Written evidence from Motors.co.uk (ELV0109) 

Environment & Climate Change Committee

Electric Vehicles – UK market

Motors.co.uk Written Submission - September 2023

Government approaches

1. 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?

Obstacles and phase out dates.

We believe that car manufacturers (OEMs) are clear about the targets set and are adjusting the production cycles to accommodate this.  Therefore, the supply of new vehicles is likely to be on-track.

We have concerns that consumers require more encouragement to rapidly increase their adoption of EVs between now and 2030.  Currently only 16% of new car registrations are EVs (fully battery electric vehicles - SMMT Jan-Aug 23). 

Our Consumer Insight Panel research data shows that 19% of consumers (both new and used cars) would like their next car to be an EV.  This figure is flat over the last 2 years.  Concerns continue to pervade around:

1)    Cost of the vehicle (they are typically higher than ICE equivalents - both used and new)

2)    Access to charging infrastructure.  Whilst significantly improved, it remains a major concern.

3)    Cost of ownership and charging.  The rise in electricity costs has reduced the financial attractiveness of operating an EV.

Key data points from Motors.co.uk research

Source. Motors.co.uk Consumer Insight Panel - August 2018 - May 2023

Source. Motors.co.uk Consumer Insight Panel - November 2021 - September 2023

Further consideration should also be given to the used car market if the government’s ambition is to reduce emissions from vehicles (as opposed to simply increasing the volume of EVs on the road).  Used EVs currently make up 3% of listings on Motors.co.uk (see table below) and it will take seismic movements in new car registrations over time to significantly alter the proportions away from internal combustion engine (ICE) vehicles.

Source. Motors.co.uk September 2023

Potential Government Considerations

Motors.co.uk believes that the government should consider a number of initiatives to support the phase-out.  We believe that OEMs are clear in their manufacturing targets.  However, the biggest change is encouraging and supporting potential car buyers.

Key actions for consideration:

-         Reduction in charging costs (at home and out-of-home) - this could include tax subsidies/reductions for electricity usage.  We note a mismatch with VAT on out-of-home charging at 20%.  The cost of out-of-home charging is significantly higher than at home charging.  We believe this could be a barrier for those without access to a chargepoint at home or when travelling away from home.

-         Incentives for trading of second-hand vehicles - incentives to-date have focused on the new market.  By supporting the sale of second-hand vehicles, this will improve residual prices (unlocking additional funding from lease companies) and dealer confidence (to stock and promote used EVs).  One such option would be lower VAT or similar incentives on second-hand EV trading.

-         Incentives for replacement of older, higher emission vehicles - we are aware that scrappage schemes are expensive, but alternatives may exist for encouraging consumers to move from older, higher emission vehicles.  This would help accelerate the reduction in emissions.

-         Improved education and information - we believe that there is a volume of disinformation around switching to EVs that is impacting consumer confidence.  There needs to be consideration to a clear and consistent education on the benefits of EVs.

-         Ongoing investment in infrastructure - consumers are noticing improvements in access to EV charging, but this still remains a concern (particularly for those reliant on out-of-home charging).  Access to charging will remain a fundamental need

2. Do the 2030 and 2035 phase-out dates serve their purpose to incentivise the development of an EV market in the UK? To what extent are car makers focusing on one date or the other? What are the impacts of the deadlines on the ability of the UK supply chain to benefit and how could the Government seek to further support the development of the UK EV industry? Would the introduction of a plan with key dates and timescales support the development of the EV industry in the UK?

Motors.co.uk believes that the deadlines set provide OEMs with clear direction on their manufacturing requirements.  It is a mandate rather than an incentive.  We can see OEMs adjusting the production cycles to plan for this.

We believe that the government could support with better clarity on the hybrid sector.  In particular, hybrid often mixes both self-charging and plug-in-hybrid.  The government should be clearer, and more sympathetic, to plug-in-hybrid as a steppingstone to EV use.

