Article Type: Insight

BEV residual values struggle in UK used-car market

Jayson Whittington, head of valuations in the UK for Glass’s (part of Autovista Group) discusses how residual values (RVs) have developed in the UK so far in 2023.

Demand for used cars has not dampened in the UK, despite consumers experiencing significant financial pressures due to the rising cost of living. Retail activity in the first quarter of 2023 was buoyant, which in turn led to busy wholesale channels as dealers sought to replenish stock more frequently.

At auction houses, demand outstripped supply throughout March, which led to Glass’s average RV for a three-year-old car to increase by 1.4% in April, according to Autovista Group’s monthly market dashboard. A year-on-year comparison shows that RVs have increased by 5%.

There was a difference in fuel types when it came to RVs in April however. Petrol cars experienced a greater increase of 2%, while diesel values rose by 0.7% and hybrid models grew by 2%. Only plug-in vehicles bucked this upward trend, with plug-in hybrids (PHEVs) falling by 0.1% and battery-electric vehicles (BEVs) falling 9.7%. BEVs now sit 14.1% lower than they did in April 2022.

The chart below shows the development of residual values as a percentage of retained list price (%RV) since January 2021, split by fuel type. All RVs rose significantly as the market began to experience strong retail conditions coupled with reduced used-car supply throughout 2021. This was the result of severe delays in new-car production caused by COVID-19-related labour and component disruption, which saw fewer used cars enter the market due to contract extensions and a smaller number of part exchanges.

%RVs of 36-month-old cars by fuel type, January 2021 to April 2023

BEVs struggle on used-car market

It appears the used-car market began to correct downwards from the second quarter of last year but recovered again as supply eased once more. Except for BEV models, values have been relatively stable ever since. While BEV values have fallen sharply since the final quarter of 2022, the average RV remains higher than in January 2021, due to the upward trajectory experienced throughout 2021 and 2022, thanks to high demand and poor supply.

Hybrid models continue to outperform all other fuel types, retaining a greater percentage of original cost price at three years of age. At 72.7%, values are a staggering 25 percentage points higher on average than BEV models, which are currently performing the worst. Although, for context, the difference is only £391 (€450), in favour of BEVs, and perhaps that underlines a part of the issue.

BEVs are far more expensive to buy when new than other fuel types. However, the used buyer is not prepared to pay a large premium for a vehicle that offers few benefits over internal-combustion engine (ICE) and hybrid alternatives, plus they are no longer in short supply.

There remains very good retail demand for used BEVs, demonstrated by Autovista’s sales-volume index which measures the level of retail sales. It shows a massive sales increase of 276% compared to April last year. However, demand is failing to keep pace with the huge increase in supply.

Selling BEVs takes dealers longer

The average number of days it took a dealer to sell a used car reduced in April, falling 1.8 days to 38 days. This was almost two weeks less than 12 months ago, underlining just how buoyant retail activity has been. PHEVs and BEVs took much longer for dealers to sell at 49 and 53 days respectively, with hybrids taking 40 days, diesel 39 days and petrol leading the way at just 36 days.

The length of time it takes to retail a BEV will be a concern to dealers. At 53 days, that is 15 longer than the average, which brings with it an additional potential risk in the form of two costly book drops. It is therefore easy to understand why dealers have become cautious and auction hammer prices have been in decline. It is likely that rather than keep BEVs in stock, dealers will wait for a commitment from consumers before buying from wholesale channels, especially as there is no shortage of BEVs on offer.

Changing expectations

At the beginning of the year, Glass’s expected the rising cost of living and further planned increases in energy costs to have a negative impact on used-car sales and RVs by year-end. It was anticipated that RVs would decline by around 5%, following on from last year’s fall of 2.5%. Even with this fall, the value of used cars would remain high due to the approximately 30% rise in RVs in 2021.

However, with demand outstripping supply and no obvious increase in stock on the horizon, this expectation has changed, with values now anticipated to end the year in line with December 2022. There will of course be exceptions to this, in particular BEVs, where supply continues to outstrip demand and values remain volatile.

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How are UK battery-electric vehicle residual values developing?

Jayson Whittington, head of valuations at Glass’s (part of Autovista Group), discusses the development of battery-electric vehicle (BEV) residual values (RVs) in the UK.

The UK’s used-car market returned to seasonal norms in January, with an uptick in demand. Although the month began slowly, wholesale activity ramped up as the month progressed. The Glass’s valuation team observed auction conversion rates approaching 80%, something not seen regularly throughout 2022.

