Great progress has been made in the automotive sector’s journey to net-zero, and electric vehicles (EVs) are the headline-grabber in this quest. A booming second-hand EV market is on the horizon but there’s work to do before the industry is ready to take advantage of the opportunities it will bring.
The looming ban in some markets on the sale of new gasoline and diesel cars is motivating more drivers to “go green”. EV production in the UK doubled between May last year and this year, and the region saw a 92% increase in 2021 EV registrations. But for many drivers, new electric models are simply too expensive.
Unsurprisingly, in light of the ongoing cost of living crisis, interest in more affordable second-hand options is on the rise. A quick check of Autotrader’s listings reveals that today’s demand for used EVs far outweighs supply. But this could be about to change. With an increase in new EVs being manufactured, many more used ones will hit the market. Ongoing investment into “e-fleets” will soon be trickling into second-hand supply too.
To prepare for a new era of drivers, there are some hurdles the automotive industry must overcome.
The switch to electric is significant, and drivers need to re-evaluate how they use their car on a daily basis
Although consumer enthusiasm is there for EVs, many may not be aware of what to expect when “going green”. The switch to electric is significant, and drivers need to re-evaluate how they use their car on a daily basis. Will a full charge (as opposed to a full tank) get them from A to B in a single journey? Are there charging points (as opposed to gas stations) en route? Will weather conditions impact their EV’s performance?
When it comes to second-hand models, additional questions might also arise when it comes to the vehicle’s longevity. Batteries in older EVs cause some concern over the possibility that their performance will diminish over time.
Batteries also present a new element to car finance where, in some circumstances, customers can choose to make payments on the entire cost of the car, or to lease the battery separately. This option gives piece of mind to the customer concerned about long-term battery life but can make financing the vehicle more problematic. For the dealer, it could help keep down the price of the vehicle.
Although the volume of second-hand EVs being financed today remains low, it’s important for lenders and dealers to ensure they are developing the right products now for when the market takes off.
The government also has a role to play in setting up the used EV market for success. To meet the 2030 ICE phaseout deadline in the UK, sufficient infrastructure must be in place to support an “electric revolution”.
With range anxiety a major barrier to EV adoption, charging points are the obvious first step. Research shows that the UK’s charging network is not on track to meet the number of EVs predicted to be on the roads in the coming years. The good news is that investment is well underway, with the government this year announcing a £1.6bn investment into 300,000 charging points that will be available before the decade is out.
A more neglected area, however, is EV skills. With only 6.5% of automotive workers qualified to service EVs currently, more training, upskilling and financial support will be needed for mechanics if we are to maintain more second-hand EVs on our roads.
A second-hand EV market is an exciting prospect for the industry, but all stakeholders within the sector have an important part to play in making it work. Let’s act now and not risk playing catch up when the time comes.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Joanne Robinson is Director of Lenders at Zuto
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