The Government has reintroduced grants to slash the price of some new electric cars as part of its efforts to boost sales before the end of the decade.
Transport Secretary Heidi Alexander has today (Monday) unveiled Labour’s £650million Electric Car Grant, which comes three years after the previous Tory regime scrapped its own plug-in car grant.
The Department for Transport confirms only fully electric models priced at £37,000 or less are eligible for the new grants of up to £3,750, with funding confirmed up until 2028-29.
However, there are a number of caveats.
Firstly, the scheme will not immediately be available, despite officially launching on Wednesday 16 July. That’s because manufacturers need to apply for eligibility for vehicles in their ranges, rather than buyers registering grants at the point of purchase.
And not all grants will have a value of £3,750. There will be a two-tier approach to the value deducted from the recommended retail price (RRP), which is determined by how green the manufacturing process is for each different model.
The RAC says the grant’s restrictions mean drivers will be ‘picking models that are not only better for their wallets, but better for the planet too’.
We’ve picked five of the best EVs that are certain to be eligible for the grant – though we will have to wait to find out which will qualify for the full subsidy amount of £3,750.
What is the Electric Car Grant?
The Electric Car Grant (ECG) is the Government’s new big hope to drive sales of EVs in the run-up to the end of the decade as it continues to steer towards outlawing the availability of new petrol and diesel cars from 2030.
It arrives three years after the previous Tory administration prematurely scrapped its Plug-in Car Grant (PiCG), which it launched in 2011.
Over its 11-year spell, the PiCG amount was gradually wound down; having originally offered to slash the price of any new EV or plug-in hybrid by £5,000 in 2011, by the time the scheme was closed in June 2022 only fully-electric cars below £32,000 were eligible, and the amount knocked off the RRP just £1,500.
That said, the scheme proved incredibly successful.
It provided more than £1.4billion to motorists to support purchases of nearly half a million electric and hybrid vehicles in that period, in which it was widely responsible for encouraging early adoption of electrified cars.
The new ECG will hope to reignite electric car demand among private buyers with the same level of impact after months of stagnating sales.
It will be supported by a £650million backing from the Government that will be available for the next three years.
However, funding will remain under review, with the scheme subject to amendments or an ‘early closure with no notice’ should the pot of available money ‘become exhausted’, the DfT clarified.
Only cars up to £37,000 qualify for the grant, which rules out premium models, including every Tesla on sale. No Audi, BMW or Mercedes EV will be eligible either.
The Government’s hope is that by making the most financially attainable EVs even more affordable, it will make switching more appealing to private buyers rather than just those who lease more expensive EVs or acquire them as company cars or through salary sacrifice schemes.
Around 50 different models are expected to be eligible for the grants.
There are also a number of electric cars that are just over the £37,000 threshold and manufacturers are likely to review whether to lower the RRPs on these models in order to qualify.
How does the Electric Car Grant work?
Unlike the PiCG, buyers will not be allocated the grant amount at the point of purchase.
Instead, manufacturers must apply to be eligible for the scheme with their sub-£37,000 cars on a ‘first come, first served’ basis.
This means that motorists will not need to fill in any additional paperwork to receive the grant, with all administration handled by the car maker, dealership, and the Government.
But because manufacturers must apply for the scheme, it may take weeks for discounted EVs to begin appearing in showrooms, experts say.
The new scheme will also differ from the PiCG in that it is a two-tier approach based on ‘sustainability criteria’.
Only the greenest models – considered ‘band one’ – receiving the full £3,750 amount.
Band two cars with a lower eco rating will be eligible for a reduced amount as low as £1,500.
Bands are determined by each maker’s Science-Based Target (SBT) – an industry-wide scheme, with manufacturers needing to meet carbon scores below a specific criterion to achieve the highest green standard.
Volkswagen and Renault Group have both confirmed they are signed up with the SBT scheme.
ECG bands – which could later expand beyond two tiers – will be determined by how much CO2 is emitted in an EV’s production, assessing the energy used during assembly as well as battery manufacturing.
An overall SBT score is weighted 70 per cent for the CO2 produced during battery manufacturing and 30 per cent for vehicle assembly emissions.
Threshold levels to achieve the full £3,750 discount or the lower banded £1,500 have yet to be made public. However, vehicles that don’t meet a minimum level will not receive a grant at all.
This could be bad news for Chinese EV makers, which currently offer some of the most competitive prices but could fall foul of the emissions-based rules.
According to early reports, British-built EVs were said to qualify for band one in support of UK car makers. However, the DfT has said this will not be the case and that ‘all products are assessed under the same framework’.
Transport Secretary Heidi Alexander confirmed the ECG’s availability on Monday night, saying: ‘The EV grant will not only allow people to keep more of their hard-earned money – it’ll help our automotive sector seize one of the biggest opportunities of the 21st century.’
On Sunday, Alexander admitted she has not been able to afford an electric car as she hinted towards the introduction of new subsidies.
The Cabinet minister – who earns around £160,000 – said she had not purchased a vehicle for about six years as it was ‘expensive’.
Car industry welcomes EV purchase incentive
The Society of Motor Manufacturers and Traders (SMMT), which has been campaigning for new EV purchase incentives to be launched since the PiCG was closed three years ago, said the grant is a ‘clear signal to consumers that now is the time to switch’.
Mike Hawes, its chief executive, said: ‘Rapid deployment and availability of this grant over the next few years will help provide the momentum that is essential to take the EV market from just one in four today, to four in five by the end of the decade.
‘This announcement is a welcome response to consistent calls from the industry for more support, which will be in addition to the substantive subsidies already provided by manufacturers.’
