Automotive Blog

Dealing with ‘e-used cars’ (used EVs) is challenging for retailers so far, although things might change for the better in the not-too-distant future …

CG Blog

For the time being, the good news for used car retailers is that the vast majority of used battery electric vehicle (BEV) buyers prefer to deal with them as professionals, rather than purchase their car from the private to private market.  An analysis of used car sales channels split by fuel type in France and Italy in 2017 shows that more than 80% of French and Italian ‘e-used car’ buyers prefer to deal with professionals.  For internal combustion engine used cars, this share is around 35% on average in France and 43% in Italy.
The bad news is that retailers already involved in this market segment often describe the e-used car sales process as being long and tough, or at the very least longer and tougher than that they are used to with used cars with traditional powertrains.  The main things retailers complain about are:
• Firstly, they have to understand why the customer has decided that they want to buy a used BEV, and evaluate their ‘electro-compatibility’
• Due to all the technology in the product, sales staff need to be able to answer a lot of questions, and be convincing
• Although the range of BEVs – even those of the first generation – will probably fit with the average daily distance driven by most buyers, the battery range remains the main customer perception obstacle to be overcome
• Retailers have reported that the selling process of a used electric vehicle is also very demanding in terms of administration of battery lease contracts and/ or wall box installations
• The battery lease is itself an issue for some retailers.  A number of National Sales Companies (NSCs) and car manufacturers (OEMs) have separated the acquisition of the car from that of the battery.  And whilst battery leases might appeal to NSCs and OEMs, allowing them greater control over the battery, they appear to cause significant issues for retailers.  One of the key concerns is the significant impact that a battery lease has on the residual value (RV) of a BEV.  In the UK, one independent used car operator quoted the difference in RV for a Renault Zoe with an owned battery vs. a leased battery as being around £6,500, dropping from £11,000 to £4,500.  At the same time, battery leases also undermine margin for retailers – the battery leasing fee is invoiced by the leasing company whilst the car is still in the retailer’s hands (although now at a lower rate)
• Finally, it is sometimes challenging for retailers to find a finance provider willing to lend, as illustrated by this quote coming from another UK used car retailer interviewed as part of our research: “Our finance partner has now stopped lending against BEVs, a critical factor is confidence around the battery life and replacement cost at the end of the finance term, say 6 years, at or close to end of the battery warranty”.
All these issues might prove to be constraints to e-used car market growth, since untrained or unmotivated salespeople might well be more inclined to close a deal for a used ICE car instead.  To avoid this behaviour, some dealer groups have implemented specific incentive policies for both new and used EV sales.
Because of the issues with residual values, and the tough selling process for BEVs compared to ICEs, many large independent retailers are currently reluctant to offer used BEVs.  Looking at Motorpoint for example, one of the largest UK used car retailers focused on nearly new used cars, illustrates the problem:  out of over 5,500 used cars in stock, just a single vehicle was a BEV.  This same situation extends to the majority of the large used car retailers in the other big European markets.  Looking at the number of used cars in stock, and the percentage of them that are used EVs, for the 5 largest used car retailers in the EU-4 (France, Germany, Italy, UK), we found a high of 0.1%.  It is clear that many big used car players have no, or only marginal, current interest in stocking used cars.
If their degree of involvement is typically low so far, most used car retailers nevertheless believe that the e-used car market will grow.  They base their belief on a combination of factors which together draw a virtuous circle:
• Used car retailers, like many other operators in the market, feel that, as a whole, a positive change in customer mindset is coming with regard to EVs
• Thanks partly to the fact that worries over battery reliability have been removed
• In the EU-4, most e-used car customers are considering a BEV as the second car in their household
• And even 1st generation EVs have a range which fits with most people’s daily commuting needs
• In addition, for those wanting to benefit from a higher range or willing to have a full capacity battery, retrofit is now available for some brands
• In any case, the industry expects a strong range increase in the future.  This will clearly be the tipping point for used car retailers, and more broadly for all types of used car operator
• Once the used car market will be fed with greater volumes of longer range electric cars, the main obstacle will have been overcome
Once this happens, more buyers will become e-used car buyers, the market will grow, and then will also become ‘just another used car market’…

Post a comment

Blog view options