The Government’s decision to withdraw the Plug-in Car Grant is unlikely to undermine fleet uptake of electric cars, but could prove a headache for employers that offer salary sacrifice schemes to their staff, according to a new survey of more than 200 fleet decision makers by 360 Media Group.
Research by 360 Media Group found that government grants were only fourth on the list of reasons to buy or lease electric company cars, lagging well behind the need to operate vehicles that comply with ultra-low emission zones, corporate social responsibility and driver demand for company cars that incur barely no benefit in kind tax.
The same study found that fleets had intensified their electrification efforts in the knowledge that the PICG was likely to be short lived. The grant had already declined from its original £5,000 to £1,500 at the time of its withdrawal, and its end followed the demise of the grant for house owners to install domestic charge points.
Moreover, in its final iteration the grant only applied to electric cars with a list price below £32,000, which severely limited its relevance to the majority of company cars.
However, the grant did reduce the depreciation cost of cars to which it applied by the equivalent of £41.67 per month on a typical three-year lease, which could have a significant knock-on effect in two areas of the salary sacrifice sector. Firstly, monthly lease rentals are in line to rise by over £40 per month for the smaller, cheaper electric cars that qualified for the grant. And secondly, sacrificing this extra money out of gross income might reduce the salary of some lower paid employees below the threshold for the national minimum wage – HR departments will have to be especially diligent when approving employee requests to join a salary sacrifice car scheme.
Elsewhere, fleet industry reaction was more worried about the signal that the withdrawal of the PICG sent to the market than the actual removal of the grant. Leasing companies and manufacturers now identify the strength of the public recharging network as the principal factor in supporting EV uptake, so the Government’s announcement that the end of the grant would enable it to “concentrate funding on expanding the public chargepoint network,” was welcomed, as was the continuation of the PICG for vans and trucks – just 4% of new light commercial vehicles sold in the first five months of this year were electric – as well as plug-in taxis, motorcycles, and wheelchair accessible vehicles.
Among company car drivers, the biggest incentive to switch to an electric vehicle remains the 2% benefit in kind tax levied on EVs, compared to 25% and above for a typical lower medium diesel car.
The Association of Fleet Professionals, which represents fleet managers, is now concerned that the Government might start to ratchet up its tax take from company car drivers, amid misplaced confidence that the company car market has sufficient EV momentum to require no more support.
HMRC has published benefit in kind tax rates up to 2025, and the fleet sector is intensifying its calls for the Government to provide more clarity on the rates that will apply beyond this date, with Paul Hollick, chair at the AFP, saying any subsequent rise in benefit in kind tax must provide a ‘soft landing’. “What the government should note is that the impetus behind EV use by businesses is yes, partially driven by environmental concerns but also by financial advantages. If the sums for operating EVs don’t stack up, adoption could very well slow down,” he said.