The world’s top sellers of electric vehicles (EV), Elon Musk’s Tesla and Chinese rival BYD, reported sharp falls in sales in the first financial quarter of this year, adding to “concerns over the slowing shifts towards EVs”. There are a range of issues here, but consumers seem to be getting more rather than less hesitant about EVs, particularly where government subsidies and tax incentives have been withdrawn or reduced, as in the UK.
Anxiety about the availability of charging stations and bad publicity about firms claiming dodgy maximum range numbers have also contributed to those outcomes. Testing by Consumer Reports (CR), an independent, nonprofit member organization noted for its independent product studies found that of the 22 EVs they examined, “nearly half fell short of their EPA-estimated ranges when driven at highway speeds”, sometimes by more than 50 miles.
Closer to home, my daughter and son-in-law are driving a 16 year old Ford Fiesta (which used to be my wife’s) and it is getting to the point where the annual service to get it through the MOT costs more than the residual value of the car. So time for a new purchase? But do they go for an EV, that is the question. Most of their journeys are in and around Cambridge, with the occasional trip to see us (70 miles) or other friends that sort of distance away. So range anxiety should not be too big an issue, although they need a bit more space in the vehicle now with a baby, so it won’t be a tiny little town car.
But what about residual values? Consumer sentiment is turning away from EVs in the UK at least and the industry is calling for more government subsidies. In March, pure EVs lost market share to petrol and hybrid cars. Amongst private buyers, the performance of EVs is even weaker and it is only the corporate fleet market that is sustaining EVs really because of tax incentives. So second hand values for EVs fell dramatically between late 2022 and late 2023, although it looks like the decline may have halted in the most recent months.
This article looked at some of the biggest declines in value. A one-year old Seat Mii Electric with 10,000 miles on the clock was worth £18,650 at the beginning of 2023. The same spec by the end of the year was available for £10,150! Thats a fall of over 45%. Many other models lost 30% plus over the year too. Some of this may be caused by newer models coming on the market which make the older vehicles look less attractive because of factors such as range, but it is a pretty dramatic market movement. Of course, cheaper used cars could be good news for daughter’s finances, as they would almost certainly buy a second hand EV.
There are also issues around the availability of rare metals and minerals that are used in the manufacture of EVs, often as key components of the batteries. That has implications for a number of other “purpose-related” issues, including human rights amongst mining workers, and deforestation caused by natural landscapes being destroyed for new mines. We have even seen problems for road and infrastructure designers. Because the average EV is bigger and heavier than the average petrol car, roads are wearing out more quickly and parking spaces or entire multi-story car parks just aren’t big enough for the EV monsters that are now all too prevalent. These are very complex and tangled issues.
In the UK, the government has set targets for EV sales with manufacturers due to pay fines if they don’t hit a certain share of their sales in that format. So that might lead to some price reductions in the coming years on new EVs – but that will hit profits, or might even make some firms question if they want to operate in the UK! Meanwhile, the Chinese EV firms will take a greater share of our market, which is concerning given stories of how data from the vehicles could end up in the hands of a not totally friendly government.
It all seems to be another example of a lack of strategic and joined-up thinking, which is something this government is guilty of in many different areas. What exactly are the “national interest goals” in terms of EVs, relating to national security, industrial strategy and so on? Once you are clear on those, the Government can use levers such as taxation, legislation and persuasion to try and achieve them. But we don’t even seem to have much clue what we would like to happen here, or even if EVs really are overall a good thing.
Meanwhile, fleet buyers and others in procurement who have an interest in EVs need to keep a very close eye on what is going on here from a legislative, market and consumer preference standpoint.