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 1. Home
 2. Latest News
 3. Finance
 4. New financing options needed to support EV market: iVendi


NEW FINANCING OPTIONS NEEDED TO SUPPORT EV MARKET: IVENDI


15/11/2023 in Finance
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Car manufacturers and their captive lenders need to find ways to support the new
electric vehicle (EV) sector to overcome growing buyer objections, according to
iVendi.

Factors such as high prices, delaying the EV production deadline to 2035, and
rapidly rising insurance premiums are all causing some potential buyers to lose
confidence in the market.

James Tew, iVendi CEO, explained: “Despite the government’s recent move to set
back the electrification production deadline, existing manufacturer plans and
the EV mandate means that the new market still needs to electrify very quickly.
The rising supply we are going to see will demand it. However, outside of the
company car sector, buyers appear to be increasingly lukewarm.

“There are several reasons behind this. The 2035 postponement itself is likely
to lead to more confusion about EVs and indicate to many people that the whole
subject of electrification is a can that has been kicked down the road. At least
some private buyers who were planning to buy an EV are now probably rethinking.

“Also, we are seeing issues regarding insurance, with premiums for EVs rising
exponentially and even causing some existing owners to reportedly sell their
cars because the cost has become prohibitive. It all creates a high degree of
uncertainty in the minds of people who thought their next car would be
electric.”

Tew added that with large numbers of EVs due to start arriving on the market in
the next couple of years, new ways needed to be found to create more confidence
in electric cars as a proposition – and manufacturers and their captive lenders
had a role to play.

“The obvious route is discounting but in our opinion, the optics of this are
wrong. While there may be longer term, downward price adjustments for EVs as
manufacturing costs fall, it would be damaging if it looked as though what is
essentially still a new technology was being dumped on the market.

“Supporting the future residual value (RV) in order to reduce PCP costs would be
a better route. Obviously, this risk will only be realised if the vehicle is
handed back and within a typical 3-4 year contract, we are likely to see a
recovery in values, anyway.

“Other options include to better promote leasing products where there needs to
be no public disclosure of pricing. However, consumers have a mindset that PCP
gives them all the upside of reward without the risk, and most have enjoyed a
positive experience over recent years with the rise in used car values.

“Personal Contract Hire (PCH) still isn’t the funding method of choice and
there’s much to do to convince the consumer. Ultimately price will be the
biggest driver – making a 3 or 4 year deal comparatively cheaper on a lease
versus a PCP will start to win hearts and minds.

“Insurance is another area that could be tackled by looking at captive insurers.
Offering fixed cost cover over the first two years of the lease would be
relatively cost effective and would help to remove another of the objections
that are emerging among potential new car customers.”

Tew added that buyers may well be surprised at the speed at which the new car
market continued to electrify over the rest of the decade.

“The EV mandate is really going to be the big factor here, with the government
stipulating the proportion of EVs that car makers can sell in the UK. The
targets are really quite ambitious, plus there is a £15,000 per unit fine if
they don’t meet their objective. Supply of petrol and diesel vehicles is going
to dry up faster than many people perhaps imagine, and the impact of the 2035
switch is likely to be limited. By the late 2020s, new car supply will be
overwhelmingly electric.

“For this reason, bringing more confidence to the new EV market is essential.
There is literally no alternative than making electrification work. Increased
acceptance in the new market will also benefit the used market. This will take
time though but is much needed."





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