A key concern raised to us by dealers is around the aftersales (service and repair) market. Principally:

i) Lack of team members trained and qualified for handling EVs.  Support should be provided for training and clear industry standards.

ii) Reduction in revenues from aftersales threatening future profitability of their businesses (EVs typically require less mechanical support due to fewer moving components).  Whilst this is a consumer benefit, it is a further item that may prevent dealers from embracing EV sales.

Key dates and a clear timeline would support focus and provide clarity.  To this extent, it is our observation that the automotive industry is focussing on 2030 as a deadline, with 2035 rarely mentioned. Clarity is essential in this process, as is consideration of the impact upon various stakeholders in the automotive retail sector.

3. 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?

To date, policies that have helped initial EV adoption are:

-         Company car tax incentives - EV adoption has been highest in the lease / company car sector.

-         Reduced Road Tax - cost of EV ownership has been incentivised by lower road tax.  Though we believe consumers are wary that this will be temporary as government tax revenues fall from this source

-         Plug-in Car Grant - contribution to charge points helped reduce the initial outlay of transitioning to EV for consumers between 2016 and 2022.

We recognise that most incentives come at a cost to the government.  However, we note that a number of EV linked incentives (such as removal of home charger and solar panel incentives and phasing out of zero VED for EVs from 2025) are premature and reducing appetite to switch to EV.

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?

We believe that there is a volume of disinformation around switching to EVs that is impacting consumer confidence.  There needs to be consideration to a clear and consistent education on the benefits of EVs.

As a business, we have been working to overcome this with the creation of an EV Hub (https://news.motors.co.uk/electric-vehicles/) which is regularly updated with guides and reviews.  This is in addition to video content. 

That said, we are aware of contradictory information in the market with more cynical views. The debate about EV ownership is important and we believe the government could help stimulate more of a debate.  For example, reliable data points on real-world performance and life expectancy of EVs is not standardised and ripe for manipulation by both pro and anti EV groups.

This would allow consumers to feel more empowered to make the right decision for their future ownership.

5. What is your view on the accuracy of the information in the public domain relating to EVs and their usage?

Please see above.  We are concerned as a business by disinformation in the market.  We welcome greater debate and access to information for consumers.

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?

Our data shows the key concerns consumers have around buying EVs:

Source. Motors.co.uk Consumer Insight Panel - November 2021 - September 2023

Many of these elements are open to uncertainty over future development which adds to a general lack of confidence in switching to EV. 

We believe that the government could help with:

-         Cost of charging cars - providing commitment around both taxes on charging costs helping to regulate costs from external operators.

-         Access to charging points - both ongoing investment infrastructure and encouraging/mandating OEMs to provide faster charge options.  Consumers are concerned not only with access to chargers but the convenience of out-of-home charging (i.e., availability and time taken to charge)

-         Battery health / maintenance - consumers require confidence that batteries will last during their duration and will not face unnecessarily high costs as the car ages.  This could be supported with clear residual values on batteries and high maintenance standards.

-         Promotion of environmental benefits - reassure consumers on the positive contribution they are making to the environment by driving EV. This needs to be supported with education on the lifetime emissions of cars (including production and end-of-life - and in particular promoting battery recycling)

-         Tax visibility - consumers are concerned about future increases in EV related taxes.  Providing certainty on future costs would help support any decisions to move to EV

EV Market and Acquiring an EV

These questions relate to the UK EV market and uptake of EVs by UK consumers.

8. What are the main routes for acquiring an EV? Which aspects of these routes are working well, and which aspects could be improved?

Second-hand cars will become the largest route for EV purchases.  At present this is not particularly well supported.  Key reasons:

-         Falling values - whilst this will lead to more affordable EVs, for consumers making a buying decision today, they face buying an asset that will fall in value in the near term.  Furthermore, car dealers are reluctant to stock EVs (therefore making them available to consumers) because of the price reductions.

-         Technology improvements - new generations of EVs being released typically have improved technology (including battery range).  This makes newer EVs more attractive than used cars.

