SUBSIDIES 
for new electric vehicle purchases serve only to reduce second hand values and threaten the viability of the future EV market.
That’s the view of CAP which carried out a pan-European analysis of the impact of EV purchase subsidies.
Due to the cautious market view of electric vehicles, they already depreciate around twice as much as a conventional car, such as the Volkswagen Golf or Ford Focus.
However, CAP’s new report, which will be delivered to manufacturers at this week’s Frankfurt Motor Show, suggests that used values are forced down further by government subsidies.
To compare values in countries with an without EV grants, CAP analysed the used market performance of the Nissan Leaf in the UK, Germany, France and Italy.
Results show a direct correlation between stronger used values in Germany and Italy, where there are no plug-in car grants, and weaker values in the UK and France where new car purchases are subsidised by the government.
The report also revealed that if all subsidies were to be removed, it would widen the gap between new and used values so much that it would threaten the economic viability of choosing a new electric vehicle in the future.
According to the report’s author, Mark Norman, government subsidies for new plug-in car purchases merely serve to create cheaper used electric vehicles.
Norman said: ‘Our analysis of used market values across markets with and without a subsidy clearly shows that grants are ineffective as a means of reducing ownership costs and, worse still, their inevitable eventual removal will cost new EV owners thousands in additional depreciation.
‘This is because the used value is now established in each market and when the subsidy is removed in the UK and France, the additional cost of a new vehicle will never be retained by a higher residual value.’
He added: ‘As it stands, 12-month depreciation levels in the UK already amount to almost half the subsidised new price for a Nissan Leaf. Without the original £5,000 subsidy, total 12 months depreciation over the first year would amount to over £17,000.
‘With average depreciation for a comparable specification diesel Volkswagen Golf or Ford Focus currently standing at around £7,000, this would make the economic argument for buying the Leaf all but impossible to make even with the potential fuel cost savings.’
