INNOVATIVE solutions needed to protect residual values of electric vehicles from ‘dramatic falls’, reports Glass’s managing director, Andy Carroll.THE value of the typical EV at five years old could be little more than 10% of the list price.
THE NEW breed of electric vehicles (EVs) soon to be launched in the UK will have residual values well below those of rival petrol and diesel models – unless manufacturers properly address customer concerns regarding battery life and performance.
We’re saying this now since we’ve just conducted a detailed analysis of the factors that will affect depreciation for EVs: battery ownership; warranty details; supply and anticipated patterns of demand. This new forecasting methodology is being used by manufacturers to assist in their launch planning and business modelling across Europe.
After one year of ownership we would expect EV residual values to be above the segment average expressed in terms of pound values. But, if the battery is owned rather than leased, and lacks the appropriate extended warranty, the value of the typical EV will then fall dramatically until the vehicle is five years old. At this point the car will have a trade value little more than 10% of the list price.
The cost of battery replacement
This alarming rate of depreciation is a function of customer recognition that the typical EV battery will have a useful life of up to eight years and will cost some L8,000 to replace.
Potential used EV buyers fear this cost, but the key issue is that buyers will assume that their specific battery will need replacing in the near future regardless of the manufacturers’ predictions of battery life. Our RV predictions are therefore based on this worst-case scenario – which is exactly how we believe that prospective customers would perceive the costs of owning an EV.
However, manufacturers can address this problem. Take, for example, a family hatchback type car. If the anticipated L8,000 cost of the battery in such a car were taken off the list price, and recovered instead through a long-term L100-per-month battery lease scheme, the retained value in monetary terms would make it one of the best performing used cars in its segment, rather than one of the worst.
Through such an arrangement battery life anxiety would be dispelled by ensuring that a guarantee of minimum battery performance is a feature of the lease agreement.
The dealer network could play a key role in the management of battery upgrading and replacement on behalf of the lease providers.
The EV package lease option
With the EV market is in its infancy, manufacturers should also consider leasing the car and battery together as a single package. This would bring on board early adopters and win over a sceptical buying public.
I believe this kind of lease proposition should be in place until there is wider market experience and acceptance of EV products. After all, we have over 100 years’ experience of owning vehicles with internal combustion engines. Until the facts prove the manufacturers’ claims regarding battery life and performance in real world conditions, they need to put their money where their mouth is, and take all risk and uncertainty away from the end consumer.
