Just this week I’ve had more news from our old friends in ‘The Department of No Surprises’ as I learned that the finance companies which lease EVs in the UK are losing millions…One wonders why it’s taken so long for this ‘news’ to be released. I picked up on this about a year ago, although to be fair, it wasn’t confirmed by anybody in a position of authority at that time.
As of this week, The British Vehicle Rental and Leasing Association, BVRLA, has confirmed that its members are losing lots of money on EV leased cars. Naturally, they want the Government to step in and help them out. Par for the course these days?
As anybody with an IQ greater than their shoe-size knows, the depreciation on EVs is far greater than it is on ICE vehicles for a number of very obvious reasons, the foremost of which being the astronomical cost of a replacement battery. The average cost is around £7,300 according to BookMyGarage but go up to £13-15,000 for Tesla models.
Repair costs are also much higher as, in the event of a significant shunt, there is a strong possibility of damage to some of the battery cells which necessitates the replacement of the whole battery. For this reason, EVs are more likely to be written off than ICE vehicles, all other things being equal.
What puzzles me, as it does ‘Geoff Buys Cars’ in this video, is how on earth did so few people see this coming? The logical outcome of skewing the market towards purchase and lease of EVs is that the secondhand market for end-of-lease vehicles is stuffed full of three-year old cars that nobody wants to buy, and the residual value of these vehicles to the finance companies is close to zero. Don’t people do business plans these days?
Will the Government decide to throw more taxpayers’ cash at bailing the finance companies out? I wouldn’t be surprised if they did, although I’d guess that this would be the thin end of a very big wedge as it would require a funding commitment for another ten years – certainly not something which our Chancellor of The Exchequer has planned for. Typing that and keeping a straight face was a challenge….
What irks me is that EV owners have had government subsidies from Day One, directly on purchase price of between £3,500 and £4,500, dropped to £2,500 from 2021 which even applied to cars of £50,000 and over, as if buyers in that price range really needed subsidising by taxpayers.
There is still a grant of up to £350 or 75% towards getting a home charging point installed so that EV owners can make the most of the lower electricity tariffs, always assuming they’re in the 65% of homeowners with off-street parking. EV motorists also get generous tax allowances through business deductions and the tax concessions on corporate fleet leases are significant.
As if the rest of the motorists subsidising EVs via their taxes weren’t already being penalised enough, we’ve been faced with massive increases in insurance premiums which is, in part, the result of the increased payouts from insurance companies for EV repairs and write-offs.
I would suggest that it’s a safe bet that ICE car personal lease/finance costs will also have been raised to try and offset some of the massive losses on EVs. I don’t know this for a fact, but it’s a reasonable conjecture, absent any evidence to the contrary and premised on what we do know about car insurance.
Let me be clear that I am not setting out a case against EV owners who have benefitted from the government subsidies over the last ten years or so. One makes choices premised on the best information available at the time of purchase, and the offers were, and still are, very attractive.
I should also say that I have no rooted objection to EVs as far as cars are concerned, although I’m highly dubious about their application to heavier vehicles such as vans over 2.5 tonnes and HGVs.
My overall position on EVs is quite simple and easily explained. As a marketing man I fully appreciate the need for the best corporate Research and Development in cycles which refresh, improve, and change companies’ product offers.
There are numerous examples of failed products because R&D didn’t get it right, and in the automotive industry the outstanding example of this was the Ford Edsel which was withdrawn from production within one year of its launch in 1958, such were its manifest failings.
In brief, it is my contention that the car makers were cajoled into making EVs by the powerful consensus of governments around the world premised on the absolute certainty of Anthropogenic Global Warming, AGW, and rushed their EVs to market.
Relatively short-notice bans on the sale of ICE vehicles, along with increased fuel and road taxes, as well as the subsidies, completely skewed the markets, and forced manufacturers to rush forward with EV models as quickly as possible, not least because Tesla and, more importantly, a number of Chinese carmakers, were set to dominate the markets.
Ford US have realised, after spending some $13.0 billion, that this was a mistake, and VW, Mercedes, and others are in similar ambiguously unfortunate positions, with only Toyota staying with its Plug-in Hybrid Electric Vehicles, (PHEV), a range which developed from their original hybrid, the Prius. This was a groundbreaking development, much loved by virtue signalers who would keep one on the drive, and the Bentley in the garage.
I would argue that the continued R&D over another ten to fifteen years would have, and probably still will, result in a far more efficient, cost-effective, and resilient EV option.
By the same token, I would argue that the phenomenal improvement in ICE technologies over the last 30 years still has much to offer both in terms of efficiencies and massive reductions in the emissions which are the target of governments, and that these will always be required in parts of the world where the electricity infrastructure and distribution doesn’t easily permit EV use.
It’s worth noting that the greater part of ICE technological development stems from Formula1 R&D and that almost all this innovative work is based in UK. I suppose that this will soon cease to exist with the consequent loss of skills and talent in that specialised workforce. I’ve no doubt that another country will step in to offer a home for this valuable resource and we shall be the poorer for this.
I’m deliberately avoiding the scientific premises which define AGW, and the way that all Western governments and international agencies have bought into this without reservations, and the consequences of these policies. This has been addressed here on FSB by others who are much better equipped to cover the subject, and I’ve been grateful for these valuable contributions to my own knowledge.
The only question in the more general area which I would like to ask, and feel entirely comfortable asking, is where are the Cost Benefit Analyses, CBA, which are usually, and should always be, calculated before embarking on a particular course of action?
The whole Net Zero policy and its ramifications are set to cost trillions of Pounds just between today and 2035, with further costs from that point up to 2050 – Year Zero? (Pun intended).
We are assured by the Government, in particular the Prime Minister and the Secretary of State for Energy and Climate Change, that renewable energy is cheaper than fossil fuels and that our energy costs will be coming down, although they don’t say when, and the ‘how’ is a bit of a mystery.
I have worked on a variety of development projects funded by different agencies around the world for some 25 years. Not once have I encountered a project worth over $10,000 which hasn’t required a CBA from the outset. It’s just not possible to miss this out.
I’ll concede that I’ve seen some very dodgy juggling with the numbers in order to justify projects which should never have been allowed to go forward, and this has usually been done for political reasons with unwritten instructions from on high.
How we find this country in the position of having an open-ended and massive commitment to destroying our energy security and replacing this with technologies which can’t be demonstrated as effective, efficient, sustainable, or consistent is as puzzling as it is alarming.
The fact that this dates back from 2008 and has been implemented by both Labour and Conservative governments, without any coherent challenges, is an indictment of our political class and the Civil Service, along with the entire establishment in both media and the relevant fields in academia.
It would be interesting to see the response were somebody to petition the Government for a Cost Benefit Analysis into Net Zero, although I’d be pessimistic about any worthwhile outcome.
In conclusion, I should make it clear that I’m no expert on the automotive industry and hope that I haven’t made too many mistakes in this exposition, which is based purely on my personal observations over the last ten years.