Middle classes cannot afford electric cars, warns Vauxhall owner

Motorists are rapidly losing interest in electric cars as the cost of power surges and petrol and diesel prices continue to fall, the AA has suggested.

The proportion of car buyers considering purchasing an electric model this year has slumped to less than a fifth compared with one in four a year ago, its research found.

It came as the boss of Stellantis, which owns Vauxhall, warned that the middle classes cannot afford the cost of electric cars without the support of state subsidies.

Carlos Tavares, chief executive of Stellantis, said: “The most significant problem of electrification is the affordability for the middle classes.

“That's what we are now fighting against – how fast can we reduce the costs to bring the EV [electric vehicle] to the level of affordability that people can pay for without subsidies.”

The up-front cost of plug-in vehicles has become unaffordable for many as rampant inflation makes models even more expensive. For example, a Volkswagen Golf costs from around £25,000, while a similarly-sized all-electric VW ID.3 starts at about £36,400. Prices for Nissan's battery-powered Leaf start at £29,000, while its combustion engine model Juke starts at £20,700.

At the same time, falling prices at the pump means many drivers are holding onto petrol and diesel cars for longer. 

After rocketing following Russia’s invasion of Ukraine, petrol prices have declined from highs of more than 191 pence per litre in the summer to an average of 148.4 pence per litre. Meanwhile, diesel prices have fallen to the lowest level since just after the start of the Ukraine war.

Higher wholesale gas prices have also driven up electricity prices, making it most expensive to charge an electric vehicle both at home and on the road. 

A lack of charging points on Britain's roads have also put the adoption of plug-in vehicles under strain. Just one new public charger was built for every 53 electric cars sold last year, according to the Society of Motor Manufacturers and Traders (SMMT).

Overall, 22pc of drivers polled by the AA said they wanted to buy a car this year despite the cost-of-living crisis.

Mark Oakley, director of AA Cars, said: “It is reassuring for the car industry that so many drivers intend to buy a car this year, though stretched household budgets are often leading people to make different purchasing decisions.

“AA Cars search data shows buyers are showing particular interest in smaller cars that are affordable to buy and cheap to run. This may also be behind the cooling appetite for EVs, as they typically cost more upfront than their petrol or diesel equivalents.”

According to data published by the RAC in January, the cost of charging an electric car on the road for long drives is now more expensive than filling up their petrol and diesel equivalents.

Eight in ten drivers who are planning to buy a car this year said they would swap their existing petrol or diesel vehicle for another combustion engine model, the AA said. 

It added that the cost of charging an electric car battery to 80pc at home costs about £21 based on the current price cap for electricity. Using a rapid public charging point costs an average £30, but can set drivers back as much as £46.

Drivers face paying more to charge their electric car at home from April when energy prices are due to rise by 20pc on average under the Government’s energy price guarantee. A typical household bill will increase to £3,000 a year from £2,500.

Interest in electric cars has been waning steadily in recent months. Data from the SMMT showed that 13pc of all new cars sold were electric vehicles in January 2023, down from an average of 17pc during the whole of 2022. The more limited availability of second-hand plug-in cars meant they accounted for just 1pc of used car sales last year.

On Wednesday, Stellantis boss Mr Tavares pointed to the US and Germany as examples where large subsidies have driven sales of electric cars. He said that developments in new battery designs will help cut weight and costs and bring down prices.

The launch of a $369bn (£307bn) package of green tax breaks by US President Joe Biden has raised fears that manufacturers could shun the UK as a location to invest. The EU has retaliated to Mr Biden’s measures with plans to offer tax breaks for green tech investments.

Mr Tavares used the example of so-called LFP batteries as a way the carmaker could cut the cost of electric vehicle production. LFP batteries are made from lithium iron phosphate and do not need nickel and cobalt which are more expensive to source and in limited supply.

The industry is also battling to get public charging points built in order for the cars to gain mass acceptance as a long-range travel option rather than a commuter car. Fast public chargers are also needed to make the vehicles viable for those who live in flats, where charging a car from a domestic charger is not possible.

The Society of Motor Manufacturers and Traders lobby group has repeatedly asked the Government to speed up the rollout of these chargers and make their pricing as simple and consistent as possible.