I have been working in Victoria, London, for the past three years. The buildings, the corner shops and the pubs have roughly stayed the same in this period but I’ve noticed a marked change in something else. Electric vehicles and chargers have started to appear on the streets, pavements and lampposts. Teslas, Leafs and Zoes are now gliding around quietly, with no tailpipe emissions. The direction of travel for Britain’s cars is clear, it is clean and electric. Plug-in vehicles have grown almost a hundred fold in seven years and are expected to reach ten per cent of all vehicle sales in the next two to three years. This is remarkable growth.
There is, however, an underlying injustice to this revolution. Victoria is situated in one of the fourth wealthiest local authorities in the country, which means the electric vehicles and their charging infrastructure are being bought by and subsidised for the richest in our society. In fact, more than half of all electric vehicles in the private consumer market are being bought by the top 20 per cent of income earners, with only four per cent owned by the lowest 20 per cent.
Electric vehicles are cheaper overall but have high upfront costs
Electric vehicles are cheaper to run, service and maintain and are considered to offer a higher degree of driving ease and comfort. They also result in cleaner air. But, with prohibitively high upfront costs, they are out of reach to low and middle income households, who could benefit most from using them. A small family model, like an electric VW Golf, costs at least £6,000 more than a comparable Ford Fiesta petrol model, and this translates to higher leasing costs as well, the preferred route to owning a car in Britain.
Our new report, Going electric: how everyone can benefit sooner highlights that the way to address this disparity is through more rapid growth in the used electric car market. The car market as a whole is dominated by second hand vehicles, roughly eight million used vehicles are sold each year compared to around two million new cars. Government figures show that low income households spend up to twice more on purchasing or loaning used cars than on new cars. And most of those are older cars, three quarters of used cars bought by low income households are over five years old and less than ten per cent are under two years old.
Modelling by Element Energy for Green Alliance shows that, after the first four years, the upfront price of an electric vehicle comes down significantly. At this point, most of the cost of owning a car goes on running costs. And, for electric vehicles, these costs are half that of conventional vehicles. We estimate that the total cost of owning a typical second hand family electric vehicle is roughly £2,600 to £3,200 lower than it would be for equivalent diesel and petrol engine models. And this saving would rise to £5,000 for a nine year old vehicle.
The pace of change needs to speed up
Of course, more new electric vehicles sold will eventually lead to more in the used car market. But the problem is that, over the past couple of years, the number of new electric vehicles on the market has been woefully insufficient to meet the fast growing demand, with frustratingly long waiting times for prospective owners. Subsequently, only two and a half per cent of new cars sold in 2018 were electric. This isn’t fast enough, either to tackle the problems of climate change and air quality, or to help those on lower incomes to reap the benefits of switching to electric. This situation would be helped if the government introduced a production mandate on carmakers to require that a higher proportion of the cars they sell in the UK are electric, as implemented in places such as China and California.
Our study also shows that, by 2025, even without the existing plug-in vehicle grant, electric vehicles will be the cheapest choice of vehicle on a total cost of ownership basis across all car models. The government is considering winding down its subsidy programme from 2021 but we suggest maintaining some form of support to keep costs down for buyers and ensure a faster rise in uptake in the short term. This could be in the form of more targeted rebates on purchases by low and middle income households, as implemented in California. How continued plug-in grants is paid for is an important question but it could be dealt with by raising new car registration fees or Vehicle Excise Duty (VED) rates on polluting cars.
Over half of vehicle purchases are made by fleet operators, so a swifter transition to electric in that sector would also push more cars into the used electric vehicle market. We acknowledge the positive results of the recently slashed benefit-in-kind tax rates but another way of increasing consumer confidence around electric vehicles would be to support the provision of workplace charging.
The shift to electric mobility is well underway but there is still an important role for government in making sure that everyone, wherever they live, can see the benefits soon.