The EV market hit a bump in the road as 2022 came to a close, but will it damage the uptake of EVs as we move forward? In the medium to longer term, I doubt it, but there are short term issues in what is an immature market, as used EVs find their value, a position not helped by the high costs of used EVs, notably BEVs if there is a short-term issue.
What has impacted the EV market?
The Autumn budget
Vehicle Excise Duty or road tax as we also know it. Currently free for EVs, this will change in 2025 following the Autumn Statement on November 17th.
From April 1st 2025, all EVs will be subject to the standard road tax rate, currently £165 per year. EVs with a list price of £40,000 or more will also pay the £355 premium car tax rate. When combined, this will mean an annual charge of £520. It will also be retrospective and apply to cars first registered from April 1st 2017. On the one hand, it can be argued that this will impact EVs; it will undoubtedly take away one of the benefits, but in real terms, it is just cost-neutral versus an ICE option.
Increased used EV supply and the cost of living crisis
SMMT tells us that in Q3, the used car market fell for the second consecutive quarter, declining by 12.2%. However, used battery electric vehicles rose 44.1%, and hybrid electric vehicle sales were up 2.5. Plug-in hybrid sales, however, fell -5.8%. All good, but we must recognise that the increase was from a low base, especially for BEVs.
Into Q4 and CAP HPI data highlights that the volume of all EV types into the used wholesale market has trebled compared to 2021. The influx of used EVs with their typically higher price is having an impact on activity. From an auction days perspective, EVs average 20 days compared to 10 for ICE vehicles. It is here that we can see the cost of living impact. EV values have come under pressure and recent data suggests that the greatest month-on-month falls in vehicle values are led by EVs.
The average auction price for an EV up to 3 years old is £12K higher than a petrol car. In the 3-5 category, it is £15.3K higher. With our findandfundmycar.com data pointing to a hotspot monthly payment range of £200 - £250 PCM, EVs are proving expensive, even if, over time, the running costs are likely to be lower.
Right now, range and arguably charger availability remain consumer concerns, add to that the price premium being charged for EVs, and in the prevailing market, the increased supply is searching for more than ‘early used EV adopter’ demand.
There is a changing guard in terms of power plants, and the new car market is starting to be dominated by EVs.
According to research by EY, EV sales in the US, China and Europe will outstrip all other engines five years sooner than previously expected. More tellingly, Auto Trader data suggests that from 2026, more electric cars will be sub-five-year-old than petrol or diesel, with the volume of three-five year old stock being predominantly EV by 2030.
The reality is that EVs will dominate the used car market in a few short years because they will be the cars that dominate the new sector, and that momentum shift can only increase from here on.
Debbie McKay, Commercial Director of Motor Sales