France-style electric vehicle leasing scheme could lift 500,000 people out of poverty

A government-backed electric vehicle (EV) leasing scheme inspired by France could lift 500,000 people out of poverty in the UK, according to a new report by the Social Market Foundation (SMF).

The cross-party think tank suggests that subsidising the cost of EVs through a social leasing scheme would enable low-income households to benefit from the substantial savings in fuel and servicing costs associated with electric cars.

The SMF’s report, released today, advocates for a social leasing programme that would allow eligible low-income families to lease an EV for no more than £100 a month over three years. At the end of the leasing period, households could choose to purchase the vehicle at its residual value or return it. This model, successfully implemented in France, is seen as a cost-effective alternative to direct subsidies.

Gideon Salutin, Senior Researcher at the SMF, emphasised the potential of EVs to combat poverty and reduce emissions. “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.”

The proposed scheme offers a more targeted and economical solution compared to direct subsidies. For instance, while a direct subsidy scheme might provide a £5,000 grant for used EVs, resulting in 16,500 additional EVs on the road at a cost of £600 million, the social leasing model could put 100,000 EVs on the road for an annual cost of £175 million, totalling £520 million over three years.

The SMF’s findings highlight the inefficiency of direct subsidies, which often benefit drivers who would have purchased an EV without financial assistance. In contrast, the leasing scheme prioritises households with annual incomes under £8,000 per person, potentially extending to those earning up to £18,000 depending on demand and driving needs.

The call for this initiative comes amid a downturn in the EV market, with Western automakers reducing their sales forecasts and facing fines for not meeting the Zero Emissions Vehicle target, which mandates 22% of sales to be EVs. Despite the growing market for high-end EVs, low-income families remain priced out, with used EVs costing approximately £6,500 more than internal combustion engine (ICE) vehicles.

The SMF’s report also underscores the urgency of addressing transport poverty, which affects five million people in the UK. Transport costs push many below the poverty line, and a well-targeted social leasing scheme could significantly reduce these expenses and elevate 500,000 people out of poverty.

In addition to advocating for the EV leasing scheme, Salutin stressed the importance of improving public transport. “We also need more alternatives, and in particular, to improve the availability, reliability, and affordability of local public transport services.”

The SMF’s proposal for a social leasing scheme represents a strategic move towards a more inclusive and sustainable transition to greener transport, ensuring that low-income households can participate in and benefit from the shift to electric vehicles.