The used electric vehicle market could hold the key to wider consumer adoption

In this section, we provide context on the global electric vehicle revolution, with a particular focus on the UK market, and share the latest dealer and consumer sentiment.

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2020 was set to be the year of the environment, but Covid-19 quickly altered governments' priorities around the world when it took hold in the spring. Fast-forward a year, and on the back of a monumental vaccine rollout effort, people and governments have begun to look towards the future optimistically, and the topics of climate, air pollution, and sustainability are at the centre of global discussion once more.

The conversation was recently thrust back into the spotlight when Joe Biden recommitted the US to The Paris Agreement, a clear sign of his presidency's promise to tackle climate change. Indeed, since his inauguration in January, climate change has been central to the Biden administration and we have immediately seen more commitment to an electric vehicle (EV) future coming from the US. The expected charging infrastructure increase in the coming months and years is a clear sign of this.

The automotive sector is a key part of national climate strategies all over the world. Ambitious carbon emission reduction targets have been set by the like of China, the EU, and the UK, and while much is being done in terms of carbon offsetting programmes and clean energy, these targets won't be met without rapid consumer adoption of battery electric vehicles (BEVs) and plug-in hybrids (PHEVs).

The EV landscape in the UK and EU

In December 2020, the European Commission launched its Sustainable and Smart Mobility Strategy, a set of initiatives that lay the foundations to allow the EU to reduce the carbon footprint of its transport sector by 90 percent by 2050. Central to the strategy is a target of at least 30 million zero-emission cars on European roads by 2030.

It is estimated that to support this number of vehicles, 3 million charging points (and 1,000 hydrogen refuelling stations) are needed – currently, the EU has roughly 200,000, a clear sign that there is a lot to be done before their ambitious targets can be met.

To help meet this demand, battery production is being ramped up drastically across the region. Many European and UK manufacturers no longer want to rely on overseas battery makers, so supply chains are being built from scratch with investment expected to be triple that of China. BloombergNEF estimates the continent could see its share of global battery production rise to 31% by 2030 from just 7% last year. In the UK a new £30 million investment fund for EV and hydrogen technology was recently announced to help launch studies into the creation of a UK-lithium supply chain, improvements in battery safety and the re-use of car batteries.

Perhaps the most ambitious EV target has come from the UK, which in November 2020 announced the ban of all new petrol and diesel cars from 2030. Rather than announce a target number of zero-emission vehicles on UK roads, the UK Government's strategy goes a step further by simply banning new fossil-fuelled vehicles. New hybrid vehicles will also be banned from 2035.

Similar to the EU, the UK faces many questions about how it can meet its target. While consumer adoption of EVs is on the rise – the market share for new BEVs and PHEVs was its best ever in 2020 at 10.7% – it is felt that more support is needed still to increase the pace of consumer adoption.

It does not help that the Government recently cut its plug-in car grant (PiCG), an electric vehicle purchase incentive scheme for motorists, leaving manufacturers and car buyers questioning its strategy to shift mobility towards an electric future. Just days later, the UK's battery supply chain investment was announced. While there is a need to kickstart battery production in the UK to protect the ongoing manufacturing of cars in the country, this mixed messaging could confuse consumers and cause adoption to plateau.

More questions remain about the UK's plans, particularly around infrastructure. The number of charging points needs to increase rapidly, so should the UK adopt a similar Mobility Strategy to the EU? Charging points are being installed quickly – the latest ZapMap data shows nearly 40,000 in total, and nearly 700 in the last month – but currently 1 in 10 charging points in the UK don't work compared to 1 in 100 in the Netherlands. There is also the fact that 1 in 3 UK motorists don’t have a dedicated parking space, making charging even harder. It's clear that this is not as simple as building the infrastructure, but also ensuring it works, has regular maintenance, and easily fits into people's daily lives.

Dealer sentiment towards EVs

Dealers are cautious about the chances of the UK meeting its 2030 target. A recent Cox Automotive dealer sentiment survey revealed that just one-quarter (26%) of dealers think the target is achievable – in other words, three-quarters (74%) lack confidence in the UK's ability to meet its target. Furthermore, 79% believe that the UK's EU exit deal has not increased the likelihood of the 2030 target being met.

