Written evidence from Auto Trader (ELV0094)
Auto Trader
Auto Trader is the UK’s largest online automotive marketplace, and our purpose is Driving Change Together. Responsibly. We are committed to use our voice and influence to support consumers to make more environmentally friendly vehicle choices and provide data and insight to support the industry and government to accelerate the adoption of electric vehicles.
With the largest number of car buyers and the largest choice of trusted stock, Auto Trader’s marketplace sits at the heart of the UK car buying process. It is this central position, and the unmatched data insights that come from this, that have driven us to take a leading role in the tracking and reporting of EV adoption in the UK. As we recently shared in the UK House of Lords Environment and Climate Change Committee meeting, our unique data sets can provide policy makers with the information they need to make informed, data-led decisions.
Government approaches
- What are the main obstacles to the achievement of the Government’s 2030 and 2035 phase-out dates? Are the phase-out dates realistic and achievable? If not, what steps should the Government take to make the phase-out dates achievable?
The industry/car makers are behind the dates and want certainty when it comes to the ZEV mandates so they can plan accordingly. The 2030 date is fairly well known by consumers too, although many don’t feel that an EV is right for them at the moment. Our research shows that half don’t think an EV will fit into their lifestyle, and this is because of the associated barriers around cost and charging. In fact, recent Auto Trader research highlights the key barriers to mainstream consumer adoption ahead of the 2030 passenger car target:
- Electric vehicles are expensive to buy – 56%
- Not enough charging points for EVs – 47%
- You can’t drive as far in an EV – 38%
- EVs take a long time to charge – 37%
- I would have to have a charging point be put into my property – 33%
- Public charging points are expensive – 32%
- The charging point would use a lot of electricity from my property – 29%
- I just don’t know enough about electric vehicles – 23%
- There is a poor range of electric vehicles – 20%
- EVs create more emissions when being made – 14%
- EVs are not very powerful – 10%
Source: Auto Trader No Driver Left Behind EV Research – May 2023, Total (n~4002)
It’s obvious that upfront price is the primary barrier for many, and new electric cars are 33% more expensive than petrol equivalents (August 2023, sample of 35 models). In terms of public charging provision, this has improved but has not kept pace with car sales so there’s a risk of experience and perception continuing to worsen.
As a result, interest in brand new electric cars for sale on Auto Trader has fallen since the Summer of 2022:
There’s a 0.88 correlation between our demand data and new retail registrations, making this a very good leading indicator of sales.
The most powerful steps the government could take would be:
- A focus on mainstream affordability – attractive finance deals could be really powerful here; the upfront cost is the biggest issue as total cost of ownership comparisons often show in favour of the electric vehicle.
- Support efforts to build confidence in our national public charging infrastructure. People need to be able to trust it’s reliable and fairly priced. Reducing VAT on public chargers would be a great help here, blanketing all public chargers with 20% VAT isn’t appropriate or fair, there are some chargers that are technically public, but they serve local communities for their at-home charging needs, compared to the fast chargers at motorway service stations – they do different jobs and should be taxed accordingly. Similarly, unblocking barriers to public charging expansion at the local council level could be transformative – the charge point operators tell us they are keen to invest and build but planning permission is their biggest blocker.
-Clarity around consumer expectations of what information they need when it comes to buying a used EV would be very powerful, we need a cross-industry consistent measure of battery health. Consumers and retailers need to see a certification of battery health as that will provide a lot of confidence for them to sell and buy used EVs especially – and the used EV market will be key to the mass adoption of EVs generally. The used market is three times the size of the new market – so this is key to accelerating mass adoption.
- What specific national policies, regulations or initiatives have been successful, or have hindered, EV adoption to date? Are these policies or initiatives fit for purpose?
The 2030 ban and the forthcoming ZEV mandate have driven strong action from carmakers, introducing new electric models at a rate of one every 10 days for the past two years. This rapid increase in supply has led to increased focus among retailers and the emergence of a used electric car market, all providing buyers with greater choice.
The application of Benefit in Kind savings and the announcement of continuation out to 2025 have been a big success to the fleet sector, driving initial adoption and certainty.
