Manufacturers are expected to ramp up discounts on new electric cars across fleet and retail in the final quarter of the year to close the gap on their ZEV Mandate targets.
With 22% of each manufacturer’s registrations this year required to be full electric – although trading schemes, credits and a 2021 benchmark formula for individual targets will allow most to avoid fines of £15,000 for each non-compliant car – some have already started testing market sensitivity to pricing.
Auto Trader director of automotive finance Rachael Jones, speaking with Fleet News editor Stephen Briers on the Q2 Market Insight recording, said: “Earlier in the year, we saw a massive uplift in engagement for the Honda eNY1 in response to their retail offer of a PCP that dropped below £200 a month for new mid-sized EV.
“Their enquiries and leads shot up by over 650% in that month. When discounting does happen, it drives demand.”
Jones predicts the pressure will start to build on manufacturers towards the final quarter of the year which could result in some “extreme discounting” as well as a spike in short cycle registrations, such as rental and captive schemes. Some manufacturers have also suggested they could supress supplies of petrol and diesel cars to control the balance, although Auto Trader has not seen any evidence of this yet.
“I think it's likely that brands are going to wait until September and then decide how to play those final few months. It's one to watch,” she said.
New car discounting on electric vehicles could put further pressure on used car residual values, which dropped by 18% in May on the back of a 19% reversal the year before. This is having a significant impact on leasing company performance with the likes of Zenith reporting used prices have affected profitability.
“Used car EV prices have fallen 21 times months in a row, which is just unsustainable and isn't going to help bring down new car monthly payments either,” Jones said.
“When we look at the RVs that we produce, a three-year-old 30,000-mileage EV retains just over 50% versus 65% on a petrol vehicle. That is around £7,700 difference.”
Auto Trader is seeing price drops across different age cohorts, including the three-to-five-year-old EV sector, which is experiencing strong demand where used EVs account for around 8% of all leads sent to retailers.
The biggest concern is the sub-one-year market, both in terms of pricing and speed of sale.
“They're taking much longer to sell than a three-to-five-year-old EV because you've got OEMs incentivising brand new ones with great finance offers and discounts and pre-reg coming back into play.” Jones said.
“There are some challenges within the used car market; it's not easy riding at the moment.”
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Bauer B2B group editor Stephen Briers has been an automotive business journalist since 1995. He has been editor of Fleet News since 2009 and before that was editor of Automotive Management for almost seven years. He now oversees both brands, as well as RAIL magazine.
Chris Mack - 14/08/2024 16:47
Going to be an interesting Q4 for sure. EV's will 100% be cheaper and the best deals are still to come. If you lose £1000 or £10000 selling an EV its still less than the £15000 fine. Its going to have a huge impact on used EV's and their RV's and will also impact used petrol and diesel vehicles too.