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By Nick Carey
LONDON, Aug 13 (Reuters) - Low resale values for
electric cars have pushed the leasing firms that drive Europe's
auto market to double prices over the last three years and some
are threatening to quit the business altogether if regulators
force them to go electric too fast, industry executives say.
The jump in prices for electric car leases comes as cuts in
subsidies for new EVs in key markets such as Germany are hitting
sales and risks stalling Europe's electric transition, just when
Brussels wants to step on the accelerator, the executives say.
"If we were pushed very, very hard, that everything has to
be electric too soon ... my shareholders will say 'we don't want
to take the risk' and we'd be out of the market," said Tim
Albertsen, CEO of Ayvens
leasing firms. "Let's be honest, without us, who will take the
risk?"
Ayvens, which is majority owned by French bank Societe
Generale
about 10% are EVs.
Leasing companies play a pivotal role in Europe as 60% of
new cars of all fuel types are leased, according to calculations
by environmental group Transport & Environment based on data
from market research firm Dataforce.
When it comes to EVs, the proportion is estimated to be as
high as 80%.
According to data provided to Reuters by Dataforce, in the
16 European markets where it can identify fleet registrations -
including Germany, Britain, France and Spain - 60% of new EVs go
to corporate fleets and commercial buyers. Experts say those
buyers almost exclusively use leases and about half of the
remaining sales to private buyers are also leases.
In markets with no EV subsidies for private buyers, the
dominance of corporates is even more pronounced. In Britain and
Belgium, for example, individuals accounted for just 23% and 8%
of new EV purchases respectively in 2023, Dataforce said.
The price of a lease is designed to account for the
depreciation of a vehicle over the typical three-year lease
period, based on estimated resale prices, or residual values.
But if second-hand prices end up being lower than
anticipated when the lease ends, leasing firms take a financial
hit when they get the vehicle back.
For various reasons - from Tesla's
concerns about charging infrastructure and battery life to the
influx of more affordable Chinese EVs - second-hand electric car
prices have been sliding in Europe since hitting a peak in
October 2022.
According to figures provided to Reuters by data firm
Autovista, resale values for EVs in Germany in early July were
24% below pre-pandemic levels and 30% lower in Britain.
That's in stark contrast to second-hand petrol models, which
remained about 15% more expensive in both markets.
"People have become more accepting of used EVs, but they've
got to be cheap," said Gary Cambridge, a partner at used car
dealer Cambridge Motors in London. "If they're expensive, people
don't want them."
PRICES MORE THAN DOUBLE
Leasing companies approached by Reuters declined to give
specific details about any losses on EV contracts from the slump
in residual values. Signs of the electric pain have shown up in
disclosures by some rental companies.
Hertz
for the roughly 20,000 EVs it has been selling off at greatly
reduced prices while Sixt
for EVs cut its 2023 earnings by 40 million euros ($44 million).
Bart Beckers, deputy CEO at Arval, the leasing company owned
by French bank BNP Paribas
resale values were currently limited in number, given EVs are
only a small portion of their overall portfolio.
"But the amounts are not insignificant," he told Reuters.
"Like other leaders in the market ... (Arval) has been forced
already to increase prices because of lower residual values."
Like Ayvens, EVs only make up about 10% of Arval's fleet of
1.7 million vehicles.
Some automakers have provided cash compensation to leasing
companies for slumping EV values, industry executives say.
Reuters reported in May that Tesla has offered discounts and
other ways to mitigate losses to leasing companies, including
Ayvens, though CEO Albertsen declined to say what they were.
But the executives say leasing companies still bear the risk
for EV resale values, which is why prices have climbed.
Leasing firms approached by Reuters declined to give
specifics about price rises for EVs as the subject is sensitive.
In Germany, Europe's biggest auto market, data provided to
Reuters by German think-tank CAR Center Automotive Research show
that EV leases have jumped in the last three years.
