Data firm Indicata has looked at the UK Government’s Electric Car Grant program and the impact it will have on the market.
It found that the program will support only approximately 5.8% to 14.4% of annual BEV sales, depending on the tier of support accessed.
“The reality is that this program, while well-intentioned, will function more as targeted support for specific market segments rather than a broad market transformation tool that many were expecting,” said Andy Shields, Indicata global business unit director.
“When we look at the Italian precedent, where similar support levels failed to materially impact BEV registration rates, we have to question whether this £650m investment will deliver the market change the government is seeking.”
The Italian Government supported BEVs in Italy with an annual budget of €240m (£208m) with support up to €5,000 per unit (£4,350). This is an equivalent level of support, yet Italian BEV registrations remained at circa 4.2%.
Indicata said the analysis identifies significant differences in how the grant program will affect vehicle residual values based on age segments. Young vehicles under 12 months will experience notable downward pressure on residual values, with approximately 90% of new vehicle price changes flowing through to the used market.
Conversely, vehicles aged three years or more will see minimal impact due to weaker correlation between new and used vehicle pricing.
“The rental industry and short-cycle fleet operators face particular exposure to these dynamics,” said Shields.
“Those purchasing non-subsidised vehicles risk significant losses if those models subsequently gain subsidy eligibility, as the market will adjust residual values downward to reflect the reduced new vehicle transaction prices.”
The Electric Car Grant’s program’s tiered structure offers £3,750 for vehicles demonstrating the lowest carbon emission scores from manufacturing processes, while providing £1,500 for vehicles meeting basic environmental criteria. This approach requires manufacturers to hold verified Science Based Targets and undergo complex dual assessment processes.
Separately, Indicata revealed that sales of used battery electric vehicles (BEVs) in the UK held record levels in June, making up 6.39% of all used car sales, according to the latest Indicata Market Watch report. In the segment of cars aged under four years old, BEVs now represent more than 13% of total sales.
It said growth came amid continued price pressure. The average retail price of used BEVs has now dropped to just 55.29% of the vehicle’s original new retail price — down from around 60% at the start of 2025. It’s the sharpest value decline of any fuel type this year.
The UK’s Zero Emission Vehicle (ZEV) mandate requires 28% of new car sales in 2025 to be zero-emission, but at the half-year point, new BEVs account for just 21.6% of sales. That shortfall means manufacturers are expected to push significantly more BEVs into the market in the second half of the year to avoid stiff financial penalties.