Electric car grant cap falls to ISK 8 million

The maximum price of passenger cars eligible for electric vehicle grants will fall from ISK 10 million to ISK 8 million from November 1, mbl.is reports. The grant per car will also be reduced, from ISK 500,000 to ISK 400,000.

Environment, Energy and Climate Minister Jóhann Páll Jóhannsson has signed a regulation setting out the changes, the Environment Ministry said. It also clarifies the framework for the Climate and Energy Fund and streamlines the process for announcing and allocating grants from its competitive funding programme.

Support will continue for the transition to cleaner energy in delivery vans, goods vehicles and coaches. Those grants will be available only to legal entities and individuals actively engaged in business.

The ministry said electric vehicle grants had largely gone to higher-income groups in recent years. Lowering the maximum eligible vehicle price is intended to direct funding towards people more likely to buy cars in lower price ranges and to increase the number of such vehicles on the second-hand market. The ministry said the change aligns with the government’s goal of a just transition.

Electric vehicle prices have become more competitive over the past year, the ministry said, citing global market developments and the removal of excise duties on new electric cars on January 1, 2026. It added that electric cars are now more competitive to buy and cheaper to run than petrol and diesel vehicles.

The Climate and Energy Fund’s 2025 annual report found that direct grants for passenger cars and delivery vans now produce considerably less benefit than many of the fund’s other projects, according to the ministry. The changes reflect those findings and the government’s focus on sustainable public finances and efficient use of public funds.