The Government has slashed the plug-in car grant by 40%, from £2,500 to £1,500.
The eligibilty criteria has also been changed. Only electric cars with a recommended retail price of £32,000 are eligible. Previously, the grant applied to electric cars up to £35,000.
Hybrid electric cars, which have CO2 emissions of less than 50g/km and can travel at least 70 miles without any emissions, no longer qualify.
There have also been cuts to the plug-in van grant with the grant for small vans (up to 2.5 tonnes gross vehicle weight) reduced from £3,000 to £2,500 and larger vans (2.5 tonnes to 3 tonnes gross vehicle weight) reduced from £6,000 to £5,000.
Motorcycle and moped grants have been changed too, with a 35% discount up to a maximum of £500 for motorcycles and £150 for mopeds, with a price cap of £10,000.
This is the second time the Government has made changes to the grants in less than a year.
In March it cut the plug-in car grant rate from £3,000 to £2,500 and reduced the price cap from £50,000 to £35,000.
Nicholas Lyes, head of roads policy at the RAC, said that the changes were disappointing as only around 20 EV modesl are now eligible for the grant.
"RAC research suggests that drivers already feel the upfront cost of electric vehicles is too high, so this has to be seen as a step in the wrong direction," he said.
The plug-in car grant has supported around half a million vehicles since it was introduced in 2010.
Transport Minister Trudy Harrison said: "The market is charging ahead in the switch to electric vehicles. This, together with the increasing choice of new vehicles and growing demand from customers, means that we are refocusing our vehicle grants on the more affordable vehicles and reducing grant rates to allow more people to benefit, and enable taxpayers’ money to go further."
