more into second-hand market.
Thanks to our £650 million grant, drivers across the UK will soon enjoy discounts of up to £3,750 on new eligible electric cars at the dealership, putting more money back in working people's pockets.
This will make owning an electric car a reality for thousands, helping them unlock savings of up to £1,500 a year compared to driving petrol or diesel.
This comes off the back of £25 million we announced last week to help people without driveways charge at home, helping put range anxiety firmly in the rear view mirror. This is a game-changer, allowing access to home electricity rates allowing drivers to run their EV for as little as 2p per mile – that's London to Birmingham for £2.50.
And for when you're out and about, we're cutting red tape and improving signs on major A-roads to make it easier to find one of the 82,000+ chargepoints already available across the UK – with a new one added every half an hour.
It's all part of delivering our Plan for Change – backing carmakers, safeguarding jobs, and helping families keep their hard-earned cash.
The discount of up to £3,750 will apply to the greenest electric vehicles in band one, while band two cars will be discounted up to £1,500.
Last week, the DfT announced a £63 million package to boost several other green transport schemes, including support for at-home charging and funding for the transition of NHS vehicles to electric.
It is all part of the government's £4.5 billion effort to 'turbocharge' the UK's switch to EVs.
However, Steve Walker of car magazine Auto Express said the latest move 'does not address some of the other barriers to EV uptake'.
Transport Secretary Heidi Alexander said many people still feel like owning an EV is 'out of reach (Picture: ZUMA Press Wire/Shutterstock)
He said: 'For example, around 70% of new EVs cost more than £40,000, yet the new grant of up to £3,750 is only available at the point of sale for cars priced at or under £37,000, meaning most models won't qualify.
'And, as of April, EVs priced at £40,000 or more are also no longer exempt from the expensive car 'road tax' supplement.
'This policy – which we have urged the Government to rethink – adds £410 to their annual VED rate for the first five years, which is a £2,050 additional hit.
Steve added: 'So, while the announcement today is undoubtedly a welcome boost, it shouldn't be seen as the end of the job.'
Yesterday, the Conservatives accused Labour of 'forcing families into more expensive electric vehicles before the country is ready'.
Shadow Chief Secretary to the Treasury Richard Fuller said: 'Only the Conservatives stand for sound public finances, lower taxes, and real support for Britain's drivers, not unaffordable electric cars and impossible net zero targets.'
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