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Why changes to EV grants are bad news for Tesla

Tyler Heatley

23 Mar 2021

The Model 3 has become one of the strongest selling electric cars, but it is now ineligible for UK government EV grants.

The popularity of electric cars has really boomed over the past few years, with 215,000 pure EVs registered on UK roads at the start of 2021. Car manufacturers are offering ever more impressive electric models, but there’s one brand that stole a march on all of its competitors and is now reaping the benefits. Regardless of your opinions on Tesla, this American EV maker has done more for electric motoring in the modern age than any other to date. However, new changes to government electric car grants are bad news for Tesla.

While Tesla’s early offerings, such as its original Roadster were seen as rather niche at the time, it paved the way for more mainstream models such as the landmark Model S. While the S was a premium vehicle that was still out of reach for the masses, its technological innovations helped make electric motoring viable. Headline grabbing sprints aside, Tesla’s Model S saw people ditch their BMWs and Mercedes-Benz company cars for the first time in decades. However, Tesla’s biggest launch was the Model 3.

The Tesla Model 3 is about the same size as a BMW 3 Series, but more importantly, about the same price as a respectably specified one. This single car opened Tesla’s EV tech to a whole new demographic of people who previously wouldn’t have considered one. In addition to being more realistically priced for many households, the battery technology that removed range anxiety and rapid charging from Tesla’s own Supercharger network makes for a tempting proposition. Other mainstream car manufacturers are catching up, but it is not an overstatement to say that Tesla is still a generation ahead.

The Model 3 has been selling strong with demand outstripping supply. In December 2020 it became the UK’s best selling car with some help from COVID lockdown, but regardless of that, it accounted for over 30% of all EV sales in that year. The UK’s government grant to encourage people into electric cars made it even more affordable, well, that was until this week.

Seemingly overnight the government announced that the grant would drop from £3,000 to £2,500. It will now only cover cars under £35,000 which is bad news for the Model 3 starting at £43k. While a £500 increase in the cost of buying an EV doesn’t sound all that much, it sends the wrong message to the car buying public and removes some of the incentive to buy the popular Model 3 over a combustion rival. Considering this same government wants a ban on combustion engine sales by 2030 and to be a world leader in EVs, it’s a bit counterintuitive.

There will be a percentage of company car buyers of which a Model 3 will become ineligible under their schemes, and some private buyers might reconsider a plug-in hybrid which will be the next target of government disincentive on this road to full electrification. Worse still, those people who are thinking of going EV for the first time, saw the Model 3’s tech as a good fit for them, and could just about make it work financially, might go the other way on the subject of electrification.

EVs will become cheaper. In fact expect the next batch to start at £34,995 to keep the incentives, but this move just as electric cars are starting to be adopted more widely has the potential to stunt their growth. Model 3 sales will be a good barometer over the next year to measure that impact.

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Tyler Heatley

23 Mar 2021