-         Finance incentives - OEMs typically provide more attractive incentives (including deposit contributions and lower finance rates) for brand new cars compared to used EVs. Below is an example of new and used offers from Fiat (provided as an example only, this is common across OEMs)

-         New - £3,000 deposit contribution, 7.9% interest rate, £349 pm

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-         Used - no deposit contribution, 12.9% interest rate, £628 pm. (this car has only 36 miles so is effectively a new car)

-        

Note - there may be other differences in the example listings provided.  These are provided for illustration of changes in pricing features.

Source - Fiat.co.uk website (top) and Spoticar.co.uk website (bottom) - 12th September 2023

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-         The consequence of this is that demand for new cars is being stimulated (which we support), but this does not flow through to the second-hand market, other than to contribute to ongoing falls in value.

-         OEM control - many EVs require access to apps to support maintenance of the car.  Again, this is a technology feature that may erode as the car ages.  It should also be noted that for many used cars, access to the app is only available through either: i) ongoing fee; and/or ii) servicing of the car being performed through the OEM dealer network.  This means that used EV owners could receive a downgraded experience without paying a premium.

-         Dealer economics - availability of EVs in the second-hand market is reliant on dealers stocking and promoting EVs.  With the above items, many dealers are reluctant to stock EVs.  On a day-to-day basis, there are more predictable profit opportunities in ICE vehicles.  This is adding further friction to the adoption of EVs.  It is important to consider the role of the dealer in the ecosystem.

We believe that the entry points for the new car market are generally well supported with OEM backing (as per example above) and also company BIK incentives encouraging lease ownership. 

We believe that whilst ongoing support of new cars is important, additional consideration should be given to the used car market to support the overall ecosystem.

9. What are the main consumer barriers to acquiring an EV, either through purchasing, leasing, or other routes?

Our data (above) provides guidance on the key barriers that consumers face in their potential ownership of EVs.

However, we think it is very important to highlight that new cars are expensive and outside of the budgets of most car owners.

Our data (shown below) highlights that 81% of ad views are generated on cars 5 years or older, when they only account for 52% of listings on the site.  We have seen consumers move to older cars (a proxy for cheaper cars) over the last year.  This ratio was 77% of views for 51% of cars last year.

Source. Motors.co.uk September 2023

The average price of a 5–10-year-old car on Motors.co.uk was £13,529 in August 2023 (+6.6% or £839 v August 2022). 

The average price of a used EV on Motors.co.uk was £30,841 in August 2023 (-18.1% or £6,811 v August 2022), though part of the higher price is due to the younger nature of EVs.  Therefore, currently, most used EVs remain unaffordable to consumers without major realignment.

Used EVs will need to be made more attractive to consumers both from a price point and the other previously highlighted barriers to change.

10. How is the Government helping to ensure that EVs are affordable and accessible for consumers, and are these approaches fit for purpose?

The government has provided helpful support to the sector over recent years including:

-         Plug-in Car Grant - contribution to charge points helped reduce the initial outlay of transitioning to EV for consumers between 2016 and 2022. This has now ended.

-         Company car BIK reductions - supporting significant adoption through the leasing sector)

-         Zero VED/road tax - though we note that exemptions will start to be removed from 2025.

Whilst these have been of use, there are examples of other countries (Norway, Netherlands etc) where significantly more generous subsidies have been provided.

The Government needs to continue to carefully balance incentivising accelerated adoption with the financial costs of such schemes.  We believe that this could be achieved by taking a broader look at the objective of reducing the total emissions output from the UK motorparc as opposed to EV adoption exclusively. 

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?

There are over 60 EV models now available in the UK and growing on a monthly basis, especially with the introduction of new EV brands.

With price being a key consideration in the purchasing journey, consumers are open minded to ownership of an EV from one of the newer brands.  32% of buyers would consider buying a used EV from one of the newer brands.

That said, 66% of car buyers do not recognise the names of 10 new EV brands (Chery is the most recognised brand, followed by Fisker and Rivian).  Data from Motors.co.uk Consumer Insight Panel May 2023.

We believe that this will improve with both ongoing marketing and consumer exposure to these brands. 

