Falling electric vehicle residual values (RVs) are proving “problematic” for fleets and EVs need action to improve their prospects in the used car market.

The AFP says it’s harder now to make a convincing financial case for EVs at board level

The Association of Fleet Professionals (AFP) has warned that RV reductions of 10-20% haven’t been uncommon over the last 12 months for some of the most popular fleet EVs.

And the industry body has warned the trend had clear repercussions.

Paul Hollick, AFP chair, remarked: “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 added that fleets and the wider motor industry needed to explore measures that could help strengthen RVs and reduce the cost of charging.

“The latter problem is potentially the easiest to resolve. Fleets that concentrate on home charging are still benefiting 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.”

But he warned that addressing the used EV market would be more of a challenge – and would centre 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.”

Auto Trader has also recently warned of the need for action on incentives; according to its Road to 2030 Report, buyer interest in new BEVs has dropped by almost two-thirds – or 65% – since the beginning of 2022, due in part to the rising cost of living, higher borrowing costs and the well-documented hike in energy prices.

And it’s highlighted that used EVs are experiencing an expected, but significant price adjustment that had seen prices fall 17% (to £31,767) by mid-April on a YoY and like-for-like basis.

Auto Trader has also called for the Government to step in with a detailed programme of tax incentives to improve the affordability of BEVs and support the industry’s efforts in driving mass consumer adoption.

Its list includes fairer charging costs through equalising VAT on public and private charging; more incentives to make EVs affordable for all, such as reducing VAT on used EVs and lower or interest-free rates on EV financing deals; and initiatives to build both buyer and seller confidence in used EVs with a focus on battery health – as already spotlighted by the Vehicle Remarketing Association (VRA) and currently being explored by the Government.

Charging infrastructure expansion foremost

AFP chair Paul Hollick

While EV incentives and education are desperately needed, the AFP says that further development of the charging infrastructure should be front and centre.

“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,” elaborated Paul Hollick.

“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.”

The hope is that the newly formed ChargeUK industry body for charging providers will work closely with government to ensure rollout is on track with needs.

“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,” continued Hollick. “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 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.”

He added that while many issues faced by fleets transitioning to EVs were likely to resolve in the longer term, greater government involvement could stop the shift to EVs being “unreasonably problematic” in the short term.

“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.”