The crumbling values of electric cars pushed rental company Hertz to a loss last quarter, caused the collapse of UK EV provider Onto in September and dented the 2023 bottom line of one Europe’s largest leasing companies after it made a loss on EV disposals.
Stable used car values have become critical to new car sales in that they determine finance costs, so the continued weakness in EV prices is also hurting car companies as they look to increase the percentage of zero-emission cars they sell.
Those car companies are now torn. They either boost demand for pricier EVs by slashing prices, which would shred used values. Or they shore up those values by holding firm on pricing, losing them customers.
“We have to be very careful on how we manage the residual value of EVs,” Luca de Meo, CEO of the Renault Group, said on the company’s earning call in mid-February.”The most dangerous thing is pushing cars that the market doesn't want.”
Used electric car prices in the UK collapsed in spring last year after spiking unsustainable in 2022.
After a period of stabilisation, EV values are now weakening again as increasing numbers hit the used forecourts. Price researcher CAP noted a further 1.9% decline in prices for one-year-old EVs in January compared with the month previous, versus no change for petrols, diesels and hybrids.
A big reason for the decline is the increased discounting on new EVs, with CAP pointing to discounts of up to £15,000. “With such strong new car offers on EVs, where is the incentive for the used buyer?” CAP noted in its February report.
Discounts on electric cars have increased by 204% in 12 months, according to a new report by What Car?, equating to another £3149 on the table. Honda topped the incentive charts in January with an average discount of 21% on its sole EV, the e:Ny1 small SUV, but the Stellantis brands of Vauxhall, Fiat and Jeep took the next three places.
This was despite Stellantis CEO Carlos Tavares claiming in the company’s recent earnings call that the company was protecting margins on EVs by holding firm on pricing.
The UK has been the hardest hit on EV values in Europe, according to Tim Albertsen, CEO of Ayvens, the leasing giant created last year through the merger of Leaseplan and ALD. Ayvens operates throughout Europe and is now the UK’s largest leasing company. In the last quarter of 2023, it booked a loss on the approximately 8000 electric cars it sold onto the used market in those three months.
“The UK was probably the worst in terms of EVs in Q4, for different reasons,” Albertsen said on the company’s earnings call in February. One of the reasons he pointed to was the “EV bashing” by sections of the media, which has created a more negative view of electric cars and thus depressed prices. This has also been highlighted by the recent House of Lords report.
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