How Government EV sales row could impact used and new EV prices

The ongoing dispute between the UK government and the automotive industry over electric vehicle (EV) sales targets is poised to impact various facets of the car market, including the pricing of used EVs.

The disagreement stems from aggressive targets for zero-emission vehicles, which car manufacturers argue are outpacing current consumer demand. If unresolved, this tension could ripple into the used EV market, reshaping prices and consumer behaviours.

We consider how the row over EV quotas could impact pricing for new and used electric vehicles. (Photo: Pexels.com)

What is the row about?

Under the government's zero-emissions vehicle mandate, manufacturers are required to ensure that a growing percentage of their sales are EVs. The targets, which start at 22% of car sales in 2023 and increase incrementally to 80% by 2030, are tied to significant penalties for non-compliance—£15,000 per non-EV sale. While sales of EVs have risen, industry insiders argue that much of this growth has been driven by unsustainable discounting rather than organic demand.

The mandates have sparked concerns across the automotive sector:

1. Manufacturer challenges: Companies like Stellantis have pointed to the phase-out of petrol and diesel vehicles as a contributing factor to major decisions, such as the proposed closure of its Luton plant. Similarly, Ford has announced job cuts and called for more consumer incentives to boost EV uptake.
2. Economic concerns: The Society of Motor Manufacturers & Traders (SMMT) warns that the combination of weak demand and sales quotas could harm business viability and lead to further job losses.
3. Government reconsideration: The government has pledged to consult on these policies, signalling potential adjustments. However, the 2030 deadline for banning petrol and diesel car sales remains unchanged.

Implications for used EV prices

The friction between policy and market demand could significantly influence the pricing dynamics of used EVs. Here’s how:

1. Increased new EV discounts

To meet stringent quotas, manufacturers are discounting new EVs heavily. While this can temporarily boost sales, it also depresses the value of used EVs. If a new EV is sold at a steep discount, its resale value will likely drop, creating downward pressure on prices in the used market.

2. Oversupply of EVs in the market

Should manufacturers flood the market with EVs to meet targets, supply may outstrip demand. An oversupply of used EVs, coupled with insufficient consumer interest, could further erode prices. Buyers will likely prioritise newer, discounted models, leaving older ones to depreciate faster.

3. Consumer hesitation

The industry's emphasis on incentives suggests that many consumers remain cautious about adopting EVs, possibly due to concerns about charging infrastructure, range limitations, or upfront costs. This hesitation could suppress demand for used EVs, exacerbating price declines.

4. Impact of flexibilities and credits

The ability for companies to buy credits from EV-exclusive manufacturers like Tesla and BYD might allow some firms to avoid flooding the market with unsold EVs. However, these credits come at a cost, potentially limiting manufacturers' ability to invest in competitive pricing for both new and used EVs.

Potential upsides for buyers and sellers

While the above factors suggest falling prices, this may benefit certain consumer segments:

• Affordability: Declining used EV prices could make electric cars more accessible to budget-conscious buyers, accelerating EV adoption in the long term.
• Options for Buyers: An oversupply of used EVs might expand choices, allowing consumers to find well-equipped models at lower prices.

Key uncertainties

Several factors could alter the trajectory of used EV prices:

• Government interventions: Should the government heed industry calls for incentives, demand for new EVs could stabilise, indirectly supporting used EV values.
• Economic conditions: Broader economic challenges, including inflation and cost-of-living pressures, may further impact consumer purchasing power and demand for both new and used EVs.
• Technological advances: Breakthroughs in battery life and charging infrastructure could boost confidence in EVs, potentially increasing their long-term value.

What it could mean for EV buyers and sellers?

The standoff between the UK government and car manufacturers underscores the challenges of transitioning to a zero-emission future. For the used EV market, the implications are clear: if current dynamics persist, prices could decline, presenting both challenges and opportunities for stakeholders. For consumers, falling prices might offer a chance to enter the EV market at a lower cost, but the broader industry repercussions could create uncertainty in the near term. As the government consults on its mandate, clarity on policy direction will be crucial in shaping the market’s trajectory.

• Please note this is a comment piece only and not offering financial advice. 

 

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