Tesla Model 3 Loses Access to Subsidy in Top European Market

Tesla Inc. customers in the largest European market for the Model 3 will have to pay more for the sedan after the U.K. set a stricter limit on which electric vehicles are eligible for subsidies.

U.K. transport authorities on Thursday cut a purchasing bonus for electric cars, vans and trucks to 2,500 pounds ($3,491) from 3,000 pounds, and lowered the price of models qualifying to less than 35,000 pounds. While the previous ceiling of 50,000 pounds meant most Model 3 variants got the aid, none will qualify under the new rule.

Tesla Model 3 Loses Access to Subsidy in Top European Market

The changed rule could undermine Tesla’s ambitions in the U.K., where one-in-four Model 3s sold across Western Europe were registered last year, according to Schmidt Automotive Research. Pricing for the Model 3 starts at 40,490 pounds in the country, according to the carmaker’s website.

The U.K. government has been under pressure to plug a hole in the country’s finances left by the pandemic. It argues that buyers of higher-priced EVs can afford to make the switch from combustion-engine cars even without the aid, and that the number of battery-powered models costing less than 35,000 pounds has increased almost 50% since 2019. The U.K. said it will continue to offer tax incentives for electric company cars, with Tesla’s entire lineup eligible.

Industry Pushback

Carmakers still balked at the decision, saying the cut to subsidies is the wrong move as registrations plunge amid shuttered showrooms and economic damage caused by the virus. The European auto industry’s trade group this week reported the worst February for new-vehicle registrations since 2013, with the U.K. car market shrinking 36%.

“This sends the wrong message to the consumer, especially private customers, and to an industry challenged to meet the government’s ambition to be a world leader in the transition to zero emission mobility,” Mike Hawes, chief executive officer of the Society of Motor Manufacturers and Traders, said in a statement.

©2021 Bloomberg L.P.

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