8:00 am, January 31, 2024
Car manufacturers are set to unleash a series of killer deals in 2024 as the battle for electric car sales really begins to heat up.
A Car Dealer Investigation has found that experts predict a bloody battleground as legacy car makers fight a growing number of ambitious Chinese challengers for the few retail EV car buyers around.
With a tough government-mandated 22% target this year of every car maker’s sales having to be electric – coupled with punishing £15,000 fines for every car they miss – do not underestimate just how fierce this fight will become.
While prime minister Rishi Sunak may have delayed the ban on petrol and diesel cars to 2035 in September, what he didn’t change were those stringent EV targets car makers must meet – and they get tougher every year.
In fact, in just five years’ time, more than half of the cars that manufacturers sell must be electric.
But how do they convince retail customers to switch to EV when there are little incentives to do so?
‘Consumers do want EVs, but not in the number required to hit these targets,’ said Derren Martin, director of valuations for Cap HPI.
Martin said he had already seen discounts of as much as 30% on some EVs from traditional manufacturers, while Auto Trader’s research has found the average discount on a new EV to be nearly 11% – and growing.
‘Discounting is already widespread,’ added Martin.
The battle for EV customers comes at a time when many retail buyers have simply been turned off the technology.
The government delaying the petrol and diesel ban – which is now even further away than when it was first announced – has dropped it further down the news agenda, while problems with public charging have moved it up.
Rupert Pontin, from vehicle data provider One Auto API, said he simply doesn’t believe that consumers are ‘engaged’ with buying EVs.
‘There is still a great lack of clear information on battery range and health, and this does not help confidence in EVs as a whole,’ he said.
‘The negative press coverage whenever we have a cold spell also brings out concerns on both battery range but also the poor charging infrastructure.’
Even the specialists are concerned. Tom Barnard, who is the editor of electric car website Electrifying.com, said: ‘The early adopters have mostly adopted already.
‘Now we are moving slowly into the mainstream – but there is not a great incentive for private buyers to make the switch.
‘It is too big a leap for many motorists currently – especially those who do not have access to home charging.’
Barnard thinks it’s an education problem and that there are actually many buyers out there for whom an EV would be perfect – they just don’t know it.
Curious consumers
Auto Express editor-in-chief Steve Fowler says consumer interest in electric vehicles is still relatively high.
His website’s ‘best EVs’ story consistently achieves ‘huge volumes of traffic’ – but he is also worried that low electric car sales ‘speak for themselves’.
‘Our government has to do more to bring us in line with Europe or it will risk car makers sending EVs to other markets where demand is stronger, therefore undermining the UK’s own targets,’ Fowler told Car Dealer.
‘Otherwise, it’s down to the car makers to employ tried and tested sales tactics – let the low-rate finance and deposit contribution battles begin.’
Most experts believe that the only real way to drive EV sales this year will be to make the deals look too good to be true.
‘More needs to be done to educate consumers on the benefits of EV ownership with a focus on the total cost of ownership saving,’ added Cap HPI’s Martin.
‘Some OEMs offer support for home charger installation with a new car purchase, and those that don’t would certainly reap some benefits from doing so.’
Jyoti Kumar, from market analysts Jato, said car makers will need some ‘compelling strategies’ to encourage EV browsers to become buyers in 2024.
‘We’re already seeing a number of low- or zero-rate finance offers available to buyers,’ added Kumar.
‘And we can expect to see attractive incentives for consumers ahead of March registration.’
Others, such as Karen Hilton, CEO of car buying website Heycar, believe a better incentive for buyers would be improving charging. She’d like to see all car manufacturers and the government work together on solving an issue that’s front and centre of potential buyers’ minds.
Her website asked 2,000 consumers what would most likely encourage them into an EV and 40% of them said ‘more charging points’.
These sorts of deals and big price cuts will be vital if car manufacturers are to hit the 22% target in 2024.
If they don’t, they can buy EV credits from electric vehicle car makers – such as Tesla – instead of paying the fines, so expect the American firm’s coffers to swell as a result.
EV sales targets
Government’s annual EV sales targets as part of ZEV mandate
- 2024 – 22%
- 2025 – 28%
- 2026 – 33%
- 2027 – 38%
- 2028 – 52%
- 2029 – 66%
- 2030 – 80%
- 2031 – 84%*
- 2032 – 88%*
- 2033 – 92%*
- 2034 – 96%*
- 2035 – 100%*
*Target will be set out in future legislation later in the decade.
It’s likely car manufacturers will most likely target fleet deals to hit their EV targets. There are still more incentives to buy EVs for businesses than for consumers, but even then, there’s a limit to how many the fleets can take.
Steve Young, MD of research firm ICDP, said: ‘The focus will be on fleets with longer holding times of around three to four years rather than short-cycle daily rental – and I suspect Motability will also get some great deals on electric cars.’
