The starting cost of a brand-new Nissan LEAF, the electric vehicle launched at Nissan over a decade ago, is just shy of £30,000. For roughly the same price, you can pick up a used Aston Martin DB9 with around 50,000 miles on the clock. Of course, we are comparing apples with oranges, but it highlights a huge disparity that we find in the current market. For many motorists, the idea of owning an electric car is simply too expensive and the government scrapping consumer grants for new EVs only exacerbates the issue.
There are also significant barriers, such as charging infrastructure concerns, which hindered mass adoption from electric vehicles – and that’s not mentioning Brexit, the pandemic and subsequent supply chain issues. But it is affordability which is more often than not cited as the leading obstacle. Recent statistics support this narrative: although 2021 was the best year for EV car sales – with 190,727 new registrations, accounting for 11.6 per cent of all new car registrations in total – preference for petrol remained high with 46.3 per cent of the annual market share.
At the initial point of sale, EVs are currently more expensive than equivalent internal combustion engines. Price parity is not expected to be reached until the mid-2020s at least. More than half of EV owners sit in the top 20 per cent of earners; those in the lower income bracket account for only 4 per cent, creating the perception that “electric is for the elite”.
Those on low incomes are currently priced out and will be for some time. Even with the plug-in grant scheme which kickstarted the market in 2011 (but has since been dropped), EVs were still too expensive for many.
Ironically EVs have lower running costs than conventional cars and have the potential to considerably reduce future motoring costs for households; it’s getting out the showroom which is proving difficult.
So, what can make EVs affordable for all? Developing cheaper batteries is one answer.
Currently battery technology constitutes approximately up to 50 per cent of the value of an EV. The price of the cells was more than halved between 2014 and 2020 – from $290/kWh to $110/kWh. This supports the conjecture that battery powered vehicles will be more affordable than conventional cars by 2025 and the overall cost will eventually be on par with fossil fuelled models.
But there’s a hitch. Battery costs are driven by three factors: economies, technological improvements, and the price of raw materials. Russia accounts for 11 per cent of the world’s nickel, a key component in a lithium-ion battery. The supply chain has become strangled and pushed the price of batteries back up.
On the home front, the plug-in grant scheme was targeted to more less expensive models. The previously available grant of £2500 was cut to just £1500 and only available for zero-emission cars priced under £32,000. The only problem is the limited number of cars in that price range. The scheme was then scrapped entirely in order to put cash into improving charging infrastructure.
With surging energy costs, the cost of charging at home has risen by 43 per cent and the cost of public chargers has jumped by 25 per cent. Not only are those on lower salaries going to have to fight harder to get an EV in the first place, it’s become more expensive for them to drive it. The gap between who can and can’t afford to drive an electric car has in essence stalled, just as it was closing.
EVs are still cheaper to run. While energy prices have spiralled, petrol prices have also hit all-time highs. But much of the damage done to cause the slow down in the EV market is a perception crisis.
There are still various incentives, discounts and exemptions that drive down the overall cost. But digestible information about grants and schemes remains lacking – or some may argue non-existent.
People still believe buying electric means having a Tesla while it’s actually about being able to bring down overall costs with ever-more affordable models. Then it becomes a very basic problem: if there is no demand for cheaper EVs, there won’t be a supply of them. The cycle risks becoming self-fulfilling.
It is the responsibility of the automakers, the government and the market to challenge this. If EVs are perceived as unattainable and unaffordable, petrol and diesel-fuelled cars will remain on the UK’s roads for decades after the 2030 deadline when the sale of new combustion engine cars will be banned.