Going electric: how everyone can benefit sooner

Embargo: 00.01 Monday 11 November 2019
Chaitanya Kumar Chaitanya KumarSenior policy adviser020 7630 4514ckumar@green-alliance.org.uk

Making Electric Vehicles More Accessible Can Save Low-Income Households Millions

New reports from Environmental Defense Fund Europe and Green Alliance
suggest the incoming government should prioritise steps to bring down
electric vehicle costs

(LONDON – 11 November, 2019) Electric vehicles (EVs) can not only
help clean the air and cut carbon emissions but also save millions of pounds
for people with lower incomes, if the Government takes proactive steps to
bridge the affordability gap between EVs and fossil-fuel vehicles. According to
two reports released today by Environmental Defense Fund Europe (EDFE) and
Green Alliance in conjunction with Frontier Economics and Element Energy, with
targeted action, lower-income households could save nearly £350 million in
total every year, with cost savings reaching £3,000-£5,000 per household over
the time of owning a car.

Compared to petrol and diesel cars, EVs have zero combustion
emissions, and are cheaper on a total cost of ownership basis. Yet, the reports
show there are significant barriers preventing low-income households from
accessing the EV market. By putting in place targeted policies, the Government
can ensure those on lower incomes can benefit from electric transport sooner,
as well as speed up the improvement of air quality.

“People with lower incomes bear the brunt of pollution from cars,
while being least able to afford a clean alternative,” said Baroness Bryony
Worthington, Executive Director of EDFE. “The good news is the Government has
several tools at its fingertips to bring down the cost of electric vehicles and
make clean transport more inclusive.”

Households in the lowest two income deciles made up just 4% of EV
owners from 2015-2017, but more than 10% of internal combustion engine vehicle
owners. On the other hand, those in the top 20% income range buy over half of
the EVs sold annually, but only around a quarter of internal combustion engine
vehicles. 

If policies help people on lower incomes buy EVs, they can make
considerable savings on the cost of motoring. According to EDFE’s report, if
half of new car sales shift to electric across every income level, low to
middle income households would save nearly £350 million in total every year in
fuel and maintenance costs. 

Additionally, Green Alliance’s study shows that low-income
households could save £3,000-£5,000 over the time of owning a car, if they were
to buy or lease a used EV, compared to the cheapest diesel vehicle. 
However, EV sales are still largely concentrated among the richest
income earners due to  existing barriers to affordability, including
higher upfront costs and a lack of financing options. For example, 0% APR
offerings are largely only available for conventional vehicles. Additionally,
resale values for EVs are often disproportionately low, mainly due to a lack of
historical data and car dealers’ unfamiliarity with selling second-hand EVs.

The impact of these disparities is an underdeveloped second-hand
market for EVs. Lower-income households are much less likely to purchase new
vehicles, yet there is only a limited supply of used EVs. Of the ten million
cars bought in the UK last year, eight million were second hand vehicles, but
only 2.3% of those were ultra-low emission vehicles. Poorer people are thus
disproportionately burdened by the fuel, maintenance and repair costs of owning
older conventional vehicles and will continue to suffer from high levels of
transportation pollution.

“The cost of electric vehicles should not mean their benefits are
out of reach to those who would gain the most financially from owning them. For
low-income families, second-hand electric vehicles are the route to ownership.
The government's upcoming transport decarbonisation strategy should take much
more action to expand this market sooner and ensure an equitable transition to
electric vehicles.” said Chaitanya Kumar, senior policy adviser at Green
Alliance. 

The reports include several steps the Government can take to
bridge the affordability gap, including:
  • Reduce the upfront cost of EVs: Expand loan and rebate programmes geared at making EVs more accessible, modelled on successful approaches in Scotland and California, with the inclusion of robust, targeted public education around their existence.
  • Adapt existing successful policies: Extend to 2025 and update the plug-in grant, which is designed to promote the uptake of electric vehicles in the UK, to focus on lower income households.
  • Ensure better dissemination of information: Strengthen programmes run by the Office of Low Emission Vehicles to certify car dealerships that have the demonstrated knowledge necessary to sell EVs. 
  • Set stringent sales requirements: End the sales of new petrol and diesel vehicles by 2030 and introduce a zero emissions vehicle (ZEV) mandate on auto manufacturers, potentially modeled on successful schemes in jurisdictions like California and China.
The Government recognises the need to clean up the transport sector, and is rightly considering shifting its 2040 target to stop the sale of new petrol and diesel vehicles going forward. But to reach these goals,
people of all socioeconomic levels need to be able to access cleaner transport options, including EVs. Making EVs more affordable and accessible will cut pollution and build a more equitable economy.

You can view the full EDFE report here and the Green Alliance report here
Frontier Economics provided analysis for EDFE and Element Energy for Green Alliance.