The original Plug-in Car Grant for private buyers, however, benefitted only those who could afford an electric car already and were not put off by the upfront price gap. The removal of the PiCG had no impact on demand, unsurprising given it offered little relevance to mainstream car buyers. It remains the case that the most affluent people in the UK are driving adoption. And we will run out of these people, so more needs to be done to ensure it’s an equitable transition.
2023 has seen the emergence of a maturing used EV market. This was initially characterised by oversupply, resulting in a 23% year-on-year drop in average used EV retail prices (YTD August 2023); this pricing drop has stimulated an increase in consumer demand, opening up more affordable supply, but these cars are still out of reach for the average used car buyer.
This price decline is positive for buyers, less so for the trade. Over 90% of all new cars are bought on a finance agreement, usually structured to cover the depreciation of the car over a e.g., 3-year period. The greater the depreciation, the more for the buyer to fund in that time. Depreciation is calculated by forecasting the future value, using current pricing and trends as a guide – if prices are falling, the depreciation is expected to increase, making new cars more expensive.
So, the health of the used market is vital to the affordability of new EVs and progress to 2030. A weak used market will, in time, impact confidence as well as future values.
4. Given that the Government should apply a behavioural lens to policy—which involves people making changes to their everyday lives, such as what they purchase and use—is there a role for clearer communication of the case for EVs from the Government? If so, who should take the lead on delivering that?
Our research found that fewer than half (47%) think an EV will fit into their lifestyles. In addition, trust in the product is fragile, with just 7% of rejecters describing EVs as reliable. One in 5 (20%) of rejecters could not name one benefit to owning an electric car.
The combination of these beliefs results in powerful emotional reasons to reject which could be overcome with more clear and simple communication of benefits.
When asked what information they would need to consider buying an electric vehicle, suitability – that the car will do what’s needed – was a major theme – the others were:
- That the batteries will last – 61%
- Would be able to charge it conveniently – 52%
- Can charge quickly enough for me – 51%
- Range would always be enough for where I need to go – 49%
- They are as green as reported – 35%
- That it will have decent resale value – 30%
- How they drive – 26%
- Nothing – 15%
- Something else – 1%
Source: Auto Trader No Driver Left Behind EV Research – May 2023
What information do you need to consider owning an electric vehicle? Total (n~4002)
A focus on clarity from the government – in the sense of solidifying the 2030 deadline, the ZEV mandate and plans on how we will tax these cars in the short term and a universal way of discussing battery health - would be extremely beneficial in helping give consumers the confidence they need to commit to the switch.
5. What is your view on the accuracy of the information in the public domain relating to EVs and their usage?
More fact is needed to counter what is an increasingly damaging media narrative. The experiences of owners is a world away from the perceptions of the mainstream rejecters. Owners do experience charge point frustration, for instance, but only a fifth; the many myths around EVs are clearly deterring the mainstream.
A key example is battery degradation (see 4. above). Manufacturer-held data shows that electric car batteries lose 1-2% in their performance per year. This data is vital to reassure the mass-market that what they buy will last, but it’s not currently easily available or known. We need to ensure that OEMs are mandated to share this information so that battery degradation metrics / health certificates can be created for all EVs – this is vital to giving retailers and consumers confidence in the cars.
Owners also love their EVs, 90% of EV owners wouldn’t go back to an ICE car but this is rarely in the public domain.
7. What are the likely costs that will be faced by consumers as a result of the Government’s phase-out dates for non-zero emissions vehicles? Are there policies or initiatives that the Government could use to specifically target barriers arising from unpredictable costs to the consumer, for example significant fluctuations in the cost of electricity, changes to road taxes, or the introduction of low emission zones?
Analysis conducted in April 2023 shows that fuel prices have the biggest impact on running cost savings.
Electricity pricing has had a minor impact – of more interest is the difference in the cost of charging an electric car between those who can do some at home and those reliant on public charging:
In order to help buyers by taking away as much uncertainty as possible, early clarification of any changes to road tax or road usage costs is required. Anecdotal evidence suggests that some will postpone consideration until more is known.
11. Do you think the range of EVs on offer in the UK is sufficient to meet market needs? Which segments are under-served and why? Why is the UK market not seeing low cost EVs, particularly in comparison to China?
Choice of new electric cars is still limited, with fewer than 15 models priced under £30k (compared to over 100 ICE models).
