Despite increasing levels of demand for both new and used Battery Electric Vehicles, prices for BEVs are in sharp decline. Average used BEV prices are now down 16.8% year on year according to Auto Trader. In contrast petrol and diesel cars are down 5.7% year on year. Research by Autovista in March showed a three-year old 60,000-mile vehicle is retaining only 37.8% of its original value when compared to an average across all powertrains of 52.5%.
Private BEV uptake remains sluggish compared to business buyers who are dominating the BEV market. As a result, the SMMT has lobbied for urgent action to incentivise mainstream consumer demand pointing out that fewer than one in six electric vehicles are being bought by consumers.
What are the reasons for the lack of consumer interest?
1) Research by the Green Finance Institute (GFI) and fleet management company Venson shows that initial cost is a major factor. Relating this to new vehicles and the drop in used values this means depreciation is higher than internal combustion engine vehicles.
2) Additional costs such as charger installation also weigh heavily on consumer minds.
3) Lack of charging point infrastructure is significant. Consumers are not happy with availability and lack of reliability with chargers being found defective on too many occasions. To tackle this the Government has targeted 300,000 public chargers being available by 2030. Right now, there are approximately 58,000 charging points at 32,500 locations.
4) Range anxiety concern continues to influence consumers. When this is combined with the lack of charging infrastructure and the possibility of being delayed on journeys consumers are opting for traditional powertrains.
5) Particular concern regarding used BEVs is the state of battery health. The GFI study identified that 62% of respondents named this as the leading reason for not buying a BEV. The situation is made more complex because battery health will vary from vehicle to vehicle due to the way that the vehicle has been treated in the past. This might result in a performance variance of as much as 20% between vehicles equating to 30 or 40 more miles. Battery health reports are going to be essential sales aids for dealers in the future. In addition, extended battery value guarantees stating end of life value for the BEV battery will also be required.
Actions of vehicle manufacturers, dealers and fleet operators have also contributed to the decline in values. Tesla cutting the price of its new vehicles, Hertz taking drastic action to offload all its BEVs at a significant loss and some dealers de-stocking BEVs because they have incurred significant losses have weighed heavily on used prices.
There will also be concern within leasing companies and asset funders about the contingent liability risk in balance sheets for vehicles currently out on lease. Consequently, future residual value forecasting will be more cautious and this in turn will lead to an increase in be the leasing and contract hire rates.
What can be done to give private buyers more confidence?
Suggestions have included government tax incentives to reduce VAT on public charging tariffs and further ramping up installation of charging points. Tax incentives to reduce the cost of home charger installation will also assist. The office for Zero Emission Vehicles (OZEV) is currently offering charge point grants covering up to 75% of the installation costs for a single EV charge point with a cap of £350. Any homeowner or tenant with private off-street parking can qualify. The scheme is administered through authorised installers who claim the grant on behalf of the homeowner.
Dealers offering battery health reports and extended battery life guarantees would be valuable sales aids; and training of sales staff so that they can educate prospective customers about real world expectations, the impact of driving style and weather conditions should also be part of the dealer marketing effort. In addition, training about the different charging types (slow, fast, rapid), home charging options and associated costs should also be part of the education package.
In contrast to consumer caution, the Venson study showed company car driver perceptions improving due improvements in charging infrastructure, a wider choice of vehicle options on new vehicles, greater confidence over owning and maintaining a BEV and knowledge that the driver is having a positive impact on reducing emissions. Some of this growing confidence now needs to be transferred to private buyers of used vehicles.
Author: Ian Hare, Managing Director, Motor Management
