Australia’s used market for electric and hybrid vehicles needs to improve in order to enable transition from internal combustion, an expert says.
Johan Verbois, managing partner of planning and implementation firm 5S Consulting, says enthusiasm for electric and hybrid vehicles won’t be the only factor that increases uptake and points to the business case as a major barrier.
He says even though people love the feel and look of driving an electric vehicle which is quiet and doesn’t emit greenhouse gases, the market needs to facilitate their uptake.
“You need the range, yes, but you also need the cost of ownership to make sense,” he says.
“The most expensive part of EV ownership is depreciation in residual value, what people want to pay for the vehicle at the point of on-selling prohibits or enables whether fleets adopt them,” Verbois explains.
He says the ownership cost of parts like tyres may be mixed because while they’re not replaced often, the tyres themselves can be dearer due to low demand.
“They’re not mass-produced like petrol/diesel vehicle tyres, so can cost more to make and supply, but as more models become available and share profiles and compounds, cost will come down,” Verbois says.
“You can also argue the cost of electricity is comparably good compared to the price of fuel,” he adds.
Johan Verbois, 5s Consulting.
But Verbois highlights the work needed to improve the used market is holding the supply and demand of non-internal combustion vehicles back.
“Residual value is only determined by one person, the used buyer,” he says.
“Fleet management organisations try to change this, but ultimately it comes down to how much someone can afford or is willing to pay for the electric or hybrid vehicle,” he says.
Presenting at the 2019 Australasian Fleet Conference this morning, Verbois explains how Poland’s 20% discount on the list price has drastically improved the residual value of the used EV market to make transitioning a more economically viable option, which improves availability for used buyers.
He says the percentage of residual value is almost the same comparing petrol vehicles to a battery-electric vehicle, at 47% to 45%. However, the residual value in dollar terms changes drastically from $21,000 (EV) to $14,700 (petrol).
Data provided by Car Cost Expert, shows EVs have higher depreciation because they have a higher list price, and Verbois says it’s interesting how petrol vehicles also have high depreciation, albeit with a greater mix of factors – 69% of depreciation in EVs compared with 46% in petrol cars.
Verbois points out the lack of confidence the used-car market consumer has in stepping away from petrol and diesel.
“We need to give people confidence in the used EV market – this is crucial,” he stresses.
“If people have any doubt, they will stay with what they know. We need to adapt the customer’s journey.”