Demand was strong across most fuel types in January except for BEVs. It appears there has been a sharp increase in used BEV volumes according to Autovista Group’s Monthly Market Update for January. The active-market volume index, which monitors the volume of retail cars on sale, shows a rise of 41.7% compared to December 2022. Compared to January 2022, there has been a staggering increase of 700%.

It should come as no surprise that significantly more BEVs are entering wholesale channels. The following chart shows the growth of BEV registrations over the past few years. The rise has been rapid and coincides with attractive benefit-in-kind taxation rates that have encouraged many company-car drivers to make the switch to electric.

Despite the much-discussed component shortages that led to severe new-car production delays, BEV registrations increased again last year. Manufacturers continue to prioritise the production of their electrified models as it helps them meet strict and potentially costly emissions targets.

Rapid rise continues

The used-car wholesale market has started to see a large volume of BEVs that were registered in late 2019 and 2020, de-fleeting from lease contracts. In 2020, BEV registrations increased by around 186% compared to the prior year. This rapid rise has continued, meaning there is the potential for BEV RVs to come under additional pressure should demand for used examples fail to keep pace with supply.

As a result of the recent volume uplift, the RV performance of BEVs already suffered in January. The final quarter of 2022 was also poor and as a result, values have fallen sharply in recent weeks. The average value of a three-year-old BEV in January sat at 59% of the original cost-new price, a fall of 6.6% compared to December.

BEV values were reasonably high throughout 2022, as can be seen in the following chart, which shows the average value of a three-year-old car since 2020. BEVs benefited from a spike in interest from retail consumers and businesses looking to avoid waiting up to a year for a new model. Values began rising significantly, although they have been on a steady upward trajectory since February 2021.

Although BEV values are potentially facing a correction, they are only narrowly behind the average when expressed as a percentage of the original price. At three years of age, values are 4.9% higher than in January last year.

Consequential consumer confidence

Looking ahead to 2023, the UK’s economic outlook is a factor of concern when considering how RVs will develop in general. It seems certain that consumer confidence will be affected by the continuing cost-of-living crisis and the Bank of England's recent 0.5% rise in interest rates. This puts the rate at 4%, which will be an unwelcome development for many.

However, March this year sees the third anniversary of the beginning of COVID-19 lockdowns in the UK, which signalled the start of major new-car registration disruption, together with serious supply constraints. In 2020 alone, around 680,000 fewer cars were registered than in pre-pandemic 2019. The knock-on effect on the used-car market this year will be even fewer models entering wholesale channels at the end of three-year contracts.

Glass’s expects that while demand could be affected by falling consumer confidence, used-car constraints are likely to result in a fairly balanced supply and demand dynamic, with values being somewhat protected as a result. That said, used-car prices remain at a high level as the average value of a three-year-old car increased by around 30% in 2021 and only fell back 2.5% in 2022. Glass’s expects the average value of a three-year-old car to drop around 5% in 2023, which will still see prices remaining relatively high. However, BEV values are expected to fall by more.

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High risks and high rewards of the agency model for new-car sales

Christof Engelskirchen, chief economist of Autovista Group, discusses the implications of the agency model for new cars and whether the anticipated benefits outweigh the challenges.

All the disruptions that have tormented the automotive industry over the past three years have also served as an incubator for the digitisation of the car-buyer’s customer journey. There is little debate that the new blueprint in car buying is omni-channel, with the desired customer journey between channels being truly seamless and the buying experience haggle-free.

Several automotive brands are on board with this view and are in the process of implementing the ‘agency model’ for their car sales and distribution. This either means transitioning existing dealer contracts into the new setup, possibly initially only in parts, or setting up this model from scratch.

In principle, under the agency model the carmaker takes over full ownership of the information, pricing, and contracting parts of the value chain. These parts will largely take place in an online environment. The ‘agent’ (previously dealer) maintains a physical environment for customer interaction, consults the buyer in the process, offers test drives, and deals with handover logistics. Only with a very clear differentiation around these roles can a truly seamless, haggle-free customer journey be established.

Roles of the carmaker/national sales company (NSC) and agent in the agency model

In the past, the carmaker was kept out of the loop on final offer prices and contractual arrangements. The customer relationship was held almost exclusively by the dealer. De facto, OEMs did not know who their customers were. The dealer negotiated the final price and bore the asset risks for demonstrator models, as well as either fully or partially for cars returning as part of leasing/PCP-finance arrangements. They also bore any default risk associated with their customers.

