The demand for new electric vehicles is growing with every month, and the residual value situation appears to be looking just as rosy
September was another record-breaking month for battery electric vehicles, with almost 22,000 registered to give the full electric technology a 6.7% share of the new car sales market and a 184.3% increase in registrations on September 2019. Last month accounted for almost a third of the total BEVs registered in what has been a rollercoaster 2020.
The year-to-date figure is just as positive, with full electric vehicle registrations 165.4% up on the first three-quarters of 2019, and accounting for 5.4% of all new car registrations, compared with just 1.3% for January-September last year.
But with incentives such as zero company car Benefit-in-Kind and company National Insurance cost for this tax year, and greatly reduced figures until at least April 2025, as well as the grant towards the purchase cost, all designed around at the first user, how are residual value experts expecting these cars to perform when they go to a second home?
In the very early days of electric vehicles at the beginning of the 2010s, it wasn’t unheard of for leasing companies to allocate a residual value of approaching zero to the few EVs available to early adopters, such was the concern about battery performance and the ability to find used buyers willing to adopt EVs. But the pace of change in new vehicle demand is, according to experts, being matched by the increased §knowledge, understanding and willingness to accept among used buyers.
“I don’t think there is a worry about the technology, there is a general acceptance of the technology across all makes, models and brands,” says Cap HPI’s senior values editor and EV expert, Chris Plumb.
“Over the past seven years I’ve been doing this, we’ve seen an improvement in used car demand for EVs and that will still be the case because there is a market for them, especially as new cars come in and hit certain price points. With the tech in the vehicles, over-the-air updates, eight-year battery warranties, there will be less risk to the used buyer and more confidence to take on the vehicle.”
“If I gave you an average position, then I would say electric vehicles are more at parity [with petrol and diesel], with a slight premium coming back,” says Paulo Larkman, head of fleet consultancy at Hitachi Capital Vehicle Solutions. “From a RV perspective we’re looking at a premium for electric cars over ICE.”
“In terms of the journey to there being a premium on EVs, that journey is not simply about the product, it’s not simply because EVs are now better or more desirable,” he continues. “The viability has increased and it’s been a gradual transition driven by a whole variety of things.”
One big advantage that electric vehicles have is the pace of change within society around climate objectives, including the high-profile low-emission zones coming to cities across the country.
“The clean air agenda will continue to grow and will drive demand,” says Cap’s Plumb, who also said increasing numbers of charge points will grow confidence.
“Another thing that’s going to improve the residual values of mainly electric but also a halo on hybrids is the optical availability of the charging infrastructure,” agrees Hitachi’s Larkman. “As people drive through the likes of Tesco and Asda, the visible infrastructure will make the product more desirable.”
Plumb adds:“I’m confident that there is a private retail market, the good sales from the private sector of the new market show that there is interest.
“Mainstream vehicles will see more stability in values as demand increases but more expensive ones will be under a bit more pressure. Petrol, diesel, electric, plug-in hybrid, hybrid, mild hybrid – it’s all supply and demand, and EVs are not immune to that.
“I would hope that the market will be ready for the increase in used EVs in three years; manufacturers have produced really good used car remarketing programmes – a used car PCP opens up a bigger market,” he continues. “And more independent specialists are growing that are very good at selling vehicles.”
Understanding of the technology will also boost demand, according to car retailing group Robins & Day’s chief executive, James Weston.
“The noise and awareness is starting to increase, and it drips on to more people’s potential purchase lists, and that then filters down into the used market” he tells Company Car Today. “I very much don’t see EVs sitting on used forecourts for long.
“One thing for sure is that enquiry levels will continue to grow, and as more products come from more manufacturers, the noise generates enquiries.”
Customers, both fleet and retail are also potentially going to run electric vehicles for longer to help off-set the up-front investment, which will mitigate the quantity of supply coming through of any one age or mileage, as the industry is used to with petrol or diesel vehicles at a typical three- or four-year cycle.
