Over the past three years, leasing companies in Europe have doubled the prices of electric car leases due to low resale values. This increase in prices is a concern for the industry as some companies are considering quitting the business altogether if regulators push for a rapid transition to electric vehicles. Leasing companies play a crucial role in Europe, with 60% of new cars being leased, and this percentage is even higher for electric vehicles, estimated at 80%.
The depreciation of vehicles is a key factor in determining lease prices, and leasing firms take a financial hit when second-hand prices are lower than anticipated. Factors contributing to the decline in second-hand electric car prices include price cuts by companies like Tesla, concerns about charging infrastructure and battery life, and the availability of more affordable Chinese EVs. As a result, resale values for EVs in Germany and Britain have dropped significantly compared to petrol models.
Leasing companies have felt the impact of low EV resale values, with some reporting losses and having to increase prices to mitigate the risks. Companies like Hertz and Sixt have faced financial challenges due to the slump in resale values, prompting automakers to provide cash compensation to leasing firms. The overall trend in Europe shows a decline in EV sales after the government cut subsidies for consumers, leading to concerns about the industry’s future resilience.
In response to the challenges posed by low EV resale values, some leasing companies are adjusting their strategies by leasing EVs for longer periods and offering more competitive rates. However, concerns remain about potential losses, prompting companies to seek insurance coverage for guarantees on residual values. The European Commission’s consultation on accelerating EV adoption by corporate fleets has raised concerns among leasing companies about the possibility of mandatory EV sales targets.
While environmental groups advocate for a faster transition to electric vehicles to reduce emissions, leasing companies fear that mandatory targets could exacerbate the risks they already face. The outcome of the European Commission’s consultation remains uncertain, as the fate of the EU’s 2035 ban on fossil-fuel cars is also in question. Nonetheless, leasing companies are preparing for potential changes that could impact their operations and pricing structures in the future.