Agency model enables pricing discipline

Traditionally, OEMs have rolled cars off the production line and dealers have absorbed the volumes and sold them. At times of overcapacity, and with volume bonuses and dealers pooling supply, the consequences were often heavily discounted cars, which had negative implications for margins and residual values (RVs), which in turn again negatively impacted margins.

Under the agency model, manufacturers absorb the asset risks for all cars they produce as they are the contracting partner. They also have access to all the information that previously only the dealer had. An expected benefit for the OEM under the agency model is full control over pricing and discounts, which could result in lower new-car discounting. Low discounts are an impactful driver of superior RV performance of a vehicle and support OEMs throughout the virtuous cycle of high transaction prices à stable RVs à low subsidies in leasing contracts à positive bottom-line impact.

There exist numerous variations to agent roles and financial rewards. They receive a provision for every sale that they are involved in and receive demo cars for test drives. They could receive rewards for administering test drives, and when they hand over the car. They might get further kickbacks, for example, related to customer-service evaluations.

Changing relationships in the traditional (left) and agency (right) models

Substantial challenges for agency model

The agency model brings the OEM much closer to the customer, and enables them to apply pricing discipline, but there are substantial challenges around its application as well.

Carmakers’ balance sheets massively expand under the agency model, as they hold all assets until the sale. This problem becomes aggravated as the trend to leasing/PCP-finance arrangements is rising, adding more assets and asset risks to their balance sheets.
There is a palatable risk of the agency model resulting in a loss of entrepreneurial spirit for the dealer/agent.
Customer loyalty may now be built at an OEM level but is possibly lost at the agent level.
At times of low supply and high demand (seller’s market), it is easy to control and dictate prices for new cars; once supply pressures ease and we possibly transition towards a buyer’s market, the agency model might lack agility and flexibility. At the very minimum, it requires a build-up of staff, pricing intelligence, and powerful workflow solutions at OEM level.
Especially with hybrid models, where some cars are distributed via the traditional dealer model and some via the agency model, OEMs may risk margin as they bear new costs and investments, while not being able to fully benefit from anticipated efficiencies around the agency model.
Volume is at risk if cars are wrongly priced. With more and more OEMs adopting the agency model, price transparency and comparability rises. A non-competitive price position may result in a loss of a sale. Mainstream brands may be more exposed to this risk than premium brands, as they require a higher asset turnover.
There are new areas of conflict between OEMs and agents. The latter bears lower financial risks but still substantial ones. Should a sale not conclude because cars are priced wrongly, or the system is down, the agent’s profit and loss (P&L) is directly affected by this, as they cannot counter flexibly like in the past.

Risks and opportunities for the application of the agency model

Agency-model advocates expect it to be the only setup capable of truly enabling an omni-channel, seamless, and haggle-free customer journey. It is promising but objectively presents new and substantial challenges that are difficult and possibly expensive to tackle. As many of the world’s largest automotive groups roll out an agency model, there will be opportunities to evaluate whether it delivers the expected benefits.

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Will there be enough e-fuels to save the internal-combustion engine?

E-fuels could prolong the life of the internal-combustion engine (ICE), keeping the technology relevant in a world that requires more sustainable transportation. But will there be enough of these synthetic fuels to go around?

Armed with new analysis, green group Transport and Environment (T&E) claims there will only be enough e-fuels to power roughly 2% of all the cars on Europe’s roads come 2035. However, the eFuel Alliance, an organisation committed to carbon-neutral fuels, points to a higher percentage being available sooner.

A fraction of the fleet

Combining hydrogen and CO₂, the power-to-liquid process produces synthetic hydrocarbons, an artificial version of the chemicals found in fossil fuels. A refinery process then separates out different e-fuels for specific applications, including automotive and aviation.

Proponents claim there e-fuels can be used in new and used vehicles as either a drop-in solution to be combined with fossil fuels or as a stand-alone power source. With the impending 2035 100% carbon-emission reduction target set for new cars in Europe, these synthetic fuels hold the potential to keep ICE models on the road.

But using data from Concawe, the refining industry’s research unit, T&E forecasts that only five million of the 287 million cars on Europe’s roads in 2035 will be able to take advantage of e-fuels. This 2% figure would only rise to 3% if the existing car fleet switched to plug-in hybrids (PHEVs).

‘Trojan horse’

The environmental group used this forecast to evidence its belief that e-fuels are a stalling tactic deployed by oil companies and engine makers to avoid the transmission to zero-emission technology. It urged EU lawmakers to resist the temptation of a synthetic-fuel loophole in emissions targets rules.