Simon Williams, head of road policy at the RAC, described the grant as ‘just the shot-in-the arm needed to help more drivers go electric’.
He added: ‘Within weeks, discounted cars should start appearing at dealerships across the country.
‘And, as the biggest savings will be given to cars with the strongest ‘green’ manufacturing credentials, drivers will be picking models that are not only better for their wallets, but better for the planet too.’
Ford UK’s managing director Lisa Brankin said the introduction of the ECG will slash the price of its new Puma Gen-E model.
‘Today’s confirmation of customer grants – reducing the cost of sub-£37k electric cars by up to £3,750 – is great news for UK drivers and will make purchasing an electric vehicle much more affordable,’ she told This is Money.
‘Ford applauds the UK government for taking this step. We have been on the frontline of the conversation, highlighting the urgent need for consumer-based incentives for electric vehicles, and now they have arrived.
‘Ford Puma is the best-selling car in the UK and the government grant will help make the all-electric Puma Gen-E even more affordable.’
Renault’s managing director, Adam Wood, called the grants a ‘much-needed signal that Government is ready to put tangible action behind the ambitious plans for the transition to electric vehicles that it has outlined’.
Five of the best EVs likely eligible for the grant
While any battery electric car with an RRP of £37,000 or below will be eligible for the grant, we will have to wait for manufacturers to apply for the grant before finding out which vehicles qualify – and which band and subsidy amount they will be categorised.
However, here is a list of five of the best EVs on sale currently that are available for less than £37,000 – and should become cheaper to buy within a matter of weeks.
Below, we have listed them with the potential start price if they are to qualify as band one and the full £3,750 grant allowance.
1. Renault 5 E-Tech – from £19,245*
Current price from: £22,995
Versions under £37k: all
Range: up to 250 miles
The Renault 5 E-Tech is a reborn version of the legendary eighties model with battery power – and it has proved a huge success for the French manufacturer since it arrived in Britain earlier this year.
Impressive driving characteristics, a premium feel to the cabin, and a more than adequate range of between 190 to 250 miles earned it the worthy title of European Car of the Year Award for 2025.
With a starting price of £23,000 and even the top-spec Roland Garros version ringing in at less than £30,000, every version should be eligible for the grant.
The 5 has been the best-selling EV in the UK retail sector in the months of April and May, so this is certainly one of the cars the grant is aimed at.
2. Nissan Leaf – from circa £26,250*
Current price from: circa £30,000
Versions under £37k: TBC
Range: up to 375 miles
An all-new Nissan Leaf is due to hit showrooms this year. And, given it’s the only mass-market EV produced in the UK [since assembly of the Mini EV moved to China] at the Sunderland plant in the Northeast, the Japanese brand will be hoping to meet the requirements to secure the full £3,750 ‘band one’ grant allowance.
Unlike the outgoing Leaf hatchback, the new model is a crossover with a jacked-up ride height and bulkier styling.
Prices are yet to be confirmed, but bosses have hinted it will start from around £30,000. Even mid-to-top spec models are likely to sit below the grant’s £37,000 threshold.
Two battery options will be available from launch in 2025: a smaller – and cheaper – 52kWh unit offering up to 270 miles of range on a single charge and a larger 75kWh battery which ups the distance to 375 miles.
3. Citroen e-C3 – from £18,345*
Current price from: £22,095
Versions under £37k: all
Range: up to 199 miles
There are plenty of compact EV options that should qualify for the ECG criteria, including the Dacia Spring (from £14,995) and Hyundai Inster (from £23,505). But our pick of the most attainably priced electric cars is Citroen’s new e-C3, which start from £22,095.
With a range of up to 199 miles, an existing starting price a little over £22,000, and enough room for five adults, this practical and comfortable electric supermini could become even more affordable if it qualifies for the full ECG amount.
Even the entry-spec models get a 10.25-inch infotainment screen with Apple CarPlay and Android Auto connectivity, while higher trim levels – all of them falling well below the grant’s £37,000 ceiling – have heated seats, a heated steering wheel and a reversing camera.
4. Kia EV3 – from £29,255*
Current price from: £33,005
Versions under £37k: EV3 Air
Range: up to 375 miles
Kia’s latest – and smallest – model, the new EV3, looks set to steal a march on rivals in the most competitive segment of all. With every brand on the planet seemingly offering a compact SUV, Kia’s EV3 is our choice of the bunch exclusively with battery power.
The entry ‘Air’ specification sits under the £37,000 ECG threshold with the choice of either the 58.3kWh or 81.4kWh battery.
While the smaller battery model (starting from £33,005) offers a range up to 254 miles, the £36,005 Air with the Long Range 81.4kWh battery providing up to 375 miles on a single charge.
5. Skoda Elroq – from £27,760*
Current price from: £31,510
Versions under £37k: Elroq SE, SE-L and Edition
Range: up to 266 miles
For family car buyers, Skoda’s Elroq is another quality option. And with three trims in its range likely to qualify for the ECG, a discount of up to £3,750 could make it compelling option.
It’s roomy, well-equipped and has that robust Volkswagen Group build quality. While not the most entertaining to drive, it’s excellent value against comparable rivals.
The entry Elroq SE with a 52kWh battery is the cheapest from £31,510, though this provides a maximum range of up to only 233 miles. The SE-L 60 and Edition 60 with the bigger 59kWh offer up to 266 miles and both sit below the grant’s £37,000 cut-off for eligibility. Unfortunately, the larger 77kWh battery versions are all over the ECG’s price threshold.
*lowest start price if qualifying as band one and the full £3,750 grant allowance
