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Transition to Electromobility: Helping Middle Classes Key to Mass Adoption

01.09.24 | Blog | By:

Doxa today: The future will be fair, just, inclusive and sustainable. Meaning the energy transition is not just about technology, low-carbon solutions, but also about social justice, lest climate change-skeptical populists take over from climate change-conscious governments, eventually slowing the de-fossilization toward unknown catastrophic consequences for planet habitability, like being part of the 6th Massive Extinction.

Regarding the transport transition, it is hard to believe that individual road transport, cars, one of the major changes in lifestyle of the 20th century, symbol of freedom for the majority everywhere in the world, will graciously and quickly fade into nothingness to give way to public transport, nearly the only mode of transport, albeit for a minority, before the 20th century, stagecoaches and such. Unless we fall into eco-authoritarianism: climate change-skeptical populism seems more likely, unfortunately.

Thus, as low-carbon liquid fuels, like biofuels, available since the 1970s for ethanol, struggle to replace more than 10% of fossil petrol and diesel, a more drastic technological solution has taken the front seat for the energy transition in transport: electromobility, electric vehicles (EV), possibly fuel cell EV (FCEV), if hydrogen becomes a low-carbon, competitive and efficient energy vector for individual transport.

Electromobility has to clear several formidable hurdles to become prominent. In the capitalist, neo-liberal, environment of today, with intense competition to lower prices for goods and services, the huge cost premium for EVs, compared to internal combustion engine vehicles (ICEV), easily more than 10,000 € for an equivalent mid-size car, is one of these hurdles.

Social engineering has found a way to tackle this drawback: rather than incurring an upfront cost, difficult to mobilize for the middle and lower classes, why not pay a monthly fee? Car leasing has been around for some time, good for the lender (banks and carmakers’ financial divisions), good for the motorist, who can change model every three years (fast fashion-style), at a cost though, but credit is so widespread that one more line does not make headlines anymore.

So, the French government has identified the target population for this “EV Social Leasing” program, proposed at 100 € per month. The first five deciles of the IRS are targeted, half of the population paying taxes on revenues (one half of the total population), earning on average just above the minimum wage, a good representation of the lower and middle classes, the heart of the Yellow Vest upheaval of the last decade. Estimates of car ownership in this segment: around 10 million vehicles, one quarter of the pool, a significant portion old, usually up for replacement, by second-hand vehicles due to the price of new cars.

The magic number, 100 €: social lease eligible motorists must drive 12,000 km per year, which roughly translates around 50 liters of car fuel per month, worth 100€ when the price at the pump reaches the obnoxious 2 € per liter. As the 2018 Yellow Vest movement was triggered by the increase of the fuel price, nearing this infamous threshold, and knowing 80% of EV recharge takes place at home, a slight notch on your electricity bill, or at work, for free, the message is that eligibility to the social lease means every day commuting for free, not insignificant for inflation-pressured people.

State aid related to this social leasing amounts to 13,000 € per EV, even though we are dealing with small vehicles, most models costing less than 40,000 €. In terms of public spending effort, it all depends on the volume of vehicles to be considered:

  • In 2024, only 20,000, reflecting the limited supply: we are talking of small, European-manufactured, EVs, when the global offer on this segment is mostly Chinese, thus not politically acceptable (what Gordon Hanson calls “pragmatic unilateralism”). Public effort is small, 0.26 B€, a fragment of the existing “cash-for-clunkers” yearly budget (which includes a standard support for EV purchase).
  • Should we consider the replacement of each and every “old” vehicle, i.e. produced before 2010, with CO2 emission factors that will not let them access the Low Emission Zones in urban areas, and mostly past the average retirement date, the tally climbs to 1.7 B€ per year, above the “cash-for-clunkers” budget, and only for the benefit of this population: to keep on supporting all EV sales, extra funding would have to be found, like an additional tax on super-polluting cars, ICEVs or… heavyweight SUVs, thermal and electric alike.
  • If we consider the standard replacement, i.e. at the average date, of the whole pool belonging to this segment of the population, regardless of CO2 emission factors, the budget climbs to 10 B€ par year. Where would the funding come from?

And what about the rest of the population, owners of three-quarters of the car pool, critical to convince for EV true mass market adoption? The richest class can afford to pay for a pricy EV, some already do, e.g. for status, but what about the just-above-the-average middle-class? Consider households in the sixth decile: revenues less than 20% above fifth decile’s, worth no more than 5000 € more per year, less than half of the premium you have to pay for an EV compared to its equivalent ICEV in the mid-segments.

On top of that, the standard support of 5,000 € to purchase an electric vehicle (BEV and hybrids) is reduced, in 2024, to 4,000 € for the taxpayers above the 5th decile, the government arguing the EV market has enough momentum to reduce the public support, a nudging tool (next step: increase the price of electricity used for EV recharge?). Those citizens may be less pressured by inflation than those in the first five deciles, but are they ready to ditch their well-functioning ICEV and invest two to three years of their extra revenue for the sake of lower CO2 emissions, assuming the EV qualifies as such (not the case for big electric SUVs or for some models built in coal-reliant China)?

Recent history shows us the sensitivity of EV sales to public support. Sales in Germany may drop by 40% in 2024 without public support, abruptly stopped in December 2023 following a budget crisis between the government and the Constitutional High Court, when 10 B€ have been spent since 2016 to sell 2 million EVs. Social leasing sure is a step in the right direction, sending a message that energy transition can be affordable by the least wealthy, but is it enough for the necessary wider acceptance that will trigger the mass adoption of electromobility and meet recent expectations of a whooping 40% of electric car sales in the world in 2030, in six years from now (by the end of 2023, electrified vehicles, BEV and hybrids, only accounted for 3.5% of the French pool)? If not, and assuming public support has limits, some serious thinking has to take place for EV to become affordable for all, what the emblematic Ford T became in the earlier part of the 20th century.

Philippe Marchand is a Bioenergy Steering Committee Member of the European Technology and Innovation Platform (ETIP).

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