Currently, inflation is at 8.8% and it reached its 40 year peak earlier this year. With soaring energy and food prices, 90% of adults in the UK have reported an increase in their cost of living with 1 in 4 people struggling financially. This staggering inflation is only going to get worse with the MPC predicting that it will reach 13% in 2023. Rising energy prices have affected many households and businesses in the UK but what is its impact on electric car owners?
In April 2022, Ofgem increased the energy cap by 54% meaning average household bills are set to rise by £700. As a result, charging costs for electric vehicle owners are up. Before the rising energy cap, the typical cost to charge an electric car at home with an annual mileage of 9000 miles was between £500-£830. Now, the charging costs are going up by approximately £200. From October 1st energy prices increased again by 80% meaning it costs more to run than a petrol car. However, in recent weeks, oil prices have dropped to the lowest since Russia invaded Ukraine. This, along with recession fears in the UK, is causing the price of petrol to fall.
In addition, electric cars are significantly more expensive to buy or lease than a petrol car. There is also a shortage of public charging points that may push charging costs up in the future. With over 58% of UK drivers owning a petrol or diesel car, it is evident how much more convenient they are with a higher mileage on a full tank, their lower prices and the abundance of petrol stations. Consequently, the usage of petrol cars has a negative effect on the environment due to increased air pollution and emission of greenhouse gases that contribute to climate change. However, it is fair to say that many families across the UK won’t be concerned about this right now as they will just be concentrating on feeding their families and heating their homes. Once inflation improves, we can focus on achieving environmental sustainability.
Consumer confidence fell for the fourth consecutive quarter to its lowest level on record, even lower than when the UK entered its first COVID-19 lockdown. Consumers have become pessimistic due to increasing inflation expectations and combined with the increased base rate, this means that people are saving as a precaution. Hence, few consumers are willing and able to purchase ‘big-ticket items‘ like an electric car due to the current economic climate. The demand for electric cars has decreased and will stay low until inflation and confidence improves. For the time being, consumers may be using alternate transport like trains and buses or many even work from home.
However, today’s inflation is a small setback for the electric car industry. Once all petrol cars are banned in 2030 and the economic climate improves, the electric car industry will undoubtedly be booming as their PED will become inelastic due to little availability of substitutes. The replacement of petrol cars with electric cars creates positive externalities from no emissions and less noise pollution while also creating thousands of more jobs in construction, marketing and finance.
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