‘E-fuels are presented as a carbon-neutral way to prolong the life of combustion-engine technology,’ said Yoann Gimbert, e-mobility analyst at T&E. ‘But the industry’s own data shows there will only be enough for a tiny fraction of cars on the road. Lawmakers should close the door to this Trojan Horse for the fossil-fuel industry.’

T&E explained the industry’s forecast was based on e-fuel production in the EU but included carbon captured from industrial emitters. Synthetic fuels created with carbon from fossil-fuel sources could potentially lock in investment into fossil sources, slowing down decarbonisation. It said the projections also fail to clearly define how much renewable energy would be used during the creation of the e-fuels.

The group also pointed out that industry plans to import e-fuels are unrealistic as the production sites and standards required for certification do not exist. Taking synthetic fuels from other countries might also delay decarbonisation efforts in less developed economies.

‘In Europe, e-fuels for cars would suck up renewable electricity needed for the rest of the economy,’ said Gimbert. ‘Synthetic fuels that are made in Europe should be prioritised for planes and ships, most of which cannot use batteries to decarbonise.’

‘Clear intentions’

But Dr Tobias Block, head of strategy and content at the eFuel Alliance told Autovista24 that T&E’s intentions were clear. ‘Their position is an all-electric road sector without any role for climate-neutral combustion engines,’ he said.

Block went on to level a collection of criticisms at T&E’s 13-page publication. He pointed to eFuel Alliance analysis, which found that a mix of at least 5% synthetic fuels will be possible in the European market come 2030. ‘5% e-fuels are enough to power 40 million vehicles and to avoid 60 million tonnes of CO₂ emissions,’ he said. This higher level is also backed by members of the alliance, who claim to be capable of increasing production capacities to meet the goal.

Block also pointed out that the Concawe study does not include the import of e-fuels to Europe. ‘E-fuels will be mainly produced in regions, in which renewable electricity generation is cheap and potentially abundant. For that reason, first projects are announced in Chile, Australia or the Middle East,’ he said. So, if these production locations are ignored, the availability of synthetic fuels would be much lower.

Furthermore, the Concawe study does not exist in isolation. There are many other pieces of research that have considered the global production of e-fuels. ‘For example, the Finnish LUT university foresees a huge potential of e-fuels already in 2030,’ Block said.

He explained that if synthetic fuels are not available, existing vehicles will continue to rely on those derived from fossils. To secure a place among the mobility systems of the future, e-fuels will continue to be dependent upon a supportive political framework, one which is not always present. So, the future of synthetic fuels appears undecided as arguments over supply, sustainability, and simple potential rumble on.

This content is brought to you by Autovista24.

Cap on energy prices averts crash in UK used-car prices

Set against a backdrop of 2021’s exceptional used-car market performance, when demand drove vehicle residual values (RVs) to unprecedented levels, the first half of 2022 was rather downbeat. Dominated by a lack of retail demand, trading in the wholesale market was poor, with dealers not needing to replenish stock as frequently.

The UK’s Society of Motor Manufacturers and Traders (SMMT) reports that 3.5 million used cars changed hands during the first half of 2022, down 8.3% year on year. However, the market has endured a reversal of fortune, whereby the volume of transactions was down 18.8% in the second quarter, after growth of 5.1% in the first.

Growing appetite for zero-emission cars

‘It was inevitable that the squeeze on new-car supply would filter through to the used market. Despite this, Britain’s used-car buyers clearly have a growing appetite for the latest low- and zero-emission cars, and we need a thriving new-car market to feed it,’ commented SMMT chief executive Mike Hawes.

Initially, auction hammer prices held up well this year, but they came under pressure in the second quarter, resulting in RVs suffering heavier depreciation than seen for over 12 months. In the third quarter, wholesale activity began to improve with hammer prices stabilising. Glass’s values stabilised too, staying broadly level in July and August before falling just under 0.5% in September.

Weak demand and poor supply have been evident in recent months, and this unusual dynamic is expected to continue in the final quarter of 2022. There is a risk that demand will fall further due to the upcoming festive period. The financial burden that accompanies the season could add to the pressure that households are already contending with due to the mounting ‘cost of living crisis’ that has developed throughout 2022.

However, the outlook for the fourth quarter is not as bad as it could have been, thanks to the UK’s new Prime Minister, Liz Truss, throwing in an economic lifeline in the shape of a proposed cap on energy bills. Without this, customers without a fixed energy deal would have faced sharp increases in bills due to the end of the UK energy regulator Ofgem’s current energy-price cap and huge increases in global energy prices. This would have had a major impact on disposable incomes, with bills expected to have more than doubled for many consumers.