Those that are optimistic about the Government's chances believe that manufacturers will meet the 2030 target, but only just. Manufacturers will need to balance the phasing out of fossil-fuelled vehicles at the same time, so it is difficult to predict nine years away. However, we should have a clear idea by the middle of the decade if the UK is on track. While the UK's target is certainly the most ambitious so far, both the UK and Europe are on similar EV journeys which will only help manufacturers in both territories.

Consumer opinion on the UK's EV strategy

A Regit consumer survey carried out for this report has revealed mixed opinions on the UK Government's current EV strategy. When asked whether they agree with the Government's 2030 ban on fossil-fuelled vehicles, respondents were equally split for and against the plan.

But despite mixed opinions on the strategy, the majority of consumers believe they will eventually switch to an EV, with one-quarter (24%) saying they will do so by 2025 and a further 45% by 2030. Interestingly, nearly one-third (30%) say they will never switch to an EV, meaning we could see increased demand in the used petrol and diesel markets after the ban (or a mellowing of die-hard attitudes?). Mobility as a Service (MaaS) platforms and improved public transport might also lessen the need to own a vehicle for some in the future, but it is impossible to predict the impact those will have at this stage.

The biggest barriers to EV adoption are price (79%) and charging infrastructure (70%), while range anxiety appears to have eased slightly coming in at third (66%).

Over half (54%) of respondents said that the current incentives to switch to an EV are not good enough, so the recent plug-in car grant cut will only increase concerns. A massive 92% of respondents also felt that the UK's charging infrastructure is not enough to meet current demand, let alone future demand where 69% felt the charging network would not be ready for 2030.

It is clear that while many consumers believe the 2030 EV target is right, they are generally not confident in the UK's ability to meet it. The Government needs to provide more incentives for consumers to adopt EV, even more investment into charging infrastructure, and clearer communication if they are to succeed.

"Our research shows there is an appetite amongst UK motorists to make the switch, if not before 2025, then at least prior to 2030. It's clear that three major things need to happen in order to speed that transition up. The price of EVs needs to generally reduce to better compete with petrol and diesel alternatives, there are already signs that this is happening although the removal of the EV grant for cars above £35,000 may prove to be harmful.

"There is no doubt that charging infrastructure needs to be improved and we agree with the vast majority of UK motorists in that the number of available charging points isn't good enough. The Government needs to take responsibility for this to help bring down barriers to sale. And, finally, the technology will need to continually improve so range anxiety disappears, and charge times become quicker - I have no doubt that this will happen quickly over the coming years.

"As a result, we're in a strong position to ensure there is a high adoption of electric vehicles over the coming years and this is largely down to excitement created by the automotive sector with regards to new models and technologies, but we certainly need the Government to play its part in delivering infrastructure and education so the dream of mass adoption of EVs becomes a reality."

Chris Green, Regit CCO and founder

The used EV market

The vast majority of the focus has been on the new EV market, but we believe that a rapidly maturing used EV market could hold the key to increasing consumer adoption of EVs and alternative-fuelled vehicles while the new car market continues to be shrouded in mixed messaging.

The wholesale market for EVs is still emerging, but volumes and appetite are rising as they become higher on the consumer choice list. Some earlier EV models are increasingly reaching the used market, where they are retaining high residual values, offering strong profit margins for dealers, and a more affordable, straightforward EV option for consumers.

Even if growth stalls in the new market, the wholesale market for EVs will continue to mature. With newer generation EVs being traded on the used market, the technology is becoming available to buyers otherwise turned off by the expensive new vehicle list prices, high monthly finance payments, and mixed messaging surrounding brand-new models.

However, knowledge and expertise of BEVs and PHEVs in the used car sector is limited, so more needs to be done in this area to increase consumer confidence. Consumers rightfully have concerns around battery performance on used EVs, but technology is improving at a rapid pace and the current average battery life of 8 years is forecast to be 15 years by 2035. A used EV is fast becoming a very attractive prospect for many people, but without clear messaging and education, the sector will not grow fast enough.

The UK needs to make its position on EV crystal clear for consumers and lean on the used market to help give motorists their first EV experiences, driving wider adoption across the country, which, in time, will undoubtedly be reflected in an improved position for new EV sales as the country continues to build its EV infrastructure. Meanwhile, retailers can help by specifically seeking out EV stock and ensuring a reliable supply to consumers, promoting continuous EV uptake as well as reaping rewards commercially.