Sellers and buyers face a torrid time setting values on the latest hybrid and electric cars.
Aside from the myriad of other issues that will affect both the production and adoption of BEVs and advanced hybrid technology, the industry needs to begin to understand what the future value of these cars will look like, and also the level of retail consumer interest.
Without a realistic view of the level of future values, and one based on data and not human decisions steered by OEM market influencing teams, then it will be hard to understand what types of vehicles and technology will retain value, should be produced and therefore what the short and long term running costs will be.
The chart below shows a high-level residual value forecast by fuel type over the next 2 years: –
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Using the average retail price as a % of Original Cost New across the whole market this chart gives a clear view of the future forecast by fuel type at present. It is interesting to note that despite the obvious shortcomings of the transient stepping-stone hybrid technology, the 12 and 24 month forecasts lead the market.
This is since generally speaking the retail consumer understands they are buying an ICE with a small amount of battery power, and they still have the confidence in the engine to back up to whatever battery range the car may have.
BEVs come in second place and the rate at which they depreciate is currently swifter than hybrid to the tune of 5 percentage points in year one and 6 percentage points in year two. The current reason for this is the rate at which the BEV ranges are changing from technological advantages, whether that be for the battery itself or the software management of the whole package.
The total driving range is regularly increasing model by model and as such renders model variants out of date very swiftly and hence triggering a quicker depreciation rate. This will change in the short term and it is therefore likely that the depreciation curves for BEVs will flatten in the mid-term.
It is only by having a clear and transparent view of the rate of depreciation that the OEMS and the wider industry will be able to properly plan the journey ahead to 2030. The development of sustainable and reliable vehicle solutions is critical to meet the target and reduce pollution.
The government will continue to challenge the sector to move faster and it will not be long before taxation incentivization will help to encourage consumers to make the shift to BEVs sooner rather than later but the product, finance packages and running costs need to be there for that to happen.
At the same time as understanding what the road to 2030 will become, the view of the following 5 years is also essential. It will be fascinating to see just how quickly the ICE engine completely disappears.