In August 2021, a lease for a 45,000 euro EV cost 284 euros
per month, well below the 473 euros for an equivalent
fossil-fuel model. Now, the cost for the EV has more than
doubled to 621 euros while the fossil-fuel car has fallen to 468
euros.
German EV sales fell 16.4% in the first half of 2024 after
the government abruptly axed subsidies for consumers in December
and that decline has hit the overall EU trend.
Sales of fully electric vehicles in the EU rose to 14.6% of
new car sales in 2023 from 6.1% in 2020 but that slipped to
14.4% in the first half as EV sales rose a tepid 1.3%.
MANDATORY SALES TARGETS?
Albertsen at Ayvens said the company was now leasing EVs for
longer than combustion-engine cars to reduce resale risks.
It has also started to lease EVs out once or twice more "at
a more affordable rate" and keep them in its portfolio longer,
possibly up to eight years, he said.
Such is the concern about potential losses, RVI Group, a
company based in Stamford, Connecticut that offers insurance
guaranteeing a specific residual value for an asset, opened an
office in Europe last year to field coverage queries.
Wei Fan, RVI's executive vice president for passenger
vehicles, said he'd seen more requests from Europe in the past
three years - all from leasing companies and banks - than in the
previous 14 years worldwide.
He said he expected EV price volatility to continue for the
next five to 10 years as the electrification process plays out.
Leasing firms say they are concerned, however, that an
European Commission consultation on how to speed up EV adoption
by corporate fleets could result in mandatory EV sales targets,
as this would increase the resale risks they already face.
"The larger the share of EVs in their portfolios becomes,
the bigger this problem is going to be," said Richard Knubben,
director general of Leaseurope, an umbrella body in Brussels
that lobbies on behalf of car leasing and rental groups.
The European Commission's "Greening corporate fleets" open
public consultation, which included looking at possible measures
to accelerate EV adoption, ended on July 8.
Brussels-based Transport & Environment (T&E) wants the
Commission to mandate that Europe's large corporate fleets and
leasing companies go 100% electric by 2030.
Stef Cornelis, T&E's electric fleets programme director,
said forcing fleets to electrify would result in more used cars
for consumers and speed up the EV transition.
A Commission spokesperson said the consultation was meant to
identify substantive market shortcomings that warrant action but
was not geared at gauging support for any kind of initiative.
The poor performance of Green and centrist parties in
European elections in June has raised questions about the fate
of the EU's 2035 ban on fossil-fuel cars, so it is uncertain
whether the Commission would push for a 100% mandate.
But leasing companies are taking the threat seriously.
Leaseurope said an EV mandate would significantly damage
leasing companies and Arval's Beckers says that, at a minimum,
it would have to raise future lease rates further.
"Simply put, prices would go up," he said. "That would
discourage corporate fleets from continuing to lease."
($1 = 0.9154 euros)
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EXCLUSIVE-Tesla doing damage-control, discounts for European
fleet buyers
INSIGHT-How China's EV makers aim to beat Tesla, legacy
automakers in Europe
GRAPHIC-BEV leasing rates have risen BEV leasing rates have
risen https://reut.rs/3WZppNT
GRAPHIC-Resale prices for EVs and petrol cars https://reut.rs/3WGs0Lw
GRAPHIC-Europe's fleets driving EV sales Europe's fleets driving
EV sales https://reut.rs/3WD9XG2
GRAPHIC-Corporate fleets dominate EU new car sales https://reut.rs/4fEE7RR
Corporate fleets dominate EU new car sales https://reut.rs/3WTWYRE
Europe's fleets driving EV sales (Copy) (Copy) https://reut.rs/3Mk0BdH
BEV leasing rates have risen BEV leasing rates have risen https://reut.rs/4dHsbgf
Resale prices for EVs and petrol cars https://reut.rs/3yID16U
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(Reporting by Nick Carey; Editing by David Clarke)
((nick.carey@thomsonreuters.com; +44 7385 414 954;))