Improvement Needed for H/EV Used Cars

The H/EV second-hand market in Australia needs to improve for the nation to move on from internal combustion engines.

Johan Verbois, Managing Partner from 5S Consulting, has said that H/EVs need more than just optimism and enthusiasm for uptake. The adoption of the vehicles is well supported by great selling points – the feel of driving a quiet, electric vehicle which doesn’t emit greenhouse gases. The car needs to be reliable with range, but the cost of ownership must also make sense.

“The most expensive part of H/EV ownership is depreciation in residual value, what people want to pay for the vehicle at the point of on-selling prohibits or enables whether fleets adopt them,” Verbois explains.

He says the cost of parts, like tyres, may be more expensive due to lower demand for the product.

“They’re not mass-produced like petrol/diesel vehicle tyres, so can cost more to make and supply, but as more models become available and share profiles and compounds, cost will come down,” Verbois says.

“You can also argue the cost of electricity is comparably good compared to the price of fuel,” he adds.

Verbois also says there is improvement needed for the second-hand market, where supply and demand for H/EVs is causing limitations on the growth of the segment.

“Residual value is only determined by one person, the used buyer. Fleet management organisations try to change this, but ultimately it comes down to how much someone can afford or is willing to pay for the HEV,” he says.

As part of his presentation at the 2019 Australasian Fleet Conference, Verbois said that Poland’s 20 per cent discount on the retail price has dramatically improved the value of the second-hand H/EV market, to make transitioning a more economically viable option, which improves availability for used buyers.

He says the percentage of residual value is almost the same comparing combustion engines cars to a battery-electric vehicle, at 47% to 45%. However, the value in dollar terms is quite significant – from $21,000 (H/EV) to $14,700 (petrol).

Data shows H/EVs have higher depreciation rate because of the higher retail price which sits at about 69% compared with 46% in petrol cars.

There is also a lack of confidence by consumers about moving into second-hand H/EVs says Verbois, and this needs to be improved.

“If people have any doubt, they will stay with what they know. We need to adapt the customer’s journey.”


28 May 2019

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