Plummeting used EV prices threaten to brake electric transition

Alarm bells are ringing on both sides of the Atlantic over the free fall of used EV prices. Studies indicate these are up to 40% lower than a comparable gasoline car. Facing surging pressure on their profits, some leasing companies are threatening to exit EV adoption and return to the drivelines that keep their business profitable.

In Europe, the low resale values of electric vehicles (EVs) have prompted leasing companies to double prices over the last three years, with some warning to exit the market if the shift to electric cars isn’t leveled on the second-hand car market.

This warning comes as reduced subsidies for new EVs are also causing a slowdown in Europe’s adoption of new battery models while the European Commission pushes for greater EV adoption.

‘Who will take the risk?’

Flagging the pitfall for the leasing sector is Tim Albertsen, CEO of Ayvens, Europe’s second-largest leasing firm in the hands of banking group Société Générale: “If we are forced to go all-electric too soon, my shareholders might decide the risk is too high, and we would leave the market.” He adds, “Without us, who will take on that risk?”

His last phrase is certainly significant, as many buyers (in Europe, the share of leased EVs is as high as 80%) rely on leasing firms for their electric car purchases to offset the risk of used value.

The second-hand car market is dominated by private customers, who turn their backs on electric vehicles due to battery anxiety. They fear elevated costs after the warranty has expired.

Looking at the numbers, sales of used EVs in Europe are rising. In its latest report, market watcher Indicata reported an increase in sales for the first half year, from 4% to a little over 5%. Narrowing it down to EVs up to two years old, the number rises to 10%.

But this uptick is due to the bargain prices. The data from their survey show that the overall prices for electric cars dropped by more than 60%. All drivelines are sliding, but compared to petrol cars, the divide is immense: the latter keep their retail prices 40% better. The good news is that potential buyers looking for a cheap EV are in for a good deal. The companies relying on the remarketing department for their profits are facing pressure. The latest report from rental company Sixt (H1 2024)  shows profit has been halved over the used car prices.

80% of European EVs are leased

Leasing companies are central to the European auto market, with 60% of all new cars being leased, a figure that rises to 80% for EVs, according to data from Transport & Environment (T&E).

However, the plunging resale values of EVs have created significant financial strain. Second-hand electric car prices have been downward since October 2022, driven by factors like Tesla’s price cuts, concerns about charging infrastructure, and the influx of affordable Chinese EVs.

Furthermore, the trend is global. In the United States, the same evolution is grasping the market as used prices for EVs are dropping by 20% each year, according to data from Edmunds. The overall second-hand car market in the US only lost 6%.

Leasing firms like Ayvens and Arval have already raised lease prices to offset the risks while decreasing leasing prices for fossil-fuel cars. But their worrying reaction makes clear that a battery passport, ongoing incentives, and a mature market remain pivotal to making electric mobility a viable option. The road is cobbly, even for silent drivelines.