Peter McDonald
Why cost concerns around electric vehicles are leading to some uncertainty creeping into the market
“People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome.”
Not my words, but those of George Orwell and they’re just as relevant with regard to the prices of used EVs at the moment. Nobody can truly predict the future, but that’s effectively what leasing companies and fleet managers need to do when looking at the breakdown of their fleets for both today and tomorrow.
What’s certain is that electrification is coming. Some have suggested that the Government’s commitment to its original 2030 and 2035 dates for PHEVs and EVs might be subject to change.
However, what isn’t in doubt is those OEMs that have already committed their brands to an all-electric future. Stellantis has stated that the majority of its brands in Europe will be all electric by 2028. The same goes for Jaguar, which has said it will be an all-electric brand from 2025, while all of Ford’s passenger cars in Europe will also be all-EV by 2030.
Whether you agree on a personal or professional level with the picture of all our EV futures, the undisputed fact is that it is coming, whether you like it or not. And it’s a similar picture across most of Europe too, hence the advance commitments from those OEMs.
The simple fact is that as there are more used EVs on the market than before, their rarity value has dropped
Cost-of-living concerns
While the boom in new EV sales has been dominated by fleets, that hasn’t been mirrored in the pre-owned market. In fact, earlier this year Cap HPI said that demand for internal combustion-engined used cars actually improved towards the end of 2022 as drivers felt the impact of the cost-of-living crisis.
At the same time, depreciation of EVs ironically got worse. Aside from Tesla readjusting its new car prices (which, in turn, had a knock-on effect to its finance packages and used prices), volumes are starting to play a part too. The simple fact is that as there are more used EVs on the market than before, their rarity value has dropped – between particular data periods from 2018 to 2022 observed by Cap HPI, the number of used EVs sold had increased by an incredible 800%. This will continue as we start seeing the return of the first vehicles leased with 0% BIK, with the three-year anniversary of that event nearing.
So, with that in mind, what may occur in the future? Many have already committed to start the move across to EVs as more and more of their drivers take advantage of the low BiK rates for company cars. Even if you had a company car today, your BiK rate wouldn’t rise to 5% until 2027/28, so it remains an understandably tempting option for many drivers. By 2025, the BVRLA estimates that the fleet sector will be responsible for 80% of all EV sales, so clearly this is a trend that’s expected to continue.
Safety in switching
But while those numbers and, for the time being anyway, the facts of that forthcoming Government legislation can’t be argued with, such EV depreciation would still ring a few alarm bells. Particularly for those looking to make the switch from petrol or diesel. Switching to an EV fleet is undoubtedly the right decision for the majority of fleets in the future, the big question is what that may mean for lease rate pricing?
Perhaps the bigger question, though, should be what might happen to the values of ICE vehicles in the future? As we get closer to those 2030 and 2035 dates, will the used values of ICE vehicles soften or firm up? Sheer logic would suggest that they would soften, but as those Cap HPI findings show, the opposite has been true so far.
Will that change as we get nearer to those dates? Will the majority of drivers turn towards EVs on both the new and used markets, enough to shore up those residual values, or will they try to hang onto their ICE models for as long as possible?
As Orwell’s quote said at the start of this column, those who claim with some certainty to be able to predict what will happen in the future are likely to have an ulterior motive of some description.
For everyone else though, while the long-term EV future is certain, we’ll just have to wait and see in which direction the market goes before then.
Peter McDonald is mobility director at Ohme. Prior to his current role, he spent two decades working for automotive manufacturers including Nissan, SEAT and the wider Volkswagen Group.
