Report

Electric avenue

Think tank: Social Market Foundation

Author(s): Gideon Salutin; Jake Shepherd; Danila Patti

July 21, 2024

This report from UK think tank the Social Market Foundation looks at how to make EVs more affordable to poorer households and the benefits they can offer them.

For many people in Britain, electric vehicles represent the most tangible aspect of the green transition, but high upfront costs mean they are disproportionately available to the richest households.

This report looks at how to make EVs more affordable to poorer households, and the benefits they can offer them. Over five million individuals across the UK are pushed into poverty as a result of transport costs. As electric vehicle (EV) drivers have lower running costs than internal combustion engine (ICE) vehicle drivers, the transition to EVs could pull over one million people out of poverty in the UK. But because EVs have higher upfront costs, low-income households would make a net loss over the first five years after buying an EV, even despite operational savings.

Existing policies to promote EV uptake in the UK have been ineffective or poorly targeted. The UK’s Zero Emissions Vehicles Mandate for car manufacturers is reliant on EV demand, which has slowed over the past year, and previous subsidies have been costly inefficient, with much of the money going to drivers able to afford an EV without the subsidy.

Social leasing – as developed by France – offers a more efficient alternative. This enables poorer households to lease a car for a low monthly fee from a private leasing company, with the government paying the difference between this fee and the market price.

A UK scheme providing social leasing for 10,000 EVs would initially cost £175 million per year, rising to £520 million if continued. Policymakers should prioritise the poorest households and those with high driving needs, with the potential to expand the scheme. This could pull over 500,000 people out of poverty while taking between 900,000 and 1.5 million tonnes of carbon out of the atmosphere every year.