There are plenty of concerns within the fleet industry around the switch to EV, one of them being ensuring the figures add up. Let’s address an electric elephant in the room.
It’s no exaggeration to describe what has happened to electric vehicle values over the last year as a crash, with drops of 30% for some models far from unknown. It’s something that has sent shivers down the collective spines of not just fleets but every business with a stake in EV remarketing.
We’re now in a situation where forecourt prices for many EVs are not much higher than for comparable ICE vehicles, despite their much higher purchase prices. The scenario is especially acute for bigger, more expensive and more luxurious EVs. As one AFP member holding a number of these cars said to me recently: “the residual values (RVs) are nothing short of dreadful”.
What are the reasons for this? At the core is demand. While there are more buyers looking for used EVs emerging all the time, there are not enough willing drivers to keep values high. The outlook here could be especially difficult. With fleets set to start defleeting EVs in ever-larger numbers, there are worries that the consumers needed to meet that volume may just not exist.
An additional factor is that the types of EVs that have been generally available to fleets so far have tended to be larger and pricier than the average used buyer wants or needs, with a bias towards upmarket saloons and SUVs. This trend is starting to change now but that shift will take some time to feed through to the used market.
Finally, and perhaps most fundamentally, used buyers are only able or willing to spend so much on a used car. So, as volumes increase, EV values will always be dragged down to what people can afford, rather than what vendors may want to charge.
The Government’s delay of the electrification deadline until 2035 does nothing to change this situation, in our view.
All of this adds up to an important fact: fleets need to do more to work with the remarketing sector to maximise EV RVs.
Step one is to ensure that the EVs you operate are being chosen with one eye on likely used demand. The market for big, luxury cars will always be limited, while mainstream hatches and smaller SUVs will always tend to find buyers. This is some- thing that is arguably more relevant when looking at EVs than their ICE equivalents, and constructing your choice lists with this in mind could produce long-term gains.
Another important point is to recognise that the lifecycle of EVs may turn out to be quite different to ICE. Because of their higher acquisition costs, we are already seeing some fleets operate their electric cars on longer leases or operating cycles, perhaps up to five years. It could also be that most EVs enter the remarketing cycle older and with higher mileage than levels to which market has been accustomed. This situation obviously has implications for when it comes to keeping vehicles in good condition and with watertight histories. There are also parallel predictions that EVs will soon start to be sold to used buyers on longer leases or loans – and that their overall lives will turn out to be lengthier than for ICE cars. A potentially important adjunct to this approach is the arrival of the agency model for many manufacturers, which some see as partially a bid to control cars through their second or third lives, effectively being resold by the OEM – either directly or through their dealer network – until the car is around a decade old. This will affect fleet remarketing strategies, no doubt.
Additionally, EV operators need to put more pressure on the Government to do more to support the used sector, especially when it comes to EV infrastructure for those who don’t have drives on which to install chargers and are put off by the high prices often being charged at public sites. Low-cost charging is central to the appeal of used EVs.
However, perhaps the single biggest action for fleets is simply to talk to the remarketing sector in more depth and more often. Many used car retailers are still getting their heads around the EV situation and finding out on an almost week-by-week basis what they need to do to sell electric cars. Ongoing dialogue is essential to help the used EV market function in a manner that fleets want – and need – to see happening.
