Falling electric vehicle (EV) residual values (RV) are “problematic” for fleets and action needs to be taken to improve their prospects in the used car market, says the Association of Fleet Professionals (AFP).
Paul Hollick, chair, said that residual values reductions of 10-20% had not been uncommon over the last 12 months for some of the most popular fleet EVs and that the trend had clear repercussions.
“Until perhaps a year ago, it was possible to make a convincing financial case for EVs at board level. Yes, they were expensive to buy new but residual values were remarkably strong and charging was cheap. Now the second and third parts of that argument have started to fall away.
“Of course, fleets are still going to want to continue the process of electrification thanks to benefit in kind advantages for drivers, the 2030 deadline edging closer and for environmental reasons. However, as AFP members continually testify, being able to back all of this up with a sound financial argument has always made the process much easier.”
Hollick said that the question facing fleets and the wider motor industry now was what could be done to help strengthen residual values and reduce the cost of power.
“The latter problem is potentially the easiest to resolve. Fleets that concentrate on home charging are still benefitting from lower costs and over the next year or so, we can expect to see electricity prices fall to a level that, if not comparable to before the war in Ukraine, will be at least much more competitive than today.
“However, addressing the used EV market is going to be more of a challenge. How do we change the perceptions of used car and van buyers, convincing more of them that these vehicles are desirable? It seems to us that doing so centres around making EVs more affordable while ensuring that consumers view them as practical propositions on a day-to-day basis.
“The affordability question is a tricky one. In some other countries, of course, there are government subsidies aimed at the used EV market, ranging from low-cost loans to lump sums, and these have proven effective. It would be good to see similar moves here.
“However, it is the practicality issue that we feel probably needs greater attention. The UK simply doesn’t have enough chargers of the right types in the right places, and despite infrastructure growth, it’s not clear that this will change at any point soon.
“It’s not just pictures of queues for chargers in the news that make this situation apparent to used car buyers but many people have come back from Easter breaks in France and Germany, and noted how much more advanced and useable their networks appear to be.”
Hollick said that the AFP welcomed the formation of ChargeUK, the new industry body for charging providers, and hoped it would be able to work closely with the government.
“It has appeared to us for some time that a much stronger sense of direction is needed than is currently being seen when it comes to charging. We have been arguing for the creation of a charging czar for some time and, if that isn’t going to happen, an industry body working alongside the government is probably the next best solution.
“Without visibly viable public infrastructure in place, used EV buyers are being asked to take a chance on simply being able to charge their vehicles out on the road, which is simply unreasonable.”
Hollick added that many of these issues were likely to resolve over time but were proving unreasonably problematic in the meantime.
“Ultimately, it is probable that power will become cheaper, the charging infrastructure will improve, mass production will help to bring down the price of new EVs, and used prices will therefore fall to a level that is closer to traditional ICE options.
“However, it does feel as though there is limited recognition at a government level that taking greater control over the process of electrification in the short term could make EV adoption much easier for fleets and used car buyers.”