The zero emission vehicle (ZEV) mandate for new cars risks damaging the used market as OEMs look to meet their zero emissions new car targets in 2024, according to Indicata UK.

Indicata says new and nearly new EVs are being “aggressively pushed” into the market at the same time as consumer demand for used EVs remains limited

The remarketing specialist warns that new and nearly new EVs are being “aggressively pushed” into the market at the same time as consumer demand for used EVs remains limited, and dealers are choosing to stock lower-priced models to protect their cashflow and avoid falling prices.

With OEMs now working towards the government target of achieving 22% of their annual sales through zero emission cars this year and 80% by 2030, Indicata UK’s group sales director Jon Mitchell has asked how long the used EV market can sustain the pressure from the new vehicle market.

“With the UK offering tax breaks for buyers or drivers of new EVs but nothing for used EVs, there was always likely to be an imbalance between supply and demand. Higher-priced used EVs are already in plentiful supply at the same time as volumes of new and nearly new cars are being pushed into the market.”

“The balance of supply and demand needs careful managing for fear of compromising the used EV market which heavily influences the new car market, in particular future residual values. The used EV market could be sitting on a knife edge in the coming weeks,” he added.

December’s UK new car registrations also gave some insight into the impact of the ZEV mandate with EV registrations down by 34.2% year-on-year, while sales of petrol and diesel cars were up by 29.2% and 22.1% respectively in the month.

This was the result of OEMs holding back EV sales until January to contribute towards the 22% target they need to meet to ensure they avoid fines of up to £15,000 per car by the end of 2024.

“Too many new, nearly new and used EVs are simultaneously in the market which could compromise prices. It needs a light touch to balance supply and demand,” said Mitchell.

Used EV stock levels have continued to rise in January according Indicata data with Market Days’ Supply (MDS) rising to 78 days, the highest figure recorded since March 2023. This compares with 60 days and 61 days respectively for used petrols and diesels. MDS is derived from dividing the currently available supply of stock by the average daily retail sales rate over the past 45 days.

The BVRLA has also warned about the impact of the ZEV mandate. Its newly published Leasing Outlook Report reveals that leasing companies also fear the unintended consequences of the ZEV mandate, with the risk that it artificially fuels the market for new EVs and thereby creates a subsequent glut in the used sector.

The BVRLA report also shows widespread concern for EV used values, which have tumbled by more than 30% in the past year. There are now widespread calls for government intervention in the used EV market, with suggestions ranging from an equalisation of VAT rates on home and public charging, to interest-free loans for used EVs, and greater support for charging infrastructure.

And the BVRLA has also warned that alarm bells are ringing even louder in the LCV sector, where the ZEV mandate demands that the sales of battery electric vans almost double in 2024 to 10% of total registrations. It says leasing companies are already facing pressures to include at least one e-LCV in every 10 van orders, and are working closely with fleets to identify individual vehicles that could transition to electric without operational compromise.