In recent months the UK government has pledged millions to the electric vehicle (EV) industry, to support rising demand. In turn, the market is witnessing vast improvements in technology and shifts in mind-set. However, underlying concerns remain, as demand appears to be outpacing infrastructure. Athena Chrysanthou asks industry experts in the UK and Europe for their opinions.
A recent survey by LeasePlan reveals a significant number of respondents favouring zero-emission electric driving. It also found that among those planning to lease a car in the next five years, 40% would choose an EV.
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With increased awareness of climate change, EVs are hot on the market, according to Mathijs Van der Goot, global EV lead and expert at LeasePlan.
“What we have seen in recent years is there is a strong uptake of interest of electric vehicles,” he says. “Starting electric is one of the easier ways to tackle climate change, and we have seen that our clients want it.”
Van der Goot notes that the survey also points towards more positive consumer attitudes to electric driving, with more thought given to air quality in towns and cities, and the added benefits of lower running and maintenance costs.
Chris Chandler, associate director at Lex Autolease, agrees, stating that there has been a surge in interest over the past year as more EVs have become available.
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By GlobalData“The big change we have seen in 2019 is more vehicles coming to the market which are more affordable and with greater range,” he observes. “We are now seeing our customers actively looking to put electric vehicles on their fleet policies as a standard offering rather than looking for low mileage urban scenarios.”
Principal consultant at Alphabet, David Bushell, agrees that new cars coming onto the market are creating change. “We have seen some fantastic improvements in the last 12 months, certainly with a lot of new vehicles coming into the market and more to come, but also with the improvements in battery technology in existing electric vehicles giving greater range,” he explains.
With the ability to travel further distances, Bushell believes ‘range anxiety’ is becoming a less prominent issue for EV drivers.
Industry Changes
Stéphane Renie, head of corporate and social responsibility at ALD Automotive, predicts significant developments in the industry in the coming months, both from new technologies and new players.
“There are a lot of changes happening – not in the area of new leasing players coming into the market, but more in the area of a broader ecosystem. New types of players will come into the scene, like new car makers, OEMs, electricity providers or wall box producers.”
A global focus on climate change is rapidly encouraging people to become more aware of the environmental impact of their cars, and therefore influences the attractiveness of an EV, Bushell explains.
“With climate concerns in the UK and the introduction of clean air zones in London as well as many other areas of the UK, businesses are now focusing on their impacts on the environment and looking for alternatives to conventional diesel and petrol vehicles,” he says.
The UK government launched its Road to Zero strategy last year, pledging to make at least half of new cars ultra-low-emission by 2030, and cease sales of new conventional petrol and diesel cars and vans by 2040.
Bushell explains that such initiatives are prompting businesses to be conscious of their impact on the environment, but also, from an operational perspective, to consider EVs as part of their fleet operations.
Environmental issues are growing in public awareness according to Chandler, which puts businesses in a positive position to play their part, as demonstrated by one of Lex Autolease’s customers, Mitie.
“We identified that a decent percentage of its vehicles could potentially go to electric. It is setting a challenging but achievable target that 20% of its light vehicle fleet is going to be zero-emission by the end of next year; that’s between 750 and 800 vehicles.”
This, therefore, serves as an example of a company in the industry putting environmental concerns first, and contributing to the fightback against a growing crisis. It could also serve as inspiration for more companies to follow suit in the future.
Lease or Buy?
Leasing presents more benefits for the customer over purchasing outright, the first reason for which is cost, Renie explains.
“There is still a difference of roughly €10,000 [£8,600] between a battery electric car and an ICE equivalent, so that’s obviously a higher amount to finance, hence the temptation to lease rather than buy.”
He also explains that leasing a car means the user does not have to bear the risk and uncertainty of residual values.
“If you buy such a car you have to bear the risk on the resale value which, in the context of drastic market changes, acceleration of the adoption of technology and technological evolution, comes with a number of uncertainties,” he says. “Leasing the car from a service leasing operator like ALD is one way to neutralise that risk, because we actually bear the risk on residual value.”
Chandler also maintains that cost savings are a significant factor determining the lease over purchase as an EV is cheaper to run.
“It typically costs there or four pence a mile to run an electric vehicle,” he says. “If you are amortising that hire cost over a period, during that time you are making cost savings. It is a much better budgeting scenario.”
Van der Goot agrees that there are many benefits to leasing over buying, but a significant one is being “hassle-free”, with all services included in the car.
“You don’t need an up-front large expense, you have a monthly payment – we take care of all the services, maintenance, repair the tyres,” he says.
Leasing is a preferable way to run an electric vehicle because the lessor has a better understanding of the used car market, and often includes maintenance packages, according to Bushell.
