Is demand for electric vehicles really falling?

If recent headlines are to be believed, electric vehicle demand has been in free fall since the autumn of last year. But is this really true?

New car demand has fallen for now

Sales-wise, things look healthy on the new car front with the number of new electric cars registered in the UK rising since the start of 2023 with the Society of Motor Manufacturers and Traders (SMMT) reporting 76,233 new battery electric car sales in the first quarter, up 18.8% on last year’s levels. However, these sales are primarily driven by fleets, with demand from the consumer market falling significantly. In fact, the number of enquiries sent to retailers about new electric cars has fallen 65% year-on-year, and they now only account for 9% of all new car enquiries, compared to 27% at the same time last year.

So, when it comes to new electric vehicles at least, the market has hit some potholes and we need to see more incentives introduced to attract more new car buyers to an electric car.

The story is not so clear on used

When it comes to used electric vehicles, the big news has been about supply with the volume of used electric vehicles entering the market soaring by 229% year-on-year in April.

This oversupply has led to a drop in used EV prices, with prices down 18% year-on-year as retailers look to shift stock. However there are early signs that prices have now stabilised with prices rising in recent week.

But whilst these are issues, there is plenty to be optimistic about when it comes to the used EV market. The falling price of a used EV is good news for consumers looking to make the switch who may have been priced out of an EV due to the higher upfront cost. Over one in four used EVs on our marketplace are now priced at under £20k, up from just 7% in August, opening up the prospect of EV ownership for many buyers.

Whilst EVs do remain more expensive than their petrol or diesel counterparts, these lower prices do appear to be attracting more buyers with overall demand for used EVs seeing strong growth through 2023. In fact, demand for used EVs was up 39% year-on-year in April. This rising demand also means that EVs are starting to sell faster, a key consideration for retailers when deciding what vehicles to stock. The average time it takes for a retailer to sell an EV was just 40 days in April, down from 45 days the month prior.

Whilst there are certainly reasons to be positive about the used EV market, there are still many challenges that need to be overcome to drive mass adoption of EVs and alleviate the significant oversupply of used EVs that we are currently seeing on the market. Such challenges should be expected as the market is in an early phase of maturity, so it will take time for it to behave in the way that we are all used to. With such volatility in supply and demand, it’s crucial to use live market data to ensure you have an accurate view of what’s happening in the sector as it matures.

So what can be done to drive adoption right now?

With price parity many years away, we need to see more incentives to make EVs affordable to all in the near term. We believe this can be achieved by:

·        Removal of VAT on the purchase of used electric vehicles.

·        Reforms to allow bundled finance packages including the vehicle, charge point and energy tariff in a single monthly payment.

·        Lower or interest-free interest rates need to be introduced on new EV financing deals.

 We also need to see the cost of private and public charging become aligned to attract those without the option of a home charger i.e. no off-street parking, with VAT needing to be equalised across public and private charging to entice buyers who may need to rely more on public charging.

Lower prices for both the vehicle and charging will help to address consumer concerns about the higher upfront costs of EVs and help to make a stronger case for EVs being the cheaper fuel type to own, with lower running costs and a comparable upfront price to that of a petrol or diesel an enticing prospect for consumers.

But the price is not the main concern consumers have when it comes to used EVs. In fact, after upfront cost concerns, the main concerns consumers have around used EVs all relate to battery health. Specifically, there are concerns around degradation and understanding charging terminology including battery capacity with 40-45% of consumers in our latest survey citing charging concerns and 40% citing concerns about battery life as the reasons why they would not own an EV. Furthermore, 61% stated that, in order for them to consider an EV they need to know that the batteries will last, with 52% needing to know that the vehicle can be charged quickly and easily. Consumers, therefore, need to have access to a common standard on battery health and charging terminology so that they can easily understand the reality of battery life in an EV.