Electric vehicle (EV) leasing costs in Europe have more than doubled over the past three years, driven by plummeting resale values that are putting pressure on leasing companies. This trend threatens to stall Europe’s electric transition, according to a report by Reuters.
Leasing Companies Face Mounting Pressure
Tim Albertsen, CEO of Ayvens, one of Europe’s largest auto leasing firms, warned that if regulators push too hard for rapid electrification, leasing companies might exit the market entirely. “If we were pushed very, very hard, that everything has to be electric too soon … my shareholders will say ‘we don’t want to take the risk’ and we’d be out of the market,” Albertsen stated.
The Role of Leasing in Europe’s Auto Market
Leasing companies play a crucial role in Europe’s auto market, with 60% of new cars being leased. For EVs, this figure is estimated to be as high as 80%. In markets without EV subsidies for private buyers, corporate fleets dominate even more. For instance, in Britain and Belgium, individuals accounted for just 23% and 8% of new EV purchases respectively in 2023.
Factors Contributing to Falling Resale Values
Several factors have contributed to the decline in second-hand EV prices:
- Tesla’s price cuts
- Concerns about charging infrastructure
- Battery life issues
- Influx of more affordable Chinese EVs
According to data from Autovista, resale values for EVs in Germany in early July were 24% below pre-pandemic levels and 30% lower in Britain.
Leasing Companies Adapt to Market Changes
To mitigate risks, leasing companies are adopting various strategies:
- Extending lease periods for EVs
- Leasing EVs multiple times at more affordable rates
- Keeping EVs in their portfolios for longer periods, up to eight years
The Impact on EV Adoption
The increase in leasing costs could potentially slow down EV adoption in Europe. In Germany, Europe’s largest auto market, EV sales fell 16.4% in the first half of 2023 after the government abruptly ended subsidies for consumers in December.
EVXL’s Take
The challenges faced by leasing companies in the EV market highlight the complexities of transitioning to electric mobility. While these hurdles may temporarily slow EV adoption, they also present opportunities for innovation in the leasing sector. As we’ve seen in recent Tesla news, manufacturers are continuously working to improve battery technology and reduce production costs, which could help stabilize resale values in the long term. The industry must work together to find solutions that balance the needs of leasing companies, consumers, and environmental goals to ensure a sustainable transition to electric vehicles.
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