Fuel Type: electric-vehicle-bev

EV registrations in Europe continue to surge in third quarter

Official figures show that the transition to electrically-chargeable vehicles (EVs) is picking up speed as consumers in the European Union continue to opt for more environmentally-friendly cars.

With governments across the bloc having to meet strict CO2 emissions targets, carmakers and drivers have benefitted from incentives and subsidies for electric cars. While EV registrations surged in the third quarter of the year, fossil-fuel cars saw a clear slump.

Source: ACEA

The European Automobile Manufacturers’ Association (ACEA) found that the market share for EVs continued to surge in the three-month period. In the quarter, battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs) accounted for 9.8% and 9.1%, respectively. This means that across the EU, EVs made up almost 19% of all new-car registrations.

The increase could be seen in Europe’s major automotive markets as Germany, France, Italy and Spain all reported rising demand for BEVs. Across the EU, registrations of BEVs soared nearly 57% year-on-year to more than 212,000 units in the third quarter. ACEA said this was ‘despite the overall decline in registrations of new cars over the three-month period, with growth being boosted by BEV incentives in various markets.’

PHEV models also saw a rise in registrations, jumping almost 43% to more than 197,000 units. Demand was particularly strong in Italy and Spain.

Picking up pace

Carmakers in Europe have stepped up the pace to manufacture more EV battery plants to meet the rising demand for electric cars. With the European Commission planning an effective ban on internal-combustion engine (ICE) vehicles from 2035, OEMs need to adapt quickly to the fast-moving transition to EVs.

A recent flurry of announcements makes clear that manufacturers are keen to build more factories and grow their electrification efforts. For example, Ford plans to invest £230 million (€272 million) in its British Halewood site, where it intends to build electric power units for the brand’s future BEVs.

While ICE vehicles will not disappear from the roads in 2035, they are becoming less attractive to consumers. ‘Conventional petrol and diesel cars continued to lose ground, almost completely absorbing the impact of the overall decline in car registrations of the last three months,’ ACEA said.

From July to September, registrations of petrol cars – which remain the biggest sellers and accounted for almost 40% of the new-car market – shrank by 35% to roughly 855,000 units. Overall, their share dropped from almost 48% in the third quarter of 2020 to below 40% this year.

Diesel cars fared worse. Registrations of new diesel cars more than halved across the EU, falling from nearly 770,000 units last year to around 380,000 in the third quarter of 2021. Diesels accounted for less than 18% of the market – less than hybrid electric vehicles (HEVs), which captured more than a 20% share.

The social divide – who can afford a BEV?

Is there a risk that regulation and electric mobility will result in only the relatively wealthy being able to afford electric vehicles? Dr Christof Engelskirchen, chief economist at Autovista Group, explores who will be able to afford a BEV and how governments can address emerging inequalities.

Capitalism and inequality are evident where there is economic success in the world’s most powerful nations. What is more, COVID-19 has widened the wealth gap. Societies would struggle to stimulate investments without the outlook to secure substantial profits. Those businesses that compete for the best workers are prepared to pay higher wages for better, more skilled, more productive employees. Democratically-elected governments are often tasked to moderate these inequalities. Typical areas for government intervention are in health care, regulation of monopoly power, access to education, and taxes.  

It is clear that the COVID-19 pandemic has further widened the wealth gap. According to the Global Wealth Report from Credit Suisse, the number of millionaires globally rose by 5.2 million to over 56 million in 2020. One driver has been the rebound in property prices and the stock market, following the continued loose monetary policy of many central banks. Overall, the strategy seems to have paid off so far: economies have rebounded.

Regulation and fiscal policy, alongside governments trying to meet climate change targets, are driving markets towards electric mobility, not a technological superiority of the powertrain. Battery-electric vehicles (BEVs) are heavier, have lower ranges and are currently more expensive to produce. Governments, and the societies that elect them, have set their hearts and minds on carbon neutrality. Some governments are adopting powerful industrial policies to combat climate change, which will benefit society. So far, so good, but this type of regulation and fiscal policy is contributing to a greater social divide.

‘Green’ incentives target new vehicles

Government incentives are largely targeted towards new-car buyers, who usually belong to the more affluent part of a society. In many countries, these incentives have made the total cost of ownership (TCO) profile of the battery-electric vehicle (BEV) and even the plug-in hybrid electric vehicle (PHEV) advantageous compared with an internal-combustion engine (ICE) equivalent. The wealthier part of a society also benefits from incentives to install charging infrastructure at home, which de facto requires them to have a home with suitable parking access to be able to charge an EV. This excludes those living in flats and those with houses but no driveway or allocated parking outside the property.  For some, these requirements can trigger investments in terms of groundwork, but they can increase the value of a property.

