News analysis
Residual impact of EV surge
Toby Poston, Director of Corporate Affairs, BVRLA, queries the split in vehicle preferences
L
ong-term hybrid and home- based working may have blurred the lines between personal and business lives, but the two are growing apart when it comes to vehicle preferences. Buoyed by a fair tax regime and corporate ESG strategies, business contracts are dominated by the cleanest, greenest vehicles available. Meanwhile, personal deals are bearing the brunt of increasing costs and fewer incentives. The BVRLA’s latest ‘Leasing Outlook Report’ lays the split bare. It also outlines the knock-on impact on residual values and the make-up of the used vehicle parc. The strong business demand is pulling the sector forward and contributed to the BVRLA’s leasing fleet reaching a record high at the end of 2023 (1.9m vehicles). This marks a 2.4% increase year on year and is due to the continuous improvement in vehicle availability coupled with strong demand from business clients. To see that growth in the midst of price inflation, rising interest rates, and the cost-of-living challenges eroding consumer confidence is testament to the strength of the sector. Leasing firms remain optimistic. The return of consistent supply in the new car market, intensified competition from emerging players, and the imperative for manufacturers to fulfil their Zero Emission
Vehicle (ZEV) Mandate obligations, are combining to give them confidence. Pressure to meet the terms of the ZEV Mandate could prompt the revival of discounts and promotions. This would benefit leasecos and operators alike in the form of more competitive monthly rates. The other side of the coin is if manufacturers adopt a different route to compliance. Talk is growing that orders for EVs are being required to secure supply of ICE vehicles. This approach pushes the onus on the customer to find suitable use cases or fast-track their transition to electric.
For vans, the ZEV Mandate presents a much bigger challenge. Operators are contemplating the feasibility of manufacturers reaching the 2024 goal of having 10% of new van sales for zero-emission vehicles. From where we sit now, hitting that target is highly ambitious. Factors such as price, range, payload capacity, charging downtime, and recharging expenses continue to pose significant hurdles to the widespread adoption of electric LCVs.
Work is ongoing to address those hurdles in the form of the Zero Emission Van Plan. The Plan was launched this year in collaboration between the BVRLA, Logistics UK, Recharge UK, the Association of Fleet Professionals
Above: Toby Poston, director of corporate affairs, BVRLA.
(AFP), and The EV Café. Positive examples of operators to have made the switch are being collated to show others where it can be done.
Outside of the supply-side measures such as the Mandate, measures to support demand are weighted toward company cars and having a positive impact. The confirmation of benefit- in-kind rates for company cars to 2028 is breeding confidence and fuelling the switch to EVs. The ‘Leasing Outlook Report’ shows adoption of electric vehicles is surging among business contract hire (BCH) cars. With 44% of BCH registrations for battery electric with an additional 31% being plug-in hybrid in Q4 2023.
Above: The BVRLA’s latest ‘Leasing Outlook Report’ lays bare the split in vehicle buying habits between fleet and retail consumers.
12 | April 2024 |
www.businesscar.co.uk
The absence of equivalent incentives for private drivers is leaving them behind. They are facing greater challenges to justify a transition away from internal combustion engines (ICE), shown in data for Personal Contract Hire (PCH) agreements. Two-thirds of new Personal Contract Hire (PCH) contracts were for petrol cars, while only 16% were for Battery Electric Vehicles (BEVs). Average emissions of the PCH fleet are more than double that of business registrations. Where the split between business and personal contracts is stark, there is a swelling grey area in the middle. Salary sacrifice registrations are up again, 47%
year on year. It is no longer a new kid on the block. Programmes offering salary sacrifice are growing both in size and number every quarter.
Traditional BCH agreements and salary sacrifice programmes are accelerating the number of electric vehicles coming to our roads. Where they end up after that initial lease is still in the air. Uncertainty over performance and consumer interest, in line with vehicle volumes increasing, creates volatile used values.
Just as demand for EVs varies between different customer bases, the sector’s prospects are split too. Overall numbers are up and good growth is being seen in the largest parts of the leasing sector. The success to date of the corporate BEV market is shining a spotlight on the areas that are yet to gather steam. For the ZEV Mandate targets to be hit, the issues stifling the retail markets across both new and used EVs need to be addressed. The annual targets rise sharply in the years ahead, fleet and corporate registrations can’t complete the transition alone. Discounts on new EVs will help but only cover half of the journey. For EV affordability to add up for everyone, healthy and stable used values are critical. Vehicle values on both the way in and out are what lease rates are built on. They must be considered in tandem. Only then can consumer demand be stimulated to meet steady supply.
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