Minister to work with leasing industry to lessen impact of used EVs

The Government has acknowledged the impact of used battery electric vehicle (BEV) values is having on the vehicle leasing industry and vowed to work with the sector to address concerns. 

On average, values of used EVs for cars at the same age and mileage point have more than halved in value since September 2022.

Addressing fleet and leasing industry leaders at last week’s British Vehicle Rental and Leasing Association (BVRLA) Industry Outlook Conference, transport minister Lilian Greenwood said: “The shift to zero emission road vehicles is a necessary challenge that we must meet to achieve the UK's Net Zero target by 2050, and it requires close collaboration between Government and industry. 

“We recognise the unique role that rental and leasing fleets play in driving the transition to zero emission vehicles and in delivering a healthy supply of electric vehicles into the used market.”

She added: “This Government is committed to phasing out the sale of new cars that rely solely on internal combustion engines from 2030, and all new cars and vans will need to be zero emission by 2035.”

However, with warnings from some manufacturers about the risk to UK automotive from the zero emission vehicle (ZEV) mandate, she said: “We want this to be done in a way that also supports UK economic growth. 

“We recognise that more still needs to be done to support consumer demand for electric vehicles. That's why we're continuing to provide a range of incentives.” 

Lilian Greenwood, minister for the future of roads at the Department for Transport 

As part of the Autumn Budget, the Government announced £120 million of additional funding to extend the plug-in van grant until at least the end of March 2026.

“This announcement gives certainty to fleets and manufacturers and will support the zero emission vans market as it continues to develop,” continued Greenwood. 

The transport minister acknowledged the positive impact that low benefit-in-kind (BIK) tax are having for electric vehicles (EVs) in the company car and salary sacrifice market.

“That's why we set favourable benefit-in-kind rates for zero emission vehicles out to March 2030,” she said. “This will provide long term certainty for taxpayers and industry.” 

However, she told delegates at the BVRLA conference: “We can’t take our eye off the ball when it comes to the challenges ahead.

“Strong competition, price cuts and growing supply in the new car market have brought down the prices of electric vehicles in the used market.” 

Mitigating impact of used EV values

“This drop in residual values is also providing a significant challenge to your sectors,” she added. “That's why I want to keep working with you to understand how we can address some of these concerns.”

This year’s FN50 report revealed that pre-tax profits for the country’s top 50 vehicle leasing companies have fallen by almost a third (31.6%) year-on-year after hitting £2 billion for the first time last year.

Record-breaking used car prices driven by the semiconductor shortage, pushed FN50 reported pre-tax profits to a new high in 2023. 

However, a collapse in battery electric vehicle (BEV) used values has impacted the financial performance of the FN50 this year. 

Collectively, the FN50 reported pre-tax profits of £1.39bn – down £645m on the £2.04bn achieved last year and slightly less than the £1.5bn reported by the FN50 in 2022.

Continuing support for electric vans

With electric van adoption rates struggling to meet Government targets, Greenwood also vowed to work with fleets to help improve take-up. 

“Vans are key to the UK economy,” she said. “With one-in-10 workers relying on the van for their job, zero emission vans are at the heart of the global economy. 

“We'll continue to work in partnership with industry to support the transition to zero emission vans by providing funding through a plug-in van grant, by reviewing regulations around weight thresholds to make it easier to switch and by accelerating the roll out of charging infrastructure.” 

She added: “Thank you for everything that you're doing to accelerate the transition to zero emission vehicles. 

“I look forward to working in partnership with you to tackle the challenges facing your industry, to hearing your insight and ideas and to working with you to achieve our shared ambitions.”