Pricing remains a fundamental challenge in the used car space.  Below compares two 18-month-old Volvo XC40s (a popular family mid-size SUV), with similar mileages – EV (left) vs ICE (right).

Source Motors.co.uk website 13 September 2023

Whilst there may be various other items affecting the pricing of these vehicles.  This is just one example of the used EV being significantly more expensive than the petrol equivalent.

As such, consumers with constrained budgets will continue to struggle to afford EVs without ongoing change.

OEMs will manufacture for smaller, less expensive segments if they believe the profit opportunity is there.  As such, incentives could be made to both stimulate demand and encourage manufacture.

12. What is the future role of L-segment and personal light electric vehicles, and how will that impact car ownership and usage? What is inhibiting their uptake?

N/A - we have no particular data or views to support this answer.

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?

As mentioned above, we have concerns that numerous factors are limiting the used car market from being a flywheel to support EV adoption.  This includes:

-         Falling values - whilst this will lead to more affordable EVs, for consumers making a buying decision today, they face buying an asset that will fall in value in the near term.  Furthermore, car dealers are reluctant to stock EVs (therefore making them available to consumers) because of the price reductions.

-         Technology improvements - new generations of EVs being released typically have improved technology (including battery range).  This makes newer EVs more attractive than used cars.

-         Finance incentives - OEMs typically provide more attractive incentives (including deposit contributions and lower finance rates) for brand new cars compared to used EVs (as illustrated above).  The consequence of this is that demand for new cars is being stimulated (which we support), but this does not flow through to the second-hand market, other than to contribute to ongoing falls in value.

-         OEM control - many EVs require access to apps to support maintenance of the car.  Again, this is a technology feature that may erode as the car ages.  It should also be noted that for many used cars, access to the app is only available through either: (i ongoing fee; and/or ii) servicing of the car being performed through the OEM dealer network.  This means that used EV owners could receive a downgraded experience.

-         Dealer economics - availability of EVs in the second-hand market is reliant on dealers stocking and promoting EVs.  With the above items, many dealers are reluctant to stock EVs.  On a day-to-day basis, there is more predictable profit opportunity in ICE vehicles.  This is adding further friction to the adoption of EVs.  It is important to consider the role of the dealer in the ecosystem.

14. What is the relationship between EV leasing and the second-hand market and how do they interrelate?

The lease market plays an important role in funding new car acquisition.  53% of new car registrations (Jan-Aug 23) are via the fleet sector.  All “new” cars eventually return to the market as used cars (typically within 2-4 years).  Therefore, the growth of the new car segment is important to the eventual supply of used EVs.

It is important to maintain stimulation / momentum of the new car market.  The 2030/35 directives make the requirement clear and will flow to the used car market.

However, it is important to note the scale of the challenge in-hand.  The SMMT states that there are 35.1m cars in the UK motorparc.  With 1.6m new car registrations in total (2022) this will take many years to flow through to the used market, even if virtually all new cars are EV.  Furthermore, with EVs accounting for 16% of new car registrations YTD (Jan-Aug 23) there is significant expansion required within the coming years for this to be the vast majority.

15. What barriers are there to achieving a sufficient supply of second-hand EVs, mindful that second-hand vehicles make up a high proportion of all vehicles purchased?

Core supply of used cars EVs into the market will be largely supported by the growing number of new EVs entering the market.  The current 2030/35 targets play a fundamental role in this.  We believe that OEMs are taking this target seriously, though there remains a challenge to fully deliver on this.

Our concern, as stated above, is around consumer demand for used EVs.  If this is not stimulated, with dealers wanting to sell these vehicles and consumers wanting to buy, then there will be delays in the flow through of EVs across the market.  As of 2030/35 there will still be significant volumes of used ICE cars available.

Although time will provide a natural solution for this as ICE cars age and degrade, we believe that a focus on reducing the emissions from the total motorparc requires consideration of the used car market.

17. Are consumers charged higher rates of insurance for an EV when compared to an internal combustion engine (ICE) vehicle, and if so, are these higher rates justified? Can the Government do anything to mitigate this?

N/A - we have no particular data or views to support this answer.