Automotive retailers are calling for swift intervention, claiming that the autumn in value of used electric cars might be putting the UK’s plans to phase out fossil-fuel models in peril.
Speaking at a September 6 House of Lords inquiry into barriers hindering the general public’s uptake of passenger electric vehicles (EVs), a motor industry panel spelled out that there should be support for the used EV automobile market.
Marc Palmer, brand director at Autotrader, explained that there had been some progress over recent years within the sale of latest EVs which now make up about 16 to 17% of latest registrations, but that that progress is ‘fragile’.
“We have now seen recently, probably for the last six to nine months a slowdown in demand for personal registrations, which has been driven partly by macroeconomic conditions and pressure on household budgets.”
The adoption of EVs was being driven largely by the fleet sector in response to Toby Poston, director of corporate affairs on the British Vehicle Rental & Leasing Association (BVRLA), although his members were, he said, becoming increasingly nervous that a two-tier transition was putting wider EV adoption in danger.
He explained that the company-provided vehicle sector has a mean uptake of around 50% which contrasted sharply with low uptake within the retail used automobile market, “It’s more like 10% and when you take a look at used vehicle uptake within the rental sector, it’s in the only figures.”
“That imbalance is an actual worry going forward. That will not be a healthy or potentially even a sustainable transition in the long run since the whole industry works in quite a joined up way,” he said, adding that the fleet sector had serious concerns over the chance of depreciation.
Dealerships were also concerned, in response to Autotrader’s Palmer.
“What we have seen within the last six to nine months is an oversupply of used cars coming right into a market that currently is not quite ready to take in that offer so there’s been a 23% drop year-on-year in retail prices of used cars due to oversupply.”
“It engenders a lack of confidence within the trade where dealers think ‘hang on, I’ll buy in an asset which may depreciate. How much am I going to have the ability to sell that automobile? How quickly am I going to have the ability to sell that used automobile?”
“When you get that nervousness,” he added, “auction prices might begin to fall and that is really essential because most latest automobile registrations whether or not they be fleet or retail are registered through finance which frequently is predicated on future value.”
“If we begin to see a fall in used automobile prices, and people future resale values are also falling, then the balance to fund those latest cars becomes greater and subsequently makes it tougher for us to get to the 2030 goal.”
“It’s really essential that we stimulate the used automobile demand to take in that acceleration in supply or we’d find some pressure on used. With a view to move to 100% in latest EV cars by 2030 and to make it sustainable and structurally sound, we’d like to be certain that the used supply demand dynamic is de facto robust.”
Phill Jones, chief operating officer at Motors.co.uk, identified that there is no such thing as a advantage to purchasing a used EV today.
“All of the incentives have been on the brand new and in consequence, persons are more more likely to buy the brand new automobile.”
When asked by committee members whether the industry executives thought that government intervention was needed as a way to support the transition to electric vehicles, BVRLA’s Poston proposed two potential solutions: either reducing and even zero-rating VAT on used electric vehicles or adopting a French social leasing model where automobile drivers in certain demographics are offered discounts to assist them to purchase either a used or latest electric vehicle.
The chance of not taking motion to support the used EV automobile market was serious, he said. “It has been almost like watching a slow potential automobile crash occur. You already know this this potential crunch point is slowly approaching.
“We’ve seen on average around a 20-25% fall in value of used electric vehicles. That’s from a high position but when that carries on, with these fleets which have been investing billions in tons of of 1000’s of electrical cars, those vehicles are going to hit the used market in three to 4 years’ time.“
“If that slump continues, they have to be lots more cautious in how they set their latest prices for lease rates.
“So, on the one hand, you can say low-cost used cars for buyers is nice although that profit will only really be there for some time because eventually it can just create an enormous surge in the fee of latest leased EVs – and that is the overwhelming majority of EVs – in order that’s just going to make them unaffordable and damage the transition.”
He said his members were seeking to used vehicle subscription models to offset this potential risk. “As EV cars are rather more reliable and cheaper to keep up, leasing firms are seeing them as a possible fix to supply them for a second lease. So when you lease them for 3 years, as a substitute of putting them within the used market, you possibly can then lease them for an extra three years.
“And again, meaning you have not got to place them into the chance of an auction where prices are only plummeting.”
“The important thing here is incentives,” he said. “You have got the fleet market in the intervening time which is on steroids with the really powerful tax incentives and yet the retail latest and used market has nothing and that is becoming increasingly obvious to buyers.”
Phill Jones at Motors.co.uk meanwhile summed up the dealership’s dilemma: “Automotive dealers are losing money once they take an EV because they’ve been falling in value for months. You have got this this sort of weird type of paradox where you have got higher latest automobile volume coming in, but tactically on a month to month basis, a automobile dealer is saying ‘do I hold a petroleum automobile that has a comparatively stable value or an electrical vehicle which is able to take barely longer to sell and declines in value?’.”
“You have got this sort of inertia,” he said, “and every month, automobile dealers are having to make decisions about what’s best to trade in that month.”
This Article First Appeared At www.am-online.com
