Philip Nothard, retail and consumer specialist at CAP HPI comments on the changing trends within the EV sector
Tesla has built itself a strong global brand and attracts interest to a sector that has traditionally been seen as niche. The recent launch of the Tesla 3 not only attracts discussion on future values of the manufacturers’ ‘mass market’ model, but also the wider EV sector.
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In the UK market it’s clear there remains an ‘apprehension’ from used buyers as range anxiety for electric vehicles continues to be a big hurdle, along with charging network coverage. While longer-range generations are on the horizon, for many they remain unsuitable as the primary family vehicle. Recent data from the Society of Motor Manufacturers and Traders shows that the market share for electric vehicles has risen from 0.26% in 2014, to 0.29% year-to-date 2016. Whereas, petrol/diesel hybrid account for 2.88% year-to-date 2016.
Leasing companies face a battle to dispose of returned vehicles as motor dealers can view these as a challenge. If we review over 8.5 million retail adverts from the past decade, taking all vehicles, a sale took 43 days on average. Alternative fuel vehicles over the same period took an average of 86 days to sell, and accounted for 1% of the overall total.
There’s clearly a gap between the attractiveness of some of these vehicles to company car drivers due to low benefit in kind taxation costs, and the demand from used buyers. The Tesla Model 3 may prove a game changer. The price point is attractive to a wider range of consumers, with over 325,000 buyers globally already putting down a deposit. Our research shows that Tesla vehicles hold their value on the used car market very well indeed.
In fact, Tesla used car values were virtually static last year, which is very unusual, and suggests a growing interest in electric vehicle technology as well as demand for the Tesla brand. The launch of the Model 3 will see more Teslas entering the second-hand market in a couple of years and it will be very exciting to see the impact these have on the market.
The basic Tesla Model 3 will start at $35,000 (£24,000), with a range of at least 346km per charge, which is comparable with Tesla’s existing, luxury models. In addition, the UK is investing in a growing network of supercharger points, which deliver a rate of 170 miles of range in as little as 30 minutes.
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By GlobalDataThe lower price tag on the Tesla Model 3 can only boost the popularity of this brand, and perhaps drive wider acceptance of electric vehicles. Currently, the used market for these vehicles requires special attention. Interest in ex-fleet stock can vary due to geographical variation in consumer demand. Significant dealer education is also required so that the right vehicle powertrain option is offered to the right buyer, a fact which some manufacturers are now recognising.
Alternative fuel vehicles often struggle as a used proposition. In the main they are viewed as potentially expensive relative to their counterparts. However, some of the early models to hit the market now look relatively good value – but it’s been at the cost of dealers or owners. EV accounted for 0.03% of observed trade transactions from May 2014 to April 2015, and has risen to 0.05% from May 2015 to April 2016.
A challenge remains for the manufacturers to manage the vehicle through its life cycle, once it is in the open market.
The lack of incentives in the used car space can only be a contributing factor of the performance of these vehicles. Without grants and other incentives being reflected in the used proposition when the vehicle hits the open market, it can only be a detriment to consumer demand and interest.
It takes time for consumer perceptions to change – for example, many still drive diesel vehicles because they believe that it is saving them money compared to a petrol vehicle, when that it is almost certainly untrue in the majority of cases. Range is probably the major obstacle, combined with difficulties in charging. Most manufacturers are talking about new generations of battery with a range of up to 200 miles on a single charge, but this may render the current generation of electric vehicles virtually obsolete.
The new car market is very stratified – i3, Leaf and Mitsubishi Outlander PHEV accounting for 87% of the registrations in the year to date (with another 15 models contributing the remainder). Outlander PHEV alone is 55% (on the back of attractiveness to fleet drivers in BIK taxation).There’s potential for fleet registrations to slow in the coming years as BIK tax starts to ramp up and issues remain regarding lack of official Advisory Fuel Rates.
Hydrogen fuel-cell vehicles could be the long-term solution with a huge amount of research going on in Japan and the USA – with Toyota now launching the first true production model with significant government support in Japan. Standard hybrids such as Toyota Prius performed well over the past two years as demand has increased from some sectors of the market, such as private hire taxis. Prius 36/60 values increased by +36% over the past two years. Buyers are naturally nervous about how far they might be able to travel before needing to recharge their car; clearly all of these factors don’t make for a buoyant second-hand market.