“As a buying model of running the car for longer, it becomes more profitable; there’s no reason we won’t see that,” continues Chris Plumb of Cap HPI. “It’s an exciting time for EVs and they’re not going away.”
EV RVS VS ICE
Electric residual values have now reached a point where they are generally comparable with petrol- or diesel-engined models.
As is the case with regular models, plug-in cars now seem to be subject to the same variables as petrol or diesel in terms of different models performing better or worse according to factors such as volumes, desirability and how the manufacturer behaves in relation to discounting and approaches to different market channels.
This table uses Kee Resources data to look at the residual value and whole-life cost of different powertrains available in the same or similar models, as well as the comparable company National Insurance over the next three years and monthly company car Benefit-in-Kind cost to a 40% taxpayer this tax year.
Powertrain P11D Price Depreciation Whole National BiK
(no grant) (%/cost) Life Cost Insurance
Peugeot 208 Allure
Electric £30,170 37.2 £18,945 50.6p £125 £0
Diesel £21,025 34.8 £13,700 48.6p £2176 £168
Petrol £19,525 39.3 £12,225 47.8p £2344 £182
Mini Cooper S
Electric £27,845 43.1 £15,848 45.2p £115 £0
Petrol £20,860 40.9 £12,335 53.9p £2850 £223
Hyundai Ioniq Premium SE
Electric £35,895 35.7 £23,070 56.5p £149 £0
PHEV £32,195 38.4 £19,845 52.2p £1466 £107
Hybrid £27,840 41.4 £16,315 54.5p £2881 £223
Kia Niro 3
Electric £36,795 40.8 £21,795 56.0p £152 £0
PHEV £31,890 41.7 £18,590 50.9p £1452 £106
Petrol £26,880 46.2 £14,455 52.7p £3005 £233
MG ZS Excite
Electric £28,440 35.8 £18,265 49.4p £118 £0
Petrol £17,400 35.8 £11,175 49.6p £2641 £209
Mercedes-Benz EQC/GLC AMG Line
Electric £67,600 54.9 £30,535 86.0p £280 £0
PHEV £49,617 40.4 £29,592 86.8p £3081 £232
Diesel £43,075 40.1 £25,475 96.9p £6598 £531
The situation around residual values isn’t quite so clear for plug-in hybrids, with a question mark over the future value of a technology seen as a stop-gap by some on the route to full electric.
“PHEVs have been an interesting one to monitor over the past couple of years,” says Cap HPI’s Chris Plumb. “The BiK rates mean PHEVs will continue to grow in new car registrations, and some manufacturers may use PHEVs as a way to move away from diesel, because there’s no range anxiety and the MPG can be comparable to that of diesel, but the growth hasn’t translated to used, because where is the benefit to the used buyer?”
“They’re more expensive than ICE, they need to get to a certain price point to be attractive, so they have been under pressure and have stabilised after a turbulent start,” he continues. According to Cap HPI, PHEVs are at a year-on-year price deflation of around 4%, while petrol is up 9% and diesel up 6%.
“The number of PHEVs out there – three times the number of EVs – means it’s a more mature market,” says Paulo Larkman of Hitachi Capital Vehicle Solutions. “There is a lot more knowledge of what is going back into the used market, and the fact that the premium is declining suggests the position three years ago was optimistic and there is a market concern, and I think that will continue.”
Car manufacturers also admit that PHEVs may have enjoyed too positive an early position. “At the moment there are obvious RV increases on electric and declining slightly on PHEV, which is possibly due to the market reacting to a very strong initial position,” Peugeot’s UK managing director, David Peel, tells Company Car Today. “We’ve had a move to strengthen RVs on 208 and 2008 since we launched [early this year]. PHEV is a little more of a challenge, we’ve seen Cap forecast a decrease in RVs as a general market position.”
“We’ve managed PHEV carefully, we are seeing demand for PHEV, there are benefits of going PHEV for certain users, there is a marketplace and customer for it.”