A major challenge to the adoption of EVs has to do with their resale values once a specific vehicle reaches eight to 10 years, in huge part linked to question marks pertaining to the longevity of batteries.
UK based vehicle auctioneers Shoreham Vehicle Auctions (SVA) sent out a release putting forward the company’s views on the matter. These views will help many readers not familiar with the automotive business have a glimpse on the issue.
SVA said in the UK, sales of new electric cars are up 246 percent compared to this time last year, helped by improved charging infrastructure, the continued offer of £5,000 government contributions and a noted change in the public’s approach to range anxiety and environmental protection.
SVA also said large corporates, particularly the energy providers, are now looking at embracing EVs as they provide an immediate answer to reducing running costs and emissions on a section of their fleet. Plus, if the popularity of electric vehicles continues to grow, it will provide a solution to the age-old problem of utilizing excess night time electricity in power stations as people will charge their electric vehicles overnight to take advantage of cheaper tariffs.
However, added SVA, despite the growing feel-good factor in the new market, a lack of information released by manufacturers about electric vehicles in the used market is having an effect on resale values and dealers’ confidence in stocking used EVs.
SVA explained in the UK, early adopters selling their cars are experiencing low residual values when selling or trading in their electric cars. Leasing companies who rely on residual value predictions to help them calculate a monthly contract lease rate are writing down EVs to zero at the end of a three or four year contract because of the second hand uncertainties.
The main reason for this low resale value and dealer anxiety, stated SVA, is lack of information released by manufacturers about the cost of maintaining or replacing batteries when a car hits the market at between four and 10 years of age. Currently buying new replacement batteries could cost £8,000- £10,000, a figure far in excess of the likely value of a used electric car.
With no specific short term battery loans or warranties available and manufacturers citing only “the battery will last the life of the car”, dealers are concerned they may injure relationships and reputations with customers should something go wrong, added SVA. Why would they sell a four-year-old EV to a driver for £8,000 knowing they may have to spend another £8,000 on new batteries in the next few years?
Although the EV’s build quality isn’t in question, like any battery, over time their charge storage capacity lessens through erratic use and fast charging, which results in a shorter possible range for cars. SVA believes manufacturers must launch a flexible leasing and warranty program for when batteries reach the end of their optimal life; offering a program where batteries can be replaced and leased for £40-100 a month would immediately give drivers peace of mind and boost new and used sales. Reconditioned batteries in line with the demand for older and cheaper used EVs should also be a consideration. However these won’t be available until market growth creates a demand for them.
“Residual Values (RV) are based on market confidence and by introducing flexible and affordable battery lease schemes in line with the price bracket of the vehicle on the forecourt, we believe manufacturers will protect residual values and gain the final thread of confidence to make EVs a long-term success in this country,” said Alex Wright, managing director of Shoreham Vehicle Auctions. “Manufacturers must remember the importance of sustaining strong older RVs , because RVs are built from the ground. By looking after your 10 year RVs they will look after your eight to six and four to two. Shoreham Vehicle Auctions witness performances of used vehicles under the hammer on a daily bases and as such knows what buttons to press in order to keep RVs high and maintain a strong demand for specific vehicles.
The new electric car market is growing, but manufacturers must look to when these cars move into the second hand market and if they look after the needs of the used car buyer of seven to 10 year old models, then the longer term needs of buyers of three to five year old cars will look after themselves. Ensuring used buyers are given enough information and support will ensure the market continues to grow. The benefits of electric vehicles are plentiful and with customer perceptions changing for the good, manufacturers need to act quickly to ensure this level of positivity continues.”