Supplementary evidence from Phill Jones (ELV0126)

September 6 - Session1, Panel 1: Phill Jones – Chief Operating Officer motors.co.uk

Could you expand on the meaning of ‘getting the second-hand market to work’ for EVs. Is that around reducing the cost of second-hand cars, increasing the availability of second-hand cars, or addressing barriers to people’s trust in second hand vehicles?

This point was largely around the fact that the used EV market is quite challenged at the moment with ongoing pressure on supply of all fuel types but especially EVs.  The focus of incentives has been on new cars and, whilst this is important for future supply, without simultaneous support for the used market, you only add to the inertia in the used EV market.

Key challenges for the used EV market (more in our written submission), include:

• Falling values of used EVs - 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 greater 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. 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.
• 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.

Could you reflect further on whether the current drop in used EV prices is a positive or a negative development in your view? Would you (motors.co.uk) like to see a reduction in the differential between new and second hand EVs or not?

In the medium-long term, the drop in used EV prices is important to make EVs more affordable.  There is currently too much of a premium on buying an EV.

However, in the short-term, the volatility (and general) reduction is providing an additional barrier to dealers who do not want to invest in an asset for stock that is falling in value.  And for consumers, they are more likely to delay their buying decision which reduces demand for used EVs.

Overall, it is important that EVs become more affordable to consumers.  We just need to be mindful of consumer and dealer economics along the way.

On the subject of European EV targets. Are there benefits to the UK aligning with Europe’s more flexible targets? Does it cause any problems with the UK going early or is sticking to any targets set more important?  

• We do not have any particular view on whether the EU’s targets are better than the UK’s.  That said, we are nervous about any changes that provide further ambiguity to the EV transition.  Whether the UK’s 2030/35 targets are the right ones is complicated and out of our expertise, but we do believe that removing them would further confuse the industry unless it was very well communicated. 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.