A financial shock of this nature could have led to a significant drop in consumer confidence, which is already at an all-time low. Although it looks likely that this will be averted, it is important to remember that many households are already experiencing shrinking disposable incomes due to energy-price rises early this year, together with the increasing costs for many everyday essentials.

Challenges for used-car market but no crash

While there is no doubt that the UK’s used-car market faces challenges in the fourth quarter and into 2023, Glass’s does not expect a crash in used-car prices. There is likely to be more depreciation than we have seen over the past two years, but that is not unusual as cars are for the most part a depreciating asset.

Delays in new-car supply that have affected the flow of cars entering the used-car market, at either contract de-fleet or via the part-exchange route, are still prevalent. This lack of stock is helping to protect residual values. Had there been poor demand and strong supply over the past few months, residual values would have come under serious pressure.

The volume of new cars registered in the UK in August was higher than Autovista24 predicted, and supply is expected to improve throughout the remainder of 2022. However, interest-rate hikes are expected as the Bank of England attempts to bring rising prices under control, with the consumer prices index (CPI) topping 10% in July and only receding slightly to 9.9% in August. The mounting financial pressure on businesses and consumers alike means the new-car market faces a growing derailment risk, but consumers’ attention is likely to turn once again to used cars.

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Hydrogen vehicles in Europe – is there growing support?

While electromobility is in full swing, some European manufacturers are also working to bring hydrogen vehicles to the roads, writes Autovista24 journalist Rebeka Shaid.

With the EU planning to ban the sale of new petrol and diesel cars from 2035, European carmakers have shifted their focus to electromobility. But some manufacturers are exploring alternative powertrains, with hydrogen vehicles pitched as another ‘clean’ mode of transport.

Political backing came this month from the European Parliament, which has set minimum quotas for the use of hydrogen and synthetic fuels. By 2030, the share of so-called ‘renewable fuels of non-biological origin’ should make up at least 5.7% in the transport sector.

Two of the main hydrogen cars that are commercially available now are produced by Asian brands. Toyota’s Mirai and Hyundai’s Nexo are among the best-known hydrogen-based vehicles, but European car manufacturers are also diving into fuel-cell technology – both for passenger and commercial vehicles.

‘If we look at Europe, what we hear is the need for hydrogen is increasing dramatically,’ David Holderbach, CEO of Hyvia – a joint venture between Renault Group and hydrogen fuel-cell maker Plug Power – told Autovista24.

Hydrogen vehicles are ‘the closest to diesel,’ according to Holderbach. ‘European OEMs are monitoring fuel-cell technology and have been working on it,’ he added, citing Renault’s endeavours to build hydrogen-powered cars.

The French brand introduced its concept car, the Scenic Vision, earlier this year – a prototype hydrogen fuel cell-powered SUV, which has a 75% smaller carbon footprint than a conventional battery-electric vehicle (BEV). But the car will not be available until the next decade, when electromobility will be the norm across Europe.

Hyvia, on the other hand, will start dispatching its first hydrogen vans later this year, coming with a range of up to 500km. ’10 years ago, it was clearly too early for Europe to be in the hydrogen business. Today, with what is happening in Europe – whether it is France, Germany, the Netherlands, Spain – there is a big change. Infrastructure is coming and production is coming,’ Holderbach added.

Going against the flow

While European car manufacturers are investing in hydrogen, camps remain divided on its use. BMW recently confirmed it has started producing fuel-cell systems for its hydrogen-powered iX5, describing it as a climate-friendly alternative. Hydrogen cars only emit water and warm air. They can be made from renewable energy resources, and BMW considers them to be a sustainable addition to BEVs.

But the Munich-based business is going against the flow as its German rivals do not generally view hydrogen technology as a viable solution for passenger cars. In 2018, Mercedes-Benz rolled out a hydrogen SUV, the GLC F-Cell, which has since disappeared from the market.

The GLC F-Cell was primarily delivered to customers in Germany and Japan, with the carmaker being selective from the outset by limiting the availability of the SUV. Mercedes-Benz is now clearly going down the electric path and is moving away from hydrogen technology.

‘The potential of fuel-cell technology and hydrogen as an energy-storage medium is beyond question. Nevertheless, the EV battery is currently superior to the fuel cell in terms of a large-volume market launch, especially for passenger cars, not least in view of the still small number of hydrogen fuel stations worldwide and the relatively high technology costs,’ Mercedes-Benz told Autovista24.