“We’ve been supportive of electric vehicles since 2013, so we understand the ‘second use’ market for electric and hybrid vehicles,” Bushell explains.
“This means we can set appropriate residual values for these vehicles, enabling more people to be able to access these ultra-low- and zero-emission vehicles through affordable monthly rental payments.”
He adds: “Leasing helps get people into these vehicles initially, as well as providing a supply of well-maintained, high-quality vehicles into the used car market after their primary use.”
Infrastructure Issues
In May, Deloitte called for a further £1.6bn investment into EV infrastructure by 2030, saying the UK will need around 28,000 public charge points to sufficiently support projected uptake.
Other industry experts also say that infrastructure is an area that needs to improve in order support ever-growing demand.
Van der Goot notes: “That’s one of the points where we believe we really should step up. The mobility model research shows that the current uptake of electric vehicles really outpaces the available infrastructure, so we need to fix this.”
Though range anxiety has been improved, Van der Goot says “charge anxiety” is a product of a lack of infrastructure.
Renie warns that if electric volumes were to grow 10- or 100-fold immediately, there would not be enough supporting infrastructure, but he believes charging fragmentation of charging solutions should be higher up the discussion topic list.
He says: “Because the charging market is extremely fragmented, even if you have enough charging points you may have to carry five or six different cards to make sure you can charge your car within the charging points. It becomes a headache for the customer.”
A simplified customer journey and experience within the charging ecosystem is something that should be improved.
Chandler agrees that there is currently not sufficient infrastructure to support demand, but there are a number of interesting technologies being trialled to combat this. One example is Zap-Map, an app that shows where all the charging points are in the UK, whether they are rapid or fast chargers, and how quickly they will charge your car.
Another new technology, Vehicle to Grid (V2G) can enable the user to charge their car at home and sell any surplus energy back to the national grid.
Chandler says: “We have the technology, and there are companies doing trials. There are streets where they have put electric vehicles in the whole street with V2G chargers, and they have done local trials so we know it works. We need to do a little more work in regards to having that total solution, but that’s one of the things on the table.”
The ability to charge a car at home is certainly something that may appeal to a younger generation who are more used to the charging culture. As Chandler says: “I think younger generations are less wedded, if you like, to traditional fuels, and because they are used to charging phones and laptops, it’s more logical to bring your car home at night and charge your car.”
The B Word
While government funding in the EV market suggests a positive overall outlook for its future, industry experts are inevitably concerned about the implications for the industry following Brexit.
In September this year, the UK government pledged an additional £400m for on-street electric charging. The scheme looks to encourage more people to choose an EV by making it easier to charge at home.
Industry experts say they are encouraged by the investment that manufacturers are making in EVs, but with Brexit approaching, trade could be affected, as Bushell explains.
“I am trying to resist the B word, but it creates uncertainty in the market and may have an impact on the UK’s ability to access electric and hybrid vehicles in future,” he says.
He notes that while Alphabet is “absolutely committed” to trying to help fleets electrify as many vehicles as possible by 2030 or 2040, this is “totally reliant” on manufacturers supplying these vehicles to the UK in the numbers required, as well as continued government support and incentives for the transition to electric and hybrid vehicles.
As the majority of vehicles come from Europe, China and South Korea, the UK is dependent on these countries still being interested in shipping after Brexit. Society for Motor Manufacturers and Traders chief executive Mike Hawes, penned an open letter to Prime Minister Boris Johnson in July, urging him to avoid a no-deal Brexit and outlining his concerns about trade.
His letter says the success of the UK automotive industry will depend on the outcome of Brexit, and no deal would “result in huge tariff costs and disruption that would threaten production, as well as further undermining international investors’ confidence in the UK.” It adds: “We need a deal with the EU that secures frictionless and tariff-free trade. No-deal Brexit is simply not an option.”
On top of Brexit woes, the industry is also concerned that government grants may be removed, with Transport Secretary Grant Shapps confirming that the Department of Transport plans to scrap the £3,500 plug-in car grant subsidy for EVs.
The grant allows buyers to save up to £3,500 on a new car purchase, but pulling the plug looks increasingly incompatible with the government’s Road to Zero strategy.
Looking Forward
The EV leasing industry is clearly buoyed by new cars and innovative technologies, while the push for climate change is encouraging companies to switch their fleets to electric.
With electric cars also being able to travel further than ever, charge anxiety is slowly becoming a dying problem in the industry; however, it is clear that, in the UK at least, concerns remain centred on political upheaval that could potentially have a significant impact on trade.
Infrastructure seems to be an area that is much improved, but as demand grows, it needs to keep up in order to maintain the attractiveness of EVs.