Additionally, the cars available are broadly the same cars – fairly big SUVs – which replicates a lot of the general ICE market. Further, some of the bigger carmakers are stopping production of small cars because they’re unprofitable – the implication for buyers is that choice in the entry-level price point of a new car will increase due to both electrification and the removal of smaller, cheaper models.
13. What is your assessment of the current second-hand EV market? How is the second-hand EV market projected to develop between now and the phase out dates?
Through 2023, demand for used electric cars has reached record levels (although this is relative - EVs take just under 10% of all the interest in 0–5-year-old used cars). A doubling year-on-year was stimulated by a rapid drop in prices (see above), caused by high levels of oversupply – when supply is not met by demand, retailers reduce prices to stimulate sales.
It is very likely that we will see further periods of oversupply as cars return to the market. In 2023 we expect the number of electric cars on UK roads to hit 1 million, 700,000 of which were first registered in 2020 or later. This will create another rapid increase in supply which must be met by demand.
If demand does not absorb the supply, prices are likely to fall again; this problem needs attention quickly, or there’s a danger of falling future values and structural weakness which will impact new EV affordability.
The chart below shows the evolution of electric cars registered, all of which will enter the used car market at some stage. By 2030 up to 6-7m of the UK’s 8m electric cars will be classified as used, a number requiring a significant increase in consumer acceptance in order to maintain market balance.
14. What is the relationship between EV leasing and the second-hand market and how do they interrelate?
There’s no real leasing of used cars (especially EVs), but the relationship between the used market and new car leasing is important.
Leasing is a major gateway to new EVs (makes them more affordable and predictable due to Contract Hire monthly payment model and bundling of service etc). The return of these cars is also certain – there’s an end date to the lease at which point it returns to the market as a used car.
Leasing relies upon the used market for disposal, but also for affordability. A strong used market / prices means that the balance to fund (crudely new price minus the future value) is reduced – so if used prices fall then monthly payments will increase.
20. How prepared are car dealerships, service networks, repairs and maintenance organisations, breakdown services and aftermarket suppliers to meet the growing EV uptake?
In 2022 we conducted research with our retailer partners. We found that 51.6% of retailers felt unprepared and not strategically ready to respond to EV adoption. Unsurprisingly, franchise retailers are far more confident with only a fifth (20%) saying they feel unprepared compared to nearly 60% of independent retailers.
Half of retailers surveyed (50.4%) surveyed had never sold an EV – for franchise retailers this was 14.3% and independent the number was 59.6%. Less than 5% (4.7%) of those retailers that hadn’t yet sold an EV plan to start selling them in the next 12 months, whilst nearly a quarter (22.5%) never intend to sell EVs.
The NFDA’s EVA scheme is vital to ensuring that retailers get the necessary training required to sell and market EVs effectively – the EVA accreditation then gives those retailers something to promote to consumers.
24. In terms of charging infrastructure, are there unique barriers facing consumers in areas of low affluence and/or multi-occupancy buildings, such as shared housing or high-rise flats? Do you consider public EV charging points to be accessible and equitable compared to home-charging points? What can be done to improve accessibility and equitability?
Charging availability and times, as well as cost, are a significant barrier which people with driveways can overcome more easily than those in a multi-occupancy building. Those charging on the public network will be required to pay 20% VAT, compared to homeowners who pay 5%, this isn’t appropriate or fair. This creates a trend in which the people who can least afford to pay a premium– those in certain types of housing who have no alternative - are required to do so.
Those without a driveway will have to get creative as to where they charge, but convenience is key. If people don’t have local on-street charging facilities near their home, they are very unlikely to buy an EV. Local charging needs to be accessible and fairly priced.
However, 21% of survey respondents say they won’t switch because they don’t have anywhere to charge at work. Charging at work could become the new normal and would solve local infrastructure problems – when employees are at home, they won’t need to charge but also the local community near the workplace would be able to charge at the weekends or evenings at this charge point. The government could play a significant role in encouraging the growth of at-work charging points.
25. Is there a financial benefit to the consumer of choosing an EV over an ICE vehicle? Are there further benefits, aside from financial, that a consumer may gain from EV use?
Total cost of ownership is a vital way of understanding the potential financial benefits of an electric vehicle – it involves thinking in a more long-term way about the cost of owning and running a car. Earlier this year, we launched our “No Driver Left Behind” report which features some example TCO comparisons shown right.