As another German luxury brand, Audi has similarly moved its attention away from hydrogen to concentrate on electrifying its fleet. It did consider developing a hydrogen car, dubbed the h-tron, but scrapped the concept a while ago.

While Audi, which is part of Volkswagen (VW) Group, told Autovista24 that it is responsible for the development and industrialisation of fuel-cell technology within the group, it said: ‘Under the current conditions, we do not see any significant field of application for fuel-cell propulsion in the passenger-car sector.’

Low-volume production

Like Mercedes-Benz, Audi cited challenges such as building an appropriate infrastructure. It added that high energy losses during the production of hydrogen are also problematic, as well as converting the fuel to green hydrogen, which is the most sustainable way of developing the fuel.

None of this is deterring BMW, which is also taking a vested interest in e-fuels. The manufacturer is following through with its hydrogen plans, believing in the future potential of fuel-cell technology for passenger vehicles. The company sees an advantage in the technology as it could lower reliance on rare-earth materials. That is because hydrogen-powered systems mainly rely on recyclable metals such as aluminium, steel, and platinum.

Another benefit for BMW is the battery in a fuel-cell electric vehicle, which is smaller than those used in a BEV as it is not the main source of power for the car. The iX5 features an electric motor and a high-performance battery. Cold temperatures are also not an issue for hydrogen-powered cars, which have a comparable range to electric vehicles and can be filled up in a few minutes.

‘We think hydrogen-powered vehicles are ideally placed technologically to fit alongside battery-electric vehicles and complete the electric-mobility picture,’ said BMW CEO, Oliver Zipse, at an event last month.

BMW will start low-volume production before the end of the year, with hydrogen enthusiast Toyota supplying individual fuel cells. The two car brands have been collaborating on fuel-cell drive systems since 2013, and BMW will initially test the hydrogen-powered vehicles on a small scale. But the company does not exclude large-scale production in the next five years – if the automotive market is ready by then.

Commercial vehicles

According to H2Stations.org, there were 685 hydrogen fuel stations worldwide last year, most of which can be found in Asia. In Europe, Germany leads the way, with around 100 refuelling stations. The German government is heavily funding hydrogen projects, but with infrastructure lagging behind worldwide and the variety of hydrogen models still limited, analysts believe that the fuel is unlikely to offer a breakthrough for passenger cars any time soon.

However, the number of fuel-cell electric vehicles is on the rise, with the International Energy Agency (IEA) recording more than 40,000 vehicles in use globally by the end of June 2021. It noted that deployment is concentrated on passenger light-duty vehicles, which accounted for three quarters of the stock at the end of 2020.

For commercial vehicles then, such as trucks, busses and vans, hydrogen could play a bigger role. France-based Hyvia wants to offer an ecosystem that includes light-commercial vehicles (LCVs) with fuel cells, hydrogen refuelling stations, as well as the supply of carbon-free hydrogen and services for financing fleets.

The company aims to achieve a 30% market share in the hydrogen light-commercial vehicle market by 2030, and it wants to get there in a more sustainable way. Holderbach told Autovista24 that Hyvia aims to ‘lead green-hydrogen mobility.’ He believes that hydrogen-powered vans will quickly become available in Europe, within the next couple of years or so, with the brand presenting its vehicles at the IAA Mobility show in September.

‘It will start with hubs,’ Holderbach said, especially in places such as France, Germany, and the Netherlands. ‘When you create hubs, you have massive production of hydrogen for heavy-duty industries and light-commercial usage.’

Audi told Autovista24 that its competence centre for fuel-cell technology in Neckarsulm is continuing its research activities in the area. ‘The results of our development activities could become relevant for the Volkswagen Group in the medium term, particularly for light-commercial vehicles and trucks,’ the carmaker said.

German automotive supplier Bosch projects that one in eight newly-registered commercial vehicles worldwide will be powered by a fuel cell by the end of the decade. The company told Autovista24 that it initially sees the automotive use of hydrogen in the commercial-vehicle sector.

Various European carmakers have at one point or another announced hydrogen-powered commercial vehicles. Stellantis-owned Citroën is currently testing the ë-Jumpy Hydrogen, which can be filled up in three minutes and has a range of 400km. The automotive group has other hydrogen-based vehicles in the works, modelled on their BEV counterparts, including the Opel Vivaro-e and the Peugeot e-Expert.

