In his latest 'guest opinion' for AM Volkswagen Financial Services UK chief executive Mike Todd suggests that the motor industry needs to put more focus on making used electric vehicles attractive to drive EV adoption in the mass market.
The UK’s automotive industry is navigating its biggest revolution in more than 100 years as the shift to green transport hurtles towards mainstream adoption.
The market share of electric vehicles is accelerating at an unprecedented rate, demand for electric cars has never been higher and the public charging network is continuing to expand and improve each year.
However, if we are to achieve mainstream adoption of electric cars in this country – and hit the Government’s decarbonisation targets – we need to redirect more attention to the development of the Used EV market.
Our mission is to aid affordability and a mass-market transition to BEVs, but we risk dramatically slowing the momentum that we’ve seen in recent years if we lose sight of this goal.
As we know, the sale of new petrol and diesel cars will be banned in the UK from 2030 and people are understandably keen to make the switch to electric even though new EVs are unaffordable for many drivers.
This conundrum has a few knock-on effects that need addressing. Firstly, lots of would-be EV drivers tend to consider buying a plug-in hybrid (PHEV) vehicle as a means of reducing their carbon footprint.
These vehicles are often a more affordable alternative to BEVs and give consumers greater choice, but sales of new PHEVs will be banned from 2035. Whilst the rapid development of electric vehicle technology is incredibly positive, it is also keeping new EV prices high.
The Government’s decision to axe the plug-in car grant scheme to new orders in June was a significant blow, and is expected to heavily disincentivise EV adoption across the UK.
Similarly, since April 2022, eligibility for the OZEV home wallbox charger grant has been sharply limited and is no longer available to homeowners in single-unit properties.
Affordability is the number one barrier to EV adoption and with the market share of battery electric vehicles not yet big enough to warrant a widespread price drop, drivers considering making the switch to sustainable travel are left with few options.
So, with fewer financial incentives on the table, how do we get more people behind the wheel of an EV when the upfront costs of a diesel or petrol car may be cheaper?
A solution we’re working on at Volkswagen Financial Services UK is focused on providing entry-level electric cars for the mass market and we feel that targeting used EVs is a viable approach.
Our teams are currently working on a Used EV finance offer that could potentially launch this autumn. We plan for this to be brought in for the ID. range and is likely to cover charging and servicing. Customer research has told us that the top three priorities for a used offer are battery warranty, maintenance and charging.
Customers are telling us that financial support in switching to an electric vehicle is what they want, so that’s what we’re working towards. We always strive to put customers at the heart of everything we do.
This prospective offer is hugely important because, with an anticipated influx of quality used EVs, for the first time we will be able to test mass market EV offerings and understand what the nation needs to transition to electric.
I also believe it’s especially important to turn our attention to the Used EV market because we’re seeing that battery lives are improving all the time – as are maintenance standards and technician capabilities.
As I’ve already said, EV technology is developing so fast that batteries in newer models are suffering from minimal performance degradation, which is something that will only encourage more drivers to consider a used electric car.
And we must capitalise on current momentum. The latest figures from the SMMT show that Q1 was a record first quarter for used battery electric vehicles (BEVs), with transactions more than doubling from 6,625 in the first three months of 2021 to 14,586 in the first quarter of 2022, a rise of 120.2%.
Research from Volkswagen Financial Services UK’s data insights team recently found that almost half of the British public (49%)* are open to the idea of buying a Used EV – so we know the demand exists.
As an industry we must now come together to reassure motorists that switching to a used EV is a good long-term investment; particularly when viewed through the lens of hedging against future price rises in fuel and tax hikes on ICE cars.
In summary, the mindset and mood of the nation is shifting: many believe the future belongs to electric and we must now facilitate this sea-change by making Used EVs more affordable and accessible.