UK narrows EV subsidies to 'sustainably produced' models, leaving many cars ineligible

The UK government has refocused financial support for electric cars around manufacturing sustainability rather than vehicle type, awarding the new Electric Car Grant (ECG) only to models that meet defined sustainability standards. The grant, launched in July, divides eligible vehicles into two bands — a higher Band 1 payment of £3,750 and a lower Band 2 payment of £1,500 — with a price cap of £37,000 on qualifying models. So far the Department for Transport has confirmed 35 eligible models but has disclosed only that two qualify for the full Band 1 amount, prompting confusion among manufacturers, industry experts and prospective buyers.

Under the government's approach, eligibility rests on a carmaker holding a verified science‑based target and meeting additional sustainability standards intended to address "embedded carbon emissions across a vehicle's lifetime, as well as tailpipe emissions." The Department for Transport has said production emissions will be assessed in part against the carbon intensity of the electricity grid in the countries where vehicles and batteries are assembled.

Officials and industry figures have emphasised that the ECG is not a broad push to increase the number of electric vehicles on UK roads but a targeted incentive for those that meet the government's sustainability benchmark. Transport Minister Lilian Greenwood told BBC Radio 4's Today programme the government "don't expect any cars that are assembled in China to be eligible for this scheme," a restriction that experts say will exclude many models or parts of their supply chains.

Industry observers note a practical tension between that stance and the globalised nature of car manufacturing. Ginny Buckley, chief executive of EV site Electrifying, said many models carry components or batteries sourced from China even if the final assembly takes place elsewhere, meaning a vehicle with a non‑Chinese badge may still face eligibility problems if critical manufacturing stages occurred in China.

Manufacturers have for years produced sustainability reports and carbon accounting to varying degrees of transparency. Swedish brands such as Volvo and Polestar publish detailed annual sustainability reports and lifecycle analyses that trace emissions from material extraction through end‑of‑life. Major automakers including Ford, Kia, BMW and Mercedes also issue public sustainability accounts that include targets and progress metrics. Those existing practices will affect how quickly and clearly manufacturers can demonstrate compliance with the ECG criteria.

Battery production and raw material sourcing remain central to debates about the environmental credentials of electric vehicles. Producing lithium‑ion batteries requires access to lithium, nickel, cobalt and high‑purity manganese, and demand for those materials has been rising. A McKinsey report cited in industry commentary found battery producers account for more than 80 percent of lithium consumption today and projected that share could rise towards 95 percent by 2030. Analysts have also highlighted potential competition for nickel from the stainless steel sector and predicted growing cobalt requirements, while a separate analysis warned only a small fraction of manganese supplies currently meet battery specifications.

Technological shifts in chemistry are already changing material demand. Lithium iron phosphate (LFP) batteries, which use little or no cobalt and less nickel, supplied more than 40 percent of EV battery capacity globally in 2023, according to the International Energy Agency. China has been the principal mass producer of LFP cells; two‑thirds of EV sales in China now use the chemistry. European and U.S. adoption remains below 10 percent but major manufacturers are shifting in that direction. BMW plans to introduce LFP in some models this year, Volkswagen has announced LFP usage from 2026, and Tesla has used LFP in many newer vehicles since 2022.

Researchers and industry groups also point to battery design and recycling as means to reduce the embedded emissions and material intensity of EVs. A 2025 study published in Scientific Reports estimated that replacing nickel‑cobalt‑manganese cathodes with LFP and expanding recycling could cut demand for lithium, cobalt and nickel between 2021 and 2060 by millions of tonnes. Transport & Environment (T&E) has argued that improved recycling will sharply reduce the need for virgin materials and that an EV can require far less primary raw material over its lifecycle than the oil burned by an internal combustion engine.

Human rights and governance in mineral supply chains have attracted scrutiny alongside environmental concerns. Amnesty International evaluated 13 leading automakers on how they address human‑rights risks in mineral sourcing and found widespread shortcomings. No company in the review scored above 51 out of 90, with Mercedes‑Benz highest and BYD lowest. Amnesty's assessment highlighted gaps in transparency, due diligence and remediation practices, and its secretary general, Agnès Callamard, called the overall performance "a massive disappointment."

The Science Based Targets initiative, which the government cites as a minimum benchmark for manufacturers, includes guidance on stakeholder engagement that references indigenous peoples and local communities. That suggests the ECG's sustainability thresholds could encompass aspects of human‑rights due diligence in supply chains, though the Department for Transport has not publicly detailed the full set of measures or weighting used to assign models to Band 1 or Band 2.

Policy developments at the EU and domestic level reflect a wider push to make battery supply and recycling more circular. The EU's Batteries Regulation, enacted in 2023, mandates minimum recycled content and sets recycling efficiency targets. Industry advocates say optimised recycling in Europe and the UK could supply sufficient material to produce hundreds of millions of electric cars over time, reducing dependence on new mining and the associated social and environmental impacts.

Analysts say that while EVs are not a perfect solution, they currently offer climate advantages over internal combustion cars when lifecycle emissions are considered. T&E has estimated an average EV requires 58 percent less energy than a petrol car over its lifetime and stressed that minerals used in batteries can be reused, unlike oil. Policymakers and campaigners both point to recycling, cleaner battery chemistries and improved supply‑chain standards as ways to increase the climate and social benefits of electrification.

For consumers, the new grant framework narrows the set of subsidised models and introduces uncertainty around which cars will qualify and why. The Department for Transport has published a list of eligible models but has declined to disclose the criteria scores that determined the banding for particular vehicles. That lack of transparency has prompted calls from industry and consumer groups for clearer rules and explanations so manufacturers can adapt supply chains and buyers can make informed decisions.

As the government and manufacturers adapt to evolving battery technologies and regulatory regimes, the immediate effect of the ECG is to privilege models whose production can be shown to meet the government's sustainability benchmarks. How the policy shapes purchasing patterns, manufacturer investment in cleaner supply chains, and the broader transition away from fossil fuels will depend in part on further detail from ministers and on how rapidly the industry can reduce material intensity, expand recycling and improve transparency in mineral sourcing.