LCVs are an obvious choice for hydrogen, Holderbach noted. So, what about the passenger-car market? ‘I think there will be a point where hydrogen can become more meaningful for passenger cars, but we first need to make the breakthroughs,’ he said.

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Launch Report: The Mercedes-Benz EQE electrifies the executive-saloon market

Mercedes-Benz has extended its line-up of EQ battery-electric vehicles (BEVs) with the EQE. Like the EQS, it features an aerodynamic and modest, but pleasing, ‘one-bow’ design. However, rear headroom is compromised by the sloping roofline and standard-fit panoramic roof. Similarly, the small side and rear windows, developed for aerodynamic and design purposes, reduce visibility, making the rear-view camera essential.

The chassis and suspension of the EQE are designed to be very comfortable, but also allow for more dynamic driving. The front bumper is not too low, making driving over speed bumps in urban areas easier. Additionally, the EQE’s ride height can be set and saved in the GPS to adjust every time the car takes a particular route.

The car has high perceived quality – the materials used for the dashboard, doors, and seats are first-class. The optional MBUX Hyperscreen, which extends across the entire width of the interior, is stunning, although it is only available in limited quantities because of the semiconductor shortage. The two standard displays, which resemble those in the S-Class, are also convincing and the advanced driver-assistance systems (ADAS), including an augmented-reality head up display, are all state of the art.

Electrifying the E-segment

The executive segment (E-segment) has been in decline in recent years as consumers increasingly favour SUVs. As a four-door saloon, the all-electric counterpart of the E-Class currently has no direct rivals in the segment. Estate and/or shooting brake versions of the EQE are lacking. These still account for more than 60% of the overall segment and 70% of its fleet registrations in Germany, for example. The forthcoming EQE SUV – essentially a BEV variant of the GLE – will help plug the gap, but comes with a risk of cannibalisation.

On the plus side, Mercedes-Benz is now offering a full range of powertrains in the segment as the E-Class is available with petrol and diesel engines, as well as a plug-in hybrid (PHEV) drivetrain. As the variety of electric models in the E-segment is still very limited, the EQE’s long range (up to 639km in the 350+ version with a 90.6kWh battery) will appeal to its target audience. This is one of the highest ranges in the segment, exceeding that of cars with similar pricing.

Click to open the interactive dashboard

The 400V on-board network means a DC charging capacity of up to 170kW should be possible, resulting in the battery recharging from 10% to 80% in 32 minutes. This is slightly disadvantageous compared to the 800V technology of the Audi e-Tron GT, Porsche Taycan, and some other newcomers. A larger battery is not available for the EQE, as is the case with the EQS, due to the wheelbase being 9cm shorter.

Converting E-Class owners

The wheelbase of the Mercedes-Benz EQE is over 30cm longer than the E-Class, offering generous space in all seats, and the EQE350 has 245Nm more torque than the AMG E53 E-Class (765Nm vs 520Nm).

The towing capacity of the EQE is only 750kg, compared to a maximum of 2.1 tonnes for the E-Class. Similarly, the 430-litre boot is 110 litres smaller than in the E-Class, whereas the EQS is a hatchback with 70 litres more capacity than the S-Class. There is no additional storage space under the bonnet because of a high-efficiency particulate-absorbing (HEPA) filter, which ensures clean air in the interior. This means the charging cables are stored below the boot floor, which makes charging inconvenient when the car is loaded with luggage.

Overall, the EQE should help Mercedes to retain current E-Class owners that want to, or in fact need to, switch to a BEV. Nevertheless, aside from SUVs, the EQE will face strong competition from the Tesla Model S when versions below the Plaid become available again. The Tesla was the first BEV offered in the E-segment, comes with a strong brand image, and has been regularly updated with facelifts.

Furthermore, BMW will soon start deliveries of the i7, and the i5 has been announced for 2023. An Audi A6 e-Tron, with 800V architecture and a range of over 700km, will be launched in 2024 as both a saloon and an estate. Other premium competitors, such as Volvo and Jaguar Land Rover, are investing millions in electromobility, and Asian manufacturers, including Hyundai’s premium brand Genesis, are pushing into Europe too.

View the Autovista Group dashboard, which benchmarks the Mercedes-Benz EQE in Austria, France, Germany, and the UK for more details. The interactive launch report presents new prices, forecast residual values, and SWOT (strengths, weaknesses, opportunities, and threats) analysis.

This content is brought to you by Autovista24.

Tables are turning – used-car markets down in 2022, recovery in 2023?

