The Next Phase of EV Grants: A Strategic Shift to Size and Sustainability
When policymakers talk about boosting electric vehicle sales, the focus often falls on how much money is on the table. Yet the real story is in how those subsidies are designed. Across Europe—and now in the UK—rules are being rewritten not just to speed up EV uptake, but to steer buyers toward smaller, more efficient cars and to push automakers toward cleaner supply chains.
Why Smaller EVs Matter
In the shift away from petrol and diesel, size counts. Smaller EVs need smaller batteries, which means less lithium, nickel, and cobalt mined and refined, and less factory energy used to build them. They weigh less, use less electricity per kilometre, and recharge faster. On congested city streets, they ease parking pressure and cut tyre and brake emissions compared to heavier SUVs. And because they cost less, they can bring more households into the EV market sooner.
Put simply: if Europe ends up with a fleet of supersized electric SUVs, the climate and resource benefits of electrification will be diluted. If instead policy tips the balance toward compact, efficient EVs, every tonne of battery material and every kilowatt of clean electricity stretches further.
Beyond the Tailpipe: Cleaning up the Supply Chain
Tailpipe-zero is only part of the equation. As EVs spread, manufacturing emissions now dominate the differences between models. A compact hatchback built in a European factory powered by renewables has a very different footprint than a large SUV assembled in a coal-heavy supply chain.
Governments are starting to respond. France has introduced a carbon footprint test: EVs with production emissions above 14.75 tonnes of CO₂ do not qualify for its subsidy. This mechanism not only excludes dirtier imports, it also gives European factories running on cleaner power a clear advantage. The EU, meanwhile, is pouring billions into battery cell plants, recycling facilities, and component supply chains inside Europe to shorten logistics and clean up the upstream picture.
The logic is straightforward: if subsidies are paying for the transition, they should reward cleaner production, not just cleaner use.
The UK’s Grant: Compact Cars Over Luxury EVs
This summer, the UK reintroduced a national electric car grant with an important twist. Support only applies to EVs priced under £37,000, and within that bracket models are split into two tiers: a lower band worth up to £1,500, and a top band worth up to £3,750 for cars with demonstrably lower-emission manufacturing and supply chains.
That design signals two things. First, the price cap deliberately nudges the market away from large premium EVs and toward compact models more typical of UK households. Second, the sustainability criteria tie public support to how and where the car is made—with cleaner production and better-traced batteries expected to unlock the full grant.
The policy has had teething problems: as of mid-August no car has yet cleared the bar for the higher £3,750 band. But the lower £1,500 band is already shaping the market, with approvals for models such as the Citroën ë-C3 and ë-C4, Renault’s new 4 and 5, the Peugeot e-208 and e-2008, and the Volkswagen ID.3. British buyers will also recognise familiar nameplates like the Vauxhall Corsa Electric and Mokka Electric, alongside the Nissan Micra, which fall within the scheme’s scope. These are all compact European-built EVs, positioned at the affordable end of the market and produced in factories where supply chain emissions are more transparent than in many larger imported models.
The upper tier of support still lies ahead, but the cars most likely to reach it are those with strong local assembly and lower-carbon production credentials—such as the next-generation Nissan Leaf from Sunderland or the upcoming Renault 5 E-Tech. In that sense, the grant is doing more than just lowering prices: it is planting a flag for the kind of EV Britain wants to promote—smaller, more efficient cars made in cleaner supply chains.
Europe’s EV Subsidies
Across Europe, there are early signs of a shift in subsidy design—from broad purchase incentives toward policies that reward cleaner production and smaller cars. France is furthest along, with a carbon footprint test that excludes EVs with production emissions above 14.75 tonnes of CO₂, giving a clear advantage to vehicles assembled in Europe’s cleaner power grids. Slovenia has also moved in this direction by explicitly capping prices and tailoring grants by vehicle class, ensuring micro- and city EVs remain eligible.
Elsewhere the emphasis is less on supply chains. Spain’s extended MOVES programme still channels support through range thresholds and scrappage bonuses, which tend to favour smaller, cheaper EVs but without a carbon test. Italy’s new scrappage-driven scheme tilts uptake toward mass-market models, though it likewise does not differentiate on production emissions. Germany, by contrast, has recently scaled back its EV subsidies altogether, reflecting budget pressures and sparking debate over how to sustain demand without public support.
At the EU level, billions of euros are being directed into gigafactories, recycling facilities, and critical raw material projects. That industrial base is essential: without it, national “clean supply chain” tests like France’s would be much harder to meet.
From Quantity to Quality in EV Support
What links these policies is a quiet but significant shift. Instead of treating all EVs as equal, governments are beginning to differentiate—favouring those that use resources efficiently and that are built in cleaner, closer-to-home supply chains.
For the UK, the immediate future is one of potential: a grant designed to reward cleaner manufacturing is poised to drive innovation once its highest tier is activated. Across Europe, the landscape is patchy but innovative, from France’s carbon scoring to Slovenia’s price caps. What unites them is the same direction of travel.
The next phase of the transition is no longer just about how many EVs get sold, but about which EVs we choose—and how they are made.
