How to get from ICE to EV in the most harmonious – and least disruptive way. By Toby Poston, corporate affairs director, BVRLA. 

Toby Poston, corporate affairs director, BVRLA

Business leasing has played a pivotal role in accelerating the uptake of battery electric vehicles (BEVs), buoyed by targeted incentives. Yet, as BEV adoption rises and the targets of the ZEV mandate become more ambitious, a more unified approach is needed – one that blends fiscal incentives with strategic government intervention. To truly succeed, all segments of the market and distribution channels must progress in lockstep, ensuring growth across the board.

September’s figures show that BEV registrations have gained much-needed traction in more areas, at least in the short term. This movement has, so far, been driven by heavy discounting from manufacturers and sustained investment by business fleets. While this growth is welcome, things will remain volatile and unsustainable unless the Government develops a long-term strategy for supporting the BEV market.

The sectors currently driving the transition are taking on high financial risks and cannot shoulder the full burden of the transition alone. The growing disparity between corporate and private demand is concentrating financial risk on one portion of the supply chain, which is not sustainable long-term.

The UK government’s phase-out targets present challenges without robust support measures in place. For vans, in particular, the timeline is especially daunting.

The ICE phase-out timelines, combined with the terms of the ZEV mandate, currently create a grey area from 2030 to 2035. The key issue during this period will be defining what qualifies as a ‘hybrid’ vehicle, with a consultation from the Department for Transport expected by year’s end. The consultation is expected to clarify what specifications a vehicle must have to be considered a ‘hybrid’, and therefore able to be sold between 2030 and 2035. It marks another key moment in the transition and will shape the next decade.

Creating a ‘Happy EV After’

The new EV market cannot flourish without a healthy used EV market

A thriving ‘EV ecosystem’ requires nurturing across all sectors. While business leasing has seen much success in driving BEV adoption, other areas of the market need attention to meet the UK’s ambitious goals. No matter where a vehicle begins its journey – whether in rental fleets, corporate ownership, or as a private purchase – it eventually enters the used car market. Unfortunately, this secondary market for BEVs remains underdeveloped and volatile, with residual values plummeting in recent years due to oversupply.

Collapsing used BEV values – losing more than half their value over the past two years and forecast to fall further – have already led to an estimated loss of 220,000 new EV sales. When factoring in the terms of the ZEV mandate, any future loss of EV demand will negatively impact ICE registrations too as manufacturers seek to meet their obligations. The continued fall in used values is damaging the confidence of fleet buyers and increasing the cost of the most popular way of financing a new electric car.

While falling prices may seem like good news for used EV buyers in the short term, the financial impact on the vehicle leasing industry, which is responsible for 75% of new EV registrations, is severe. The current rate of value depreciation is unsustainable for the leasing market. High depreciation pushes up rates on an initial lease, reducing the cost benefit of an EV vs ICE and causing demand to slow.

Simply put, the new EV market cannot flourish without a healthy used EV market.

Combined effort

To address these issues, targeted government intervention in the form of used EV grants, tax incentives and a consumer confidence-building communication campaign, are needed.

Highlighting the challenges facing the used EV market, the BVRLA’s Happy EV After campaign is raising awareness of this critical issue and the solutions available to government. Intensive market analysis and forecasting in a BVRLA-commissioned report from Oxford Economics emphasises the need for timely interventions and the cost of inaction.

While government intervention is a key factor in solving many of these challenges, it alone cannot provide the solution. A successful transition requires a coordinated effort across the industry, supported by private investment and innovative thinking. Collaboration between public and private sectors will be vital in driving growth throughout the EV ecosystem.

In the end, the success of the EV transition relies on these concerted efforts. Only when the new and used EV markets thrive together can we achieve our happy EV after.