He revealed that to help boost numbers car dealers are already being set electric vehicle targets with higher bonuses than those available on traditionally fuelled vehicles.
‘The scale of the offers is not enough to persuade a sceptical retail customer,’ he added.
‘They have only been shown to respond to several thousand pounds of incentives when these were on offer from the government.
‘There will therefore also be periodic campaign support from OEMs to dealers to boost electric car sales, particularly towards period ends. All classic stuff.’
Young said that car manufacturers will be able to ‘borrow’ from next year’s targets to hit this year’s 22%, but he warns this could become like ‘payday loans’ and the start of a ‘nightmare’.
SMMT boss Mike Hawes would rather see cash on the table from the government to boost EV demand.
He said: ‘While manufacturers offer a vast range of zero-emission vehicles, demand must match supply.
‘Delivering a buoyant EV market means giving all consumers the confidence to invest, which requires an attractive package of fiscal incentives, mandated infrastructure targets and a consistent message that encourages drivers to switch now.’
Winners?
Picking the winners and losers in what will be the toughest electric vehicle market for years isn’t easy – but the clever money is riding on the Chinese.
MG has already proved that good-value electric cars sell. The brand clocked up more than 81,000 sales last year and a 4.2% market share – beating the likes of Renault, Skoda and Volvo while closing in rapidly on previous top performers such as Hyundai.
And this year will see the likes of BYD increase their footing in the UK further still, along with many other new entrants from China.
‘Chinese brands will be the winners,’ predicted Umesh Samani, used car dealer and chairman of the Independent Motor Dealers Association.
‘They are already making headway and customers are looking at value and are not too worried about the brand.’
John Veichmanis, CEO of Carwow, also thinks it will be interesting to see if consumers ‘set aside’ their ‘traditional brand loyalties’ and are happy to buy from the new Chinese challengers.
He said: ‘Chinese OEMs are investing significantly in their EV product ranges and we know that the likes of BYD have ambitious plans for volumes in the UK.
‘While these new entrants may currently lack brand awareness that has always been critical for selling cars in volume in the UK, we are already seeing huge marketing campaigns in their roadmaps, which will try to overcome this.’
Jato’s Kumar added: ‘It’s important to call out emerging players like BYD. While their registrations may have been low in 2023, the brand is heavily investing in growth. Their sales in 2024 will be significant in influencing the EV targets for competing brands.
‘Conversely, Stellantis, Renault, Japanese brands and Ford may experience a decline in market share.’
BYD will challenge traditional brands for sales in 2024
What will happen to used EV prices in 2024?
With such aggressive marketing campaigns in the new EV market, what impact could heavy discounting have on used EV residual values?
Used electric car prices plummeted last year – with some models losing as much as half of their value in nine months – but is a further fall likely?
ICDP boss Young says this challenge could be tough for manufacturers to manage.
‘If distress pricing affects residual value forecasts, then this will obviously affect finance rates on new cars, multiplying the affordability challenge regardless of the list price,’ he explained.
‘Manufacturers need a story they can sell to the market that their electric vehicle values will not tank in three to four years’ time. If that is seen as a possibility – brand-specific or, even worse, applied across the market – then it is all going to get messy.’
Jayson Whittington, head of valuations at Glass, said new car price reductions on EVs was a concern of his.
‘There is always a risk that a significant price reduction will affect the used market value, but throughout 2023 used electric vehicle values suffered a significant fall – in the region of 36% – so there may be enough of a disconnect from the new car market that a reduction in new price may not fully filter through,’ he said.
‘An encouraging result of residual values falling is that used BEVs have seemingly found a new price point that is proving popular with consumers.’
Auto Express boss Fowler thinks any new car incentives will complicate a difficult market even further.
‘The used market is confused enough as it is, but cheaper new EVs are only going to mean one thing on the used market – prices will drop,’ he said.
Ian Plummer, commercial director at Auto Trader, sees those price drops as a positive.
He said: ‘More affordable supply heading for the used electric market in 2024 means that used EVs will be a viable alternative to brand-new models, which will add further competition for car makers’ ambitions.’
Carwow boss Veichmanis said demand for used EVs ‘remains subdued’ and he is concerned residual values will suffer as a result of ‘aggressive pricing on new’.
‘One of the primary concerns for the used EV market is the false perception that EV batteries have a fairly limited life or that the slightest bodywork damage could write the whole car off,’ he added.
‘More needs to be done to promote the safety of batteries; once there is a greater understanding that they can be repaired or replaced, consumer confidence in the second-hand EV market will grow.’
What does remain clear is that 2024 is set to very much be the year of the EV. Whether it’s in the new or used market, the subject is set to dominate the agenda for some time yet.