The pandemic saw European used-car markets deliver solid profits on prices that went through the roof. But the situation has changed this year and the used-car market is under pressure. Dr Christof Engelskirchen, chief economist at Autovista Group, provides an outlook for 2023.

Used-car markets boomed during the pandemic. Demand outstripped supply, as people looked for safe alternatives to public transportation and replaced older used cars with younger ones. Prices just kept rising.

The reduction in new-car supplies also helped used-car markets to prosper. This delivered solid profits to stakeholders, who complained about a lack of supply. The rise in prices may have slowed lately, but the market has not yet reached its turning point – with the exception of some milder downward corrections, e.g. in Finland, Poland and the UK.

Used-car price index by country

*Source: Autovista Group, Residual Value Intelligence*

Used-car transactions down in 2022

Used-car sales initially held up well compared to new-car registrations. Between 2019 and 2020, used transactions in the big five European markets (Germany, France, Italy, Spain, and the UK) dropped by 2.6 million units (from 29.3 million to 26.7 million), partly due to lockdowns. Used-car markets recovered swiftly to 27.8 million transactions, down merely 5% compared to pre-C0VID-19 year, 2019.

In contrast, new-car transactions fell by roughly 25% in 2020 compared to 2019 and ended slightly lower than in 2021. Based on the latest outlooks for 2022, new-car sales may contract further, but not on the same magnitude as used-car markets, which will lose roughly 3 million transactions in 2022 compared to 2021.

‘In the third year of broken supply chains for the automotive industry, tables are turning for used-car markets,’ comments Andreas Geilenbruegge, head of valuations and insights at Schwacke (part of Autovista Group). ‘Used-car transactions are coming under pressure. Our most recent outlook indicates that for Germany alone, there will be one million fewer used-car transactions in 2022. There will only be roughly 5.7 million transactions compared to 6.7 million in 2021 – a contraction of 15%.’

New- and used-car transaction big five markets 2017-2022*

Consumer confidence at all-time low

This contraction is more substantial than many players had anticipated at the beginning of the year. There are several reasons why used-car markets tightened like this:

With surging inflation, used-car prices have risen so much that elasticity of demand is kicking in. People are thinking hard about whether they can afford to buy a used vehicle at this price point. The alternative is to hold on to an existing used car for longer.
Changing monetary policy from central banks aimed at combating inflation, bears a tangible risk of negative consequences on economies and job markets. This is another crucial factor that delays purchase decisions.
The Russian aggression in Ukraine adds another layer of uncertainty to the equation, not only linked to rising costs for energy. Consumer confidence is at an all-time low.
The continued lack of new-car supply also reduces the number of available used cars. For example, models registered in 2018/ 2019 which are now up for leasing renewal are facing longer holding periods as replacements are not coming in – reducing the number of used cars created. Furthermore, three years of lower-than-normal short-cycle registrations lower the number of (young) used cars in the market.

Fewer used-car transactions

The contraction of used-car markets is largely associated with older used-cars, i.e. those older than four, or even 10 years. ‘The transactions of younger used cars, especially those coming off leases, have held up remarkably well. They are largely on pre-crisis level’, said Marc Odinius, managing director at Dataforce. ‘We also see the anticipated dip in short-cycle registrations washing through to used-car markets now, as OEMs seek higher-value channels. That is why used-car transactions in the zero to two-year age cluster are down. But clearly, the most impactful contraction happens in the older-vehicle segments.’

Used-car transaction by age (example: Germany) Jan 2017-2022*

*Full- year forecast for 2022
*Source: National registration offices, Dataforce, Autovista24 analysis*

High prices reduce willingness to compromise

Used-car transactions are coming under pressure in the older than four-year segment. Prices were rising in this category more than in any other age group, which explains why this segment is now slowing down. According to Geilenbruegge, ‘the lack of abundant supply of cars combined with very high prices make it more challenging to find the right buyer for a specific car. At those prices, people are not willing to compromise and some walk away from the market.’

Used-car price index by age cluster (example: Germany)

Uncertain outlook for 2023

The origin of the current crisis lies in cracked supply chains, strong demand, as well as solid private and public spending power. Following the economic contraction in 2020, there was a quick rebound in 2021, which drove energy prices and inflation up already towards the end of 2021.

The Russian invasion of the Ukraine in early 2022 has driven energy prices up further. They account for roughly 50% of the inflation we are witnessing in Europe. Central banks are now biting down late, but harder, creating another element of economic stress. Furthermore, there are continued semiconductor shortages and lockdowns in China, which keep on disrupting supply chains. Autumn and winter waves