UK Government cuts car aid, EV grants at risk

By Tim Pollard

Motor Industry

30 June 2010 15:48

Britain's business secretary Vince Cable today fired a warning shot across the bows of the car industry, saying that subsidies would end and warning that the pledged £5000 subsidy off the first electric cars was in peril.

'Our starting point is very clear,' he told delegates at an automotive summit arranged by the Society of Motor Manufacturers and Traders. 'We've moved on from the era of subsidies. We just have to be realistic about what's affordable.'

Cable said the new coalition Conservative-Liberal Government had not yet decided whether or how to implement the new low-carbon vehicle subsidies promised under Labour, which had set aside £250m in initial funding.

'It is still actively under consideration,' said Cable. 'We're not walking away from the industry.'

Great – so now the first wave of electric vehicles will be £5000 more expensive?

It seems likely, yes. The cuts come as the Government wrestles with the large UK deficit – there will be budget cuts across government departments. But the business secretary admitted that the UK car industry, which employs 800,000 people and is responsible for 10% of all exports, was 'incredibly important to the UK economy.'

Without £5000 subsidies, the first electric cars will be likely to soar in cost, deterring off the early adopters companies like Nissan, Renault and Mistubishi are desperate to find for their EVs.

A Renault Fluence ZE would climb from £21,000 to £26,000 when it goes on sale in spring 2012, while the pricey Mitsubishi i-MIEV would jump to £39,000.

Cable intimated that rather than subsidies, the new Government would prefer to create tax incentives to encourage the take-up of new, low-carbon vehicles.

So UK car companies are now going it alone?

So it seems. Cable said that the UK manufacturing base was no longer in an emergency and therefore direct Government support would be withdrawn. 'It is completely self-defeating at the end of the day, with governments getting poorer and companies being encouraged to produce too much, resulting in overcapacity. We can't fight and win a subsidy war.'

By Tim Pollard