In a new paper, the Social Market Foundation calls for the UK government to implement a social leasing scheme for low-income households to subsidise the cost of electric vehicles (EVs).
According to the cross-party think tank, this would allow poorer families to benefit from a 40% reduction in fuel costs and servicing enjoyed by EVs compared with ‘regular’ (internal combustion engine, or ‘ICE’) cars, and is more cost-effective for the government than directly subsidising the cost of EVs.
The SMF’s proposed social leasing scheme – modelled on France – would be less expensive for the government and better targeted than directly subsidising EVs (such as those favoured in the US) to bring their price in line with ICE vehicles, the SMF argues.
The calls come amid a dip in the market, with Western automakers lowering their EV sales forecasts.
Those that fail to meet the Zero Emissions Vehicle target minimum – that EVs represent 22% of sales – will be fined.
The problem is that the price of EVs remains far higher than ICE vehicles (a used EV costs £6,500 more than a typical ICE vehicle), and while the market for high-end EVs is saturated, low-income households remain priced out.
At present, it takes low-income drivers five years to ‘break even’ on an EV purchase, as the reduced operating costs take that long to offset the higher purchase price.
A social leasing scheme would unleash demand for EVs and bring low-income families along in the transition to greener transport by bridging the gap between automakers and the market, the SMF said.
‘EVs can and will be a powerful tool to fight poverty and decrease emissions, but they remain out of reach for those who would benefit most.
’Instead of waiting years for EVs to achieve price parity with regular vehicles, the government must be proactive. By reducing upfront costs through a social leasing scheme, we can remain on track for our net zero goals, and help hard-pressed families. Such a scheme would also come at a more modest cost to the state than directly subsidising EVs.
’Still, it must be noted that EVs are not the only tool at our disposal to ensuring a just green transition. We also need more alternatives, and in particular to improve the availability, reliability and affordability of local public transport services.’
GIDEON SALUTIN
Senior researcher at Social Market Foundation
The SMF’s proposed social leasing scheme would allow eligible low-income households to lease an EV for no more than £100 a month for three years, with the government paying the private leasing company the differential.
At the end of the three years, households would have the option to purchase the car for its remaining price or return it to the company.
This model is in practice in France and has successfully supported those at risk of transport poverty, at a modest cost to the state.
According to the SMAF’s research, this social leasing scheme could get an additional EVs on the road, compared with the 16,500 that would be added under a direct subsidy.
The SMF concludes that a direct subsidy – in the form of a £5,000 grant for used cars – would cost £60m and be ‘wasted on drivers who would have switched to an EV without it.’
In contrast, the social leasing scheme proposed by the SMF would cost £175m per year – £520m if continued – and prioritise households with less than £8,000 per person annually, potentially increasing to £18,000 depending on demand.
Previous SMF research found that five million British people are in transport poverty, with transport costs pushing them below the poverty line.
With a properly targeted social leasing scheme, 500,000 people could be brought out of poverty, and more would see significantly reduced their transport costs, the SMF finds.
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