The European Green Deal and government incentives have also reduced the supply of used ICE vehicles hitting the market, which in turn has resulted in rising prices. Selling a used car has become lucrative. Buying one has become very expensive. Used-car prices in the UK have risen by 19% on average since February 2019 (see table below). These days, used-car buyers are not only challenged by the ongoing supply-chain issues, but also by the regulation-driven drop in ICE vehicle supply.

Many markets are speeding up the transition of energy production to carbon-neutrality. This has resulted in rising costs for electricity. In Germany, the price per kWh, including taxes, was 30 cents in 2020 and around 19 cents in France. Bulgaria is at 10 cents. One reason for this is the prevalent energy mix.

If we take the argument one step further, many eastern European countries struggle with carbon-neutral energy production, charging infrastructure and provision of much lower or non-financial incentives to switch to BEVs. All of this washes through to lower demand for BEVs. Eastern Europe will depend on the ICE much longer. With ICE vehicle supply falling off a cliff, eventual spikes in prices for used ICE vehicles will be painful to absorb for households that are dependent on individual mobility solutions in the form of a used vehicle. Already today, used-car prices have risen by between 12% and 15% for ICE vehicles in Poland (see table).

Price-index development 28 August 2021 vs. 2 February 2020 in %
by fuel type across age groups

Source: Autovista Group

There are good reasons why those that can afford to are asked to fund innovations first. The first successful BEVs targeted innovators and early adopters at the luxury end of the market. Mass-market BEV production had failed previously. However, this is changing, as OEMs are beginning to announce lower-cost BEV models. BEVs are making a serious attempt not to be a third car in a household but a second and eventually a first.

The inequality argument

We are now at a point where governments must consider the inequality argument around individual mobility solutions, particularly as lower-income households could miss out. Home-office jobs are hardly an option for those doing manual labour. This means that governments and OEMs need to think hard about what they can do to limit inequalities and increase the potential market for the BEV.

Key actions that should be on OEM and government to-do lists:

  • Every new car becomes a used-car, and if there is little demand for a particular used-car, supply meets lack of demand, and the loss in value is dramatic. In turn, this prevents the model from being successful as a new car. Every sale would have to be subsidised heavily to compensate for the loss in value. Stakeholders would do well to consider every lever to make a new car successful as a used car. Our top 10 mistakes when launching a new model apply to the BEV in the same way as for any other car. For the BEV, there is a key mistake that stakeholders should not make: OEMs should hold off launching a lower-range variant alongside normal or longer-range ones. There are two reasons for not varying ranges right now. First, it avoids focusing the buyer’s attention on a particular weak spot of the BEV; secondly, as range advances, the lower-range variants will be particularly lame ducks on future used-car markets. 
  • Governments and cities should stimulate demand for used BEVs by incentivising not just the purchase, but also their ownership. Besides addressing the infrastructure challenge, there is a need to compensate for the lower suitability for daily use compared to a used ICE vehicle. Ideas range from access to restricted lanes or city areas, tax exemptions, lower electricity prices, free or reduced parking costs, or straightforward purchase incentives.
  • OEMs should focus a lot of attention on bringing list prices down for the BEV, e.g. by launching no-frills affordable model variants that excel in terms of range and connected services but less elsewhere. These models could attract a lot of attention on used-car markets.

We are at a tipping point in electric mobility adoption. The technological advancements are reputable, and the industrial policy is substantial. Electric mobility could see an unanticipated push back if we forget to stimulate its relevance on used-car markets. There are different buyer profiles and disposable incomes on used-car markets, compared to new-car markets, which represents a particular challenge for the technology. This can be addressed and moderated, but requires more attention by governments and OEMs, than it currently gets.

Autovista24 webinar – The EV subsidies gamble: Impact on new- and used-car markets

Sales of electrically-chargeable vehicles (EVs), including battery-electric vehicles (BEVs) and plug-in hybrids (PHEVs), are growing rapidly across Europe. Yet many countries are relying on incentives to drive this adoption. Does this gamble help or hinder the burgeoning EV sector in the new- and used-car markets?

Autovista24 looked at this issue in its latest webinar, The EV subsidies gamble: Impact on new- and used-car markets. The topics discussed included:

  • The state of Europe’s EV market
  • The market-adoption conundrum – new vs used
  • What can Europe learn from Norway, the continent’s leading EV market.

Autovista24 editor Phil Curry is joined by Dr Christof Engelskirchen, chief economist of Autovista Group, Roland Irles, managing director of EV-Volumes, Robert Madas, head of valuations & insights Austria, Switzerland, and Poland at Eurotax, and Geir Kristoffersen, managing director of Rødboka Norway, to discuss the EV situation.

Find the full slide deck for the presentation below. Available for viewing and download.

The EV Subsidies Gamble webinar slidesDownload

Sign up to the free Autovista24 daily email to be alerted of future webinar topics and dates, together with the latest articles, videos and podcasts discussing important automotive industry topics.

Not all lights are green for fleet decarbonisation

The British Vehicle Rental and Leasing Association (BVRLA) has revealed ‘dangerous gaps’ in the fleet market’s road to decarbonisation. Some sectors have been accelerating towards the UK’s 2030 internal-combustion engine (ICE) phaseout, but others appear stuck at a red light.

The BVRLA’s Road to Zero Report Card 2021 assesses the decarbonisation trajectories of the UK’s car, van and truck fleets. Progress is measured by scoring battery-electric vehicle (BEV) supply, demand and infrastructure with a traffic-light system.

Cars are cruising

The association’s 2021 report points to a very mixed picture of progress. There is a more positive outlook for cars. The huge demand for BEVs received a ‘green – cruising’ score. The BVRLA reflects that most fleet-car segments are enthusiastically embracing electromobility. This is thanks in no small part to a favourable tax regime, continual new model rollouts and a growing charging network.

Examining August’s UK new-car registration figures, BEV demand does indeed appear to be climbing ever higher, even though the market is contending with substantial supply shortages. These fully-electric cars accounted for 10.9% of registrations in the UK last month. Looking ahead, the Society of Motor Manufacturers and Traders (SMMT) estimates that BEVs will account for 9.5% of registrations this year. This would mark a year-on-year increase of almost 44% from the 6.6% market share the drive type held in 2020.

Under 0.7% of the UK’s car parc is currently zero-emission, but 22% of salary-sacrifice cars, 8% of company cars, and 7% of car-club cars are BEVs, the association points out. But the car-rental sector’s BEV fleet currently stands at just 0.6%, reflecting the unique decarbonisation challenges it faces.

The BVRLA ranked the decarbonisation of car supply and charging at ‘amber – accelerating.’ Infrastructure is getting developed and deployed increasingly quickly. Nissan recently partnered with Dreev to launch a bidirectional-charging offering in the UK. Meanwhile, Shell has confirmed plans to install 50,000 on-street charging points across the country by the end of 2025. However, the pace of this development must keep up with demand for BEVs, otherwise confidence in the ecosystem will take a severe blow.

No greens for larger vehicles

The BVRLA does not paint such a green picture for the van sector. Infrastructure, supply and demand all received an ‘amber – brakes-on’ rating. The association points to growing concerns around a shortage of suitable electric vans for many use cases, as well as problems with public charging and insufficient government support, such as grants or tax incentives. Just 1% of the current leased LCV market is made up of BEVs, in turn making up only 0.4% of the wider van parc. The rental market is behind here too, with 0.1% of its fleet powered by batteries.

But the report points to heavy-goods vehicles (HGVs) as the greatest cause for concern. ‘With the government poised to issue a 2035-2040 phase-out deadline, the sector receives a blanket ‘red– parked’ rating,’ the BVRLA states. ‘There is precious little momentum in this fleet segment, with no phase-out delivery plan, no technology roadmap, no mainstream vehicles and no charging infrastructure.’

‘Every fleet is on the ‘road to zero’, but the task ahead is easier for some than others,’ said BVRLA chief executive, Gerry Keaney. ‘There are “sweet spots” where the tax incentives, total cost of ownership and typical journey patterns make going zero emission an attractive choice. Elsewhere, progress is much slower as fleets grapple with a shortage of appropriate vehicles and eye-watering charging-infrastructure costs.’

BMW considers lifecycle of a vehicle with fully-recyclable car

‘What will move us next?’ is this year’s motto at the IAA Mobility 2021 in Munich, and it seems BMW might have come up with one possible answer to that question.

At the event, the German car manufacturer presented a fully-recyclable car – the i Vision Circular, which it plans to launch in 2040. The four-seater not only received attention for its futuristic looks but also its approach to sustainability. The recyclable city car is made entirely from both old and renewable raw materials. A design that uses 100% recyclable materials, including the battery pack, underlines BMW’s ambitious plans to ‘become the most sustainable car company in the world.’

Electromobility and climate neutrality

With Greenpeace activists protesting outside the IAA’s gates, the automotive sector is facing numerous challenges to improve its environmental image and adopt a greener approach. During the next 10 years, BMW plans to put 10 million battery-electric vehicles (BEVs) on the road. And by 2030, half of global BMW Group sales will be BEVs. While the future of mobility might rely on electrification, the industry cannot solely depend on electromobility to achieve climate neutrality.  

Whereas electric cars do not produce local emissions, their batteries charge on power from the electric grid, which is often generated by non-renewable energy. There have also been questions around how energy-intensive it is to manufacture a BEV or an electric battery.

The market also relies heavily on primary sources – such as steel, aluminum and plastic – all of which have an environmental impact, including air emissions. Furthermore, the raw-material demand for BEVs remains high. CO₂ emissions are thus becoming more of an issue related to the supply chain and this correlates with the depletion of scarce natural resources. Decarbonisation, a major theme at the IAA, is on top of the agenda for many car companies as the onus to reduce air emissions has shifted increasingly onto manufacturers.

Carbon-neutral production

BMW has pledged to cut CO2 emissions and aims to increase its use of secondary materials. This includes their use in production and the upstream supply chain. By 2030, CO2 emissions per vehicle and kilometre driven will be halved from 2019 levels, the company announced earlier this week. BMW has aspiring plans and said all its production sites will be net-carbon neutral ‘from 2021.’

‘How companies are dealing with CO2 emissions has become a major factor when it comes to judging corporate action. The decisive factor in the fight against global warming is how strongly we can improve the carbon footprint of vehicles over their entire life span,’ said Oliver Zipse, chairman of the board of management at BMW.

A circular design

BMW’s recyclable i Vision Circular shows great potential when it comes to combatting some of these issues by focusing on the entire lifecycle of a car. Production will rely less on primary sources, and overall, BMW has pledged to increase the share of secondary materials in its vehicles. The manufacturer said its current vehicles use almost 30% of recycled and reusable materials. In the future, the company aims to raise this figure to 50%, which will also be more cost-effective for the group.

‘We have included circularity in our concept right from the start when designing the BMW i Vision Circular. That’s why this visionary vehicle is full of innovative ideas that combine sustainability with new and inspiring aesthetics,’ said Adrian van Hooydonk, head of BMW Group Design.

A fully-recyclable car might have sounded like something out of a science-fiction novel a decade ago, but in our current climate, it could indeed move us next.

Beware of the BEV and its remarketing challenges

Dr Christof Engelskirchen, chief economist at the Autovista Group, reviews the data and facts around the remarketing of battery-electric vehicles (BEVs) and assesses whether related fears are justified.

Battery-electric vehicles (BEVs) are enjoying popularity at the moment with demand outstripping supply. This is no surprise as national and regional policies on sustainability clearly point to BEVs being the future for at least next 20 years. Furthermore, strongly government-incentivised BEVs are very competitive from a total cost of ownership-perspective and they are fun to drive.

However, there is a disconnect between new- and used-car markets – almost none of the advantages that new-BEV owners benefit from exist for used-BEV owners. This has translated into anxiety about the remarketing risks for BEVs, the majority of them being in a leasing/ PCP-type arrangement.

Minimising the effects of aging

The first used cars that hit the market after the launch of a new vehicle often create very strong remarketing results – a honeymoon effect. However, cars do not only lose value as their mileage and years on the road increase, they also age over the model’s lifecycle. Consequently, a three-year-old used vehicle that is hitting the used-car market for the first time will cost more than a three-year-old used vehicle that has been available for five years or longer as a used car.

The chart below shows this effect: when the new BMW 1-series (marked with the rhombus at the top green line) hit the market in 2019, it yielded a strong 10%-points uplift in used-car values. Following this launch effect, the line begins to decline swiftly. It is still ahead of its predecessor, but is closing in. It then crosses the Golf’s RV performance line (black line).

Residual value development for selected C-segment competitors in Germany, forecasts, Jan 2017 – Jul 2021


Source: Autovista Group Residual Value Monitor

In contrast, the Volkswagen (VW) Golf (black line) is known for ‘aging well’ and being particularly ‘timeless’ as a model, and this translates into comparatively smaller lifecycle effects. The Golf evolution is stable over time and the launch effect has been smaller (5.5 percentage points). The Ford Focus (purple line), on the other hand, shows a 10 percentage-point launch effect and features a very pronounced lifecycle depreciation.

Commercially, it is always better to minimise lifecycle depreciation than maximise launch effects, as stronger residual values (RVs) over the entire lifecycle require less subsidies and discounts on new-car markets for the model to sell. Those OEMs that are able to deliver a more favourable lifecycle depreciation pattern for their models dip into a combination of the following from their toolbox:

  • No or low discounts;
  • Less aggressive channel mix than the market average
  • Timeless model design
  • Effective lifecycle management via equipment
  • Packaging; and
  • Special editions of a strong brand

BEVs age faster than ICE

Almost any brand could have been selected to contrast BEV models – the list price evolution below features various Golf models over time. During 2017, the e-Golf received a powertrain/ battery update, and prices rose slightly. In September 2019, VW cut prices for the e-Golf in anticipation of the more advanced ID.3.

List price development e-Golf, Golf petrol, Golf diesel between Jan 2015 and May 2020, Germany

Source: Autovista Group

The effects on the lifecycle depreciation pattern of the e-Golf compared to its internal-combustion engine (ICE) variants are evident (see chart below): the battery upgrade in 2017, which represents a powerful move in lifecycle management for a BEV, increased RVs. Irrespectively, and sticking to the left side of the red vertical line, lifecycle depreciation is higher for the e-Golf than for the two ICE Golf-variants. This is largely due to competitors launching BEV models with better ranges.

The price cut with the introduction of the ID.3 (marked with the red vertical line) initiated a further substantial decline in RVs for the e-Golf. Arguably, the latter is a unique effect but it does show how sensitive used-car prices for BEVs are to advances in technology, in particular of range, and competitive action, in this case from the designated successor within the own company.

Residual value development (forecast/ 36m/60tkm/ trade) e-Golf, Golf petrol, Golf diesel between Jan 2015 and May 2020, Germany

Source: Autovista Group

BEVs perform below ICE competitors in %-RVs

When considering some of the main passenger-car segments (B/B-SUV, C/C-SUV, D/D-SUV) in the chart below, referencing again Germany,  the more pronounced lifecycle effects of BEV technology are again confirmed. The green line, which represents the weighed RV performance of all BEVs, falls more steeply than petrol or diesel. Some of the more recent decline links to the substantial government discounts offered on new-car markets for BEVs: €9,000 for a new BEV, representing a quarter of the list price in some segments. The green line for the BEV is more volatile, reflecting the frequent change of mix in the market. In the table to the right, only 1.3% of used-car transactions represent BEVs, when expressing their share in relation to the total of petrol, diesel, and BEV.

Residual value development, in % of list price, Germany, for B/B-SUV, C/C-SUV, D/D-SUV segments, weighted, 36m/60tkm

Source: Autovista Group Residual Value Monitor

BEVs currently perform at the same level as petrol cars when looking at the absolute RV  performance in EUR (not shown), despite the still significant list price differences.

Those that are anxious about RV formation for BEVs over the coming years have a point but should not panic. There are a number of actions and market aspects to consider:

  • Current used-car values for BEVs are already at a low point and reflect the high discounts offered in many markets and the anticipated technological advancements. It is unlikely that discounts will rise. They will therefore not add additional pressure.
  • It is likely that lifecycle depreciation will continue to be stronger for BEVs than for ICE over the coming years, as long as range improves with new model generations. It is simple to reflect that factor in RV setting for a model as it ages. It will have to be based on investigating a model’s and brand’s competitive performance.
  • Our experts expect slightly more RV pressure for BEVs over the coming years than for ICE due to an oversupply of used BEVs, in particular in the high-subsidies markets. Equally, ICE residual values will likely benefit due to a supply shortage as new-car markets shift to electric.
  • To minimise RV risks for the BEV (and to maximise remarketing opportunities for the ICE), a highly professional cross-border approach to remarketing will be highly beneficial.
  • Any advancements with regard to assurance of battery quality via a battery certificate, and continued extended warranties for batteries of used BEVs will support RV formation for the used BEV.
  • Transparency around the cost to repair or to replace the battery and proceeds from a sale of the battery into its second life would support RVs for BEVs as well.
  • Overall, the more diversified portfolio of leasing companies will add financial value as well.

For more exploration of this topic, join the Autovista24 webinar on ‘The EV-Subsidies Gamble – Impact on new- and used-car markets’ on 22 September.