Navigating the Turbulent Used EV Market: Strategies to Revive Demand and Achieve Decarbonization Goals

The motor finance sector is facing a critical challenge as the British Vehicle Rental & Leasing Association (BVRLA) warns that government decarbonisation targets could be jeopardised without immediate action to bolster demand for used electric vehicles (EVs). Oxford Economics forecasts a continued decline in used EV prices, potentially leading to nearly 300,000 fewer new EV registrations by 2027. This concerning trend in the used EV market requires a comprehensive response to restore confidence and drive sustained demand.

Unlocking the Potential of the Used EV Market: A Pivotal Moment for Decarbonization

Navigating the Depreciation Dilemma

The used EV market is experiencing a significant slump, with prices expected to drop by 28% between 2024 and 2030, following a 50% decline in value over the past two years. This rapid depreciation is a major concern for the vehicle leasing industry, which accounts for 75% of new EV registrations. As the depreciation of EVs drives up lease rates, the industry is under strain, facing a challenging landscape.

Bridging the Price Gap: Addressing the Affordability Barrier

The widening price gap between new and used EVs is a critical issue. New EVs are often prohibitively expensive, while used EVs are becoming increasingly affordable, but this price disparity creates a barrier to widespread adoption. The BVRLA has highlighted the need for government interventions to address this challenge, as "someone needs to pay for this price gap" and it is currently being borne by motor finance companies and new EV drivers.

Restoring Confidence in the Used EV Market

The BVRLA, in collaboration with industry partners, has launched the #happyEVafter campaign to address the crisis in the used EV market. This coalition is advocating for a range of government interventions, including an information campaign to dispel EV myths, standardised battery health certificates, and a targeted Used EV Plug-in Grant. These initiatives aim to restore confidence in the used EV market and encourage sustained demand, which is crucial for achieving the government's ambitious decarbonization targets.

Tackling the Electric Van Challenge

The electric van market is also facing challenges, with a predicted 12% decrease in used prices. This trend in the commercial vehicle segment further highlights the need for a comprehensive approach to address the broader issues in the used EV market. Addressing the depreciation and affordability concerns in the van sector will be crucial for supporting the transition to zero-emission transportation across all vehicle types.

Aligning Policy and Industry Efforts

The BVRLA's call for government interventions, such as a 50% VAT reduction on used EVs, a special 0% Benefit-in-Kind tax rate, and the inclusion of used EVs in Civil Service Salary Sacrifice schemes, underscores the need for a collaborative approach between policymakers and industry stakeholders. By aligning these efforts, the motor finance sector can work towards reviving demand and ensuring the success of the government's decarbonization goals.

Embracing Innovation and Technological Advancements

As the used EV market continues to evolve, the industry must also embrace innovative solutions and technological advancements. This may include the development of standardized battery health certificates, which can provide consumers with greater transparency and confidence in the condition of used EVs. Additionally, leveraging data-driven insights and predictive analytics can help industry players better navigate the fluctuations in the used EV market and make informed decisions.In conclusion, the motor finance sector is facing a critical challenge in the used EV market, with declining prices and the potential for a significant impact on new EV registrations. Addressing this crisis requires a multifaceted approach, involving government interventions, industry collaboration, and the adoption of innovative solutions. By working together to restore confidence and drive sustained demand, the sector can play a pivotal role in achieving the UK's decarbonization goals and paving the way for a more sustainable transportation future.