With the UK government’s plans to ban new diesel and petrol cars by the next decade looming on the horizon, the green transition relies on the affordability of the transformation of mobility and infrastructure. Electric vehicles (EVs) remain comparatively more expensive to buy than their fossil fuel counterparts, but support from non-bank lenders can help ensure a successful and smooth transition to electric.
Local councils will play an important part in the transition with charging point infrastructure high on the agenda. A further way in which local authorities can contribute to net-zero targets is the adoption of EVs in their operational fleets, a process which is still in the early stages across large parts of the country. Specialist electric vehicles are expensive to source and unexplored issues like resale value still present a stumbling block.
The coming years ahead of 2030 will be paramount in securing a green evolution for local councils, and non-bank lenders will be of vital importance to ensure the financing and leasing of next-generation vehicles.
Material costs: the EV dilemma
One of the substantial barriers to widespread electric vehicle adoption has historically been inflated costs. The materials needed for EV production include large supplies of copper, lithium, as well as nickel and cobalt, though dependence on the latter has been reduced heavily by innovations in manufacturing. If transition goals are to be achieved, these commodities will have to keep up with a rise in demand of up to eight times on current levels by 2030. Increased battery recycling will contribute to these needs, but supply will have to be increased dramatically to keep up with demand in the short term.
Progress in battery technology is likely to facilitate broader adoption, and car prices for the consumer market are estimated to fall in line with fossil fuel vehicles by 2027. Despite this, residual challenges like supply chain uncertainties and geopolitical conflicts could impact both production and delivery significantly.
Specialist vehicles are lagging behind
While the personal vehicle market is already taking giant steps towards an electric revolution, fleets comprised of utility vehicles are more difficult to acquire and more expensive to produce. Costs for specialist EVs can be up to three times the price of diesel-powered alternatives, disincentivising some from making the transition.
Local governments are faced with the same issue: large electric utility vehicles like waste collection trucks, street cleaning vehicles and gritters are often prohibitively expensive or simply do not exist in an adequate and efficient form. If unchanged, this lag in technology and affordability can restrict councils from proactive investment into a green transition. Recent reports show that 19% of councils do not have an EV strategy, while 37% have not made significant progress on their action plans.
Many councils have not prioritised EV strategy or adoption in the past, yet laying the blame on local authorities can miss the point. With council budgets severely squeezed by the fallout of the pandemic as well as inflationary pressures, the money for installing electric infrastructure and acquiring electric vehicles is often not available.
Leasing as a solution
Non-bank lenders already play a big part in alleviating financial pressures from local councils and public sector organisations. Contracts are tendered, with several companies bidding for each lease to ensure the tax payer gets the very best pricing. The council selects the most appropriate vehicles to suit their needs, and the successful investment business will then finance these vehicles for the local authorities on flexible and affordable terms, typically spread out over five to seven years. Lenders in this market have often worked with these councils for well over a decade so there is a good understanding of what councils need.
Removing the substantial initial outlay from council purses enables a faster and more comprehensive transition to new fleets, tools and equipment, while used vehicles can be re-sold after the lease term has ended. This approach is a financially viable solution for authorities nationwide, while providing investors with the opportunity to take part in an ethically impactful investment.
Reaching net zero is a vital goal for our planet and we all need to play a part in achieving a sustainable future. The route to a green transition for local councils is still in its early stages, but non-bank leasing can help overcome some of its biggest challenges.