Battery electric vehicles now make up a growing share of the UK car parc, supported by infrastructure investment, maturing residual values and improving cost profiles. In contrast, hydrogen-powered cars remain scarce, with weak market fundamentals and little infrastructure to support uptake. For funders, the divergence is critical. Lending models based on predictable resale values and insurable assets now favour EVs, prompting motor finance providers to shift products and pricing around the realities of an electric transport future.
As the UK accelerates away from internal combustion engines (ICEs), the debate over whether electric vehicles (EVs) or hydrogen fuel cell vehicles (FCVs) will dominate the future of personal transport is heating up. For those in the financial services sector, this is far more than a technological question. It’s a commercial one, with far-reaching implications for leasing, PCP and hire purchase models, risk management, residual value forecasting, and even vehicle insurance.
On paper, both EVs and hydrogen-powered vehicles offer the same promise: a cleaner, greener alternative to fossil fuels. But as the market evolves, it’s becoming increasingly clear that one technology is racing ahead. By the end of 2024, there will be more than 1.3 million BEVs and 740,000 PHEVs on UK roads. In stark contrast, fewer than 130 hydrogen cars are currently registered in the country. Infrastructure realities reinforce that disparity. Shell recently closed all its UK hydrogen refuelling stations, and only two hydrogen vehicles, Toyota’s Mirai and Hyundai’s Nexo, are available to private buyers. Hydrogen’s limited footprint simply cannot support mass market adoption at this stage.
For finance providers, this divergence is critical. Residual values are at the heart of lease, hire purchase and PCP models. With EVs, improving battery technology, manufacturer warranties, and growing consumer demand are helping to stabilise used values and de-risk end-of-term valuations. The second-hand EV market, once seen as speculative, is maturing fast, enabling lenders to price products more confidently and offer competitive rates.
Hydrogen vehicles, however, present a host of unknowns. They are expensive to produce, complex to fuel, and lack the infrastructure at present to build consumer confidence. Without a clear path to scale, predicting future values is speculative at best, making FCVs difficult to fund and even harder to place in traditional finance models. This presents an unacceptable level of risk for funders that rely on predictable depreciation curves and robust resale markets.