The UK Government’s Electric Car Grant (ECG) re-launched on 16 July 2025, and comes as a welcome announcement for the automotive sector, consumers and businesses providing company cars.
With up to £3,750 off the price of eligible Electric Vehicles (EVs), this initiative is designed to accelerate the transition to zero-emission transport and support the Zero Emission Vehicle (ZEV) mandate, while making EVs more affordable for both businesses and employees.
If you’re a fleet manager, there are several key benefits associated with the ECG. Whether you’re overseeing a company car scheme, managing a salary sacrifice programme, or planning your next round of vehicle procurement, the ECG could reshape your strategy.
Let’s break down what the grant means, how it works, and what it means for company car fleets that use salary sacrifice and business leasing.
What is the Electric Car Grant?
The ECG is a £650 million UK government scheme aimed at boosting EV adoption. It applies to new electric cars priced under £37,000, with discounts applied by the manufacturer and reflected in pricing at the point of purchase.
The grant is available to individuals and businesses, including those acquiring vehicles through leasing or salary sacrifice.
Grant tiers:
Band 1: Up to £3,750 off for vehicles with the highest sustainability credentials.
Band 2: Up to £1,500 off for vehicles meeting minimum sustainability standards.
How the electric vehicle incentive applies to salary sacrifice
Salary sacrifice schemes are an arrangement where your employees agree to receive a lower taxable salary in exchange for a non-monetary benefit.
In this case, the benefit is an EV. These are particularly popular for EVs right now due to:
Tax savings - Although your employees are required to pay Benefit-in-Kind tax, the current rates are low, and they benefit from savings because they pay for the car before tax and National Insurance Contributions (NICs) are deducted.
National Insurance savings - For you as the employer, you can make Class 1 NICs savings because the employees’ gross salary has been reduced.
All-inclusive packages - It’s possible to include insurance and maintenance as part of a salary sacrifice arrangement.
EV grant impact:
- If vehicle costs are lower, then your monthly lease payments could be lower, which could have a knock-on effect on the amount of salary your employees need to sacrifice.
- Your employees can access higher-spec EVs within the same budget, thereby boosting employee rewards and satisfaction.
Let’s take a look at a high-level example:
An EV previously priced at £36,000 might now cost £32,250 with the full grant. That reduction is directly reflected in the lease pricing, potentially saving employees £50-£100/month, depending on the salary sacrifice terms and mileage.
Business leasing: a strategic advantage
For fleet managers using Business Contract Hire (BCH) or other leasing models, the ECG offers immediate benefits.
Key advantages:
- Lower monthly lease rentals for qualifying EVs.
- Easier to meet corporate sustainability goals.
- Improved Total Cost of Ownership (TCO) metrics.
- Access to a broader range of affordable EVs under the £37,000 threshold.
If you already have a company car provider, it’s advisable to contact them to confirm which models qualify and how the savings will be passed on when you come to order new cars.
Equally, if you’re looking for a new partner or to set up a new employee car benefit scheme, ask any potential providers about how they’re integrating the latest pricing.
Electric car grant eligibility and sustainability criteria
1. Science-Based Targets (SBTs) for emissions reduction
Manufacturers must have SBTs in place – these are independently verified commitments to reduce greenhouse gas emissions in line with the goals of the Paris Agreement (climate change international treaty). This ensures that the companies producing EVs are also working to decarbonise their entire operations, not just the vehicles themselves.
For fleet managers, this means your vehicle choices support brands that are genuinely committed to long-term sustainability and not just ticking boxes.
2. Sustainable battery production – 70% weighting
Battery manufacturing is the most carbon-intensive part of an EV’s lifecycle. That’s why industry sources are reporting that 70% of a vehicle’s sustainability score under the ECG is based on how its battery is manufactured.
Key factors include:
- Utilisation of recycled materials in battery components.
- Energy sources used in battery manufacturing (e.g. renewable vs fossil fuels).
- Supply chain transparency, including ethical sourcing of raw materials.
- Battery efficiency and longevity, which reduce environmental impact over time.
This weighting encourages manufacturers to clean up their battery supply chains – something that’s increasingly important for ESG-conscious businesses.
3. Clean vehicle assembly processes – 30% weighting
It’s believed that the remaining 30% of the sustainability score is based on how the vehicle itself is assembled. This includes:
- The carbon intensity of the manufacturing facility.
- Use of renewable energy in production.
- Waste reduction and recycling practices.
- Local sourcing of parts to reduce transport emissions.
For company car fleet managers, this means the vehicles you lease or offer through salary sacrifice are not only clean on the road but also cleaner to build.
To get the most accurate list of EVs that qualify for the ECG check the official gov.uk website.
Strategic considerations for company car fleet managers
Here are five tips to help make the most of the ECG:
1. Review your vehicle list
Verify which models in your current or planned fleet are eligible for the grant. Focus on vehicles under £37,000 with strong sustainability credentials.
2. Engage leasing providers
Ask your company car partners how they’re applying the grant. Ensure the savings are reflected in your monthly rentals and salary sacrifice schemes.
3. Update internal communications
Educate employees about the new savings available through salary sacrifice. Highlight the environmental and financial benefits.
4. Plan for infrastructure
If your fleet includes home-based drivers, consider supporting the installation of a home chargers or leveraging public charging networks.
5. Track grant changes
The ECG is dynamic. Stay informed about updates to eligible models, manufacturer compliance, and grant tiers.
Looking ahead
The ECG is more than a discount – it’s a strategic lever for company car fleet managers. By reducing costs and incentivising sustainable choices, it empowers you as a business to accelerate your transition to electric.
Here at Car Benefit Solutions, we understand that despite the new incentive, making the move to EVs might still be a daunting process, and not every business will be ready immediately.
We can help you transition at your own pace with our range of company car solutions, including Salary Sacrifice Cars and Business Car Leasing. To find out more, read our blog: The Advantages of a Blended Car Benefit Solution.
Get in touch to discuss your business needs today.
FAQs
How is the EV grant applied?
Motor retailers or company car providers are responsible for administering the grant. They must ensure the vehicle and manufacturer are on the approved list before applying the discount.
What's the eligibility criteria?
The car must:
- Be brand new and cost £37,000 or less.
- Have zero tailpipe emissions and a minimum 100-mile range.
- Meet warranty and sustainability standards.
The manufacturer must:
- Hold a valid Science Based Target (SBT) for emissions reduction.
- Demonstrate sustainable manufacturing and battery production.
Will this affect existing contracts?
No, the new grant applies only from July 2025 onwards. If you’d like to learn more about switching to electric, read our blog: The Best Way to Transition Company Cars to EVs.