How a crashing second-hand market slammed the brakes on EVs – Watts Up With That?

From NOT A LOT OF PEOPLE KNOW THAT

By Paul Homewood

h/t Ian Magness

“The moment for electric cars is now,” proclaimed the website of rental start-up Onto.

“Once you get behind the steering wheel and feel what they’re capable of, we know there’s no going back.”

The Warwick-based company matched words with actions, amassing one of Britain’s biggest EV-only fleets with 7,000 cars overall.

Instead of leasing or selling the vehicles, customers were offered “hassle-free subscriptions” that included a car, insurance, maintenance and even charging from £359 a month.

Yet today customers are greeted with another message, explaining that Onto Holdings Limited was placed into administration in September.

According to accounts for the first seven months of 2023, Onto was forced to write down the value of its EV fleet by £21m – more than its total revenues for the same period.

Administrators for Onto blamed the company’s collapse on a “steep fall” in the value of electric cars, rising interest rates and the impact of the cost-of-living crisis on drivers’ disposable income. It was unable to secure additional funding from its shareholders as a result, administrators Teneo added.

Onto is far from alone in having suffered these challenges.

Second-hand EV prices plunged across the board last year, as manufacturers including Tesla slashed prices and a wave of ex-lease and rental vehicles flooded the market.

As experts have pointed out, this has long been predicted and it is generally good for consumers, the vast majority of whom only buy used cars.

But the trend has also dealt a blow to others – namely, companies and early adopters who paid higher prices and will now recoup less of their investment. 

For the moment, used EV prices are stabilising again as the bargains available stoke strong demand, says Marc Palmer, head of insights at Auto Trader.

But with competition in the new car market intensifying, there are fears Chinese brands will seek to undercut their European rivals by slashing prices further – causing further ructions for second-hand sellers.

“That is the big question – ‘will the Chinese come in more cheaply?’”, says Palmer.

“We think they could, because they sell their cars more cheaply in China than they do in Europe. So they’ve got the ability to start more aggressive pricing.

“And if new cars become more affordable, then prices of used cars will probably need to come down a bit to make sure they still provide value for consumers.”

That could make more grim reading for existing EV owners, who have already been clobbered in the past year.

Based on figures for December, Auto Trader found that an EV costing £50,000 is currently expected to lose about £24,000 of its value after just three years on the road, significantly more than the typical £17,000 reduction seen with petrol cars.

Some of the worst-hit cars include the Renault ZOE, which has shed 56pc of its value on average and now sells for £7,700, according to separate data from Motorway.co.uk. Meanwhile, the Volkswagen ID3 fell by 41pc and the Nissan Leaf lost 40pc.

Much of the turmoil last year was a result of large numbers of cars being offloaded at the same time by fleet owners such car rental firms and leasing companies. These businesses often bulk-buy vehicles at a discount, hold them for up to two years and then make a profit by selling them on.

Previously supply chain problems had kept the EV market relatively tight, helping to keep prices high. But last year the influx of supply from fleet sellers was not matched by demand, sending prices plummeting at “unsustainable” levels, Auto Trader found.

This is what fatally wounded Onto, which blamed its massive impairment on “the market downturn in the residual value of EVs”.

Eventually, lower prices triggered record demand for used EVs as drivers scrambled to snap up huge bargains. For the full year, used EV car sales rocketed 91pc higher to 118,973, according to the Society of Motor Manufacturers and Traders (SMMT).

However, with more than 800,000 EVs registered between 2020 and 2023, Auto Trader has warned that the rollercoaster for prices may not yet be over.

Some of this volatility is also down to other factors as well, such as the small (but growing) size of the used EV market. According to the SMMT, EV sales only represent 1.6pc of the used car total.

But Alex Buttle, co-founder of Motorway, says second-hand values are being dented by adjacent issues as well, such as sky-high insurance premiums and the Government’s decision to delay a ban on the sale of new petrol cars from 2030 to 2035.

“If the demand isn’t there, prices naturally come down,” he adds.

Richard Peberdy, UK head of automotive at KPMG, says the resulting hit to prices has presented upsides for consumers but is harder to swallow for manufacturers and dealers. He adds this presents “a significant challenge when it comes to reassuring consumers about the onward value of new EVs”.

https://www.telegraph.co.uk/business/2024/02/16/how-crashing-second-hand-market-slammed-brakes-on-evs/

This seems to be another desperate attempt by the motoring press to puff up the EV industry, while glossing over the problems.

Mr Peberdy does not appear to understand the laws of supply and demand! “Presents upsides”? The reason why second hand prices are so low is that there is very little demand for them. So why is this an upside for a buyer for whom an EV offers so little value?

And the market is going to get worse, much worse. Note these statements in the article:

  • used EV car sales rocketed 91pc higher to 118,973
  • more than 800,000 EVs registered between 2020 and 2023
  • EV sales only represent 1.6pc of the used car total.

Then add in the fact that EV registrations totalled 267,000 in 2022 and 314,000 last year. So this year we may well see more than 200,000 coming on to the second hand market, and more still next year.

There is no reason why demand for second hand EVs will increase from last year’s level, and if it does not prices really will collapse.

While this may benefit buyers, it will be absolutely disastrous for those who have bought new, not to mention fleet and leasing companies. As the article suggests, many may be forced to keep their EVs much longer than they had planned, as they simply won’t be able to afford to buy new again.

There is one further thought. Second hand buyers tend to be less well off; as such they often won’t have off street parking. So what use is an EV to them, however low the price?

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