The Future of the Used Electric Vehicle Market: Challenges and Opportunities

Introduction

The used car market is facing a new challenge as the number of ex-fleet electric vehicles (EVs) continues to grow. With weak consumer confidence, heavy depreciation, and an oversupply of certain models, the market is already struggling. In this article, we will explore the implications of this trend and discuss the potential impact on the value of used EVs.

The Current State of the EV Market

Recent new car registration figures show a positive growth trend for EVs. In June, EV registrations were up 39.4% year on year, and up 32.7% year to date. However, a closer look reveals that business and fleet registrations accounted for almost 79% of the total number of EVs registered. Private buyers, on the other hand, continue to favor petrol and hybrid cars.

The Role of Incentives

One of the main reasons for the growth in fleet registrations is the attractive fiscal incentives offered to businesses and fleets. Reduced benefit-in-kind tax rates and salary-sacrifice schemes make EVs an appealing option for companies. However, this has created a two-speed market that risks undermining EVs and disadvantaging private buyers. There is a lack of clear incentives for private buyers to transition to EVs, especially in the used car market where affordability is a key factor.

The Challenge for Car Makers and Leasing Companies

The absence of support for private EV buyers presents a challenge for car makers and leasing companies. They need to manage the flow of ex-company EVs into the used car market without oversupplying it. Oversupply could lead to a significant drop in residual values, making it difficult for retail buyers to afford them.

Car finance companies are already concerned about the weak residual values of some EVs. The influx of ex-company car EVs could further exacerbate this issue. However, experts believe that as long as retail demand remains steady, a crash in values is unlikely to occur. Fleets are taking steps to manage their disposals strategically, such as selling directly from their websites or drip-feeding cars into the market.

Managing Used EV Supply

To prevent a collapse in used EV values, various strategies are being employed. The British Vehicle Rental and Leasing Association states that some firms are re-leasing ex-fleet EVs to customers attracted by lower monthly payments. This approach helps maintain a steady supply of used EVs in the market without flooding it. Additionally, brand allegiance is fading, and consumers are more open to considering alternative brands like Kia and MG.

Flexible lease arrangements are also being used to manage used EV supply. Short-term lease terms of three to six months keep cars circulating, which is beneficial for residual values. Leasing companies are evolving to become mobility operators rather than fixed-term leasing operators. This shift allows them to continue making money from EVs, regardless of fluctuations in their values.

Conclusion

The growing number of ex-fleet EVs entering the used car market presents both challenges and opportunities. Weak consumer confidence, heavy depreciation, and over-supply are already impacting the market. However, strategic management of used EV supply and the evolution of leasing companies into mobility operators can help mitigate these challenges.

While concerns about weak residual values persist, experts believe that as long as retail demand remains strong, a crash in values is unlikely to occur. The future of the used EV market depends on the ability of car makers, leasing companies, and other stakeholders to adapt to changing market dynamics and provide incentives for private buyers. By doing so, they can ensure a sustainable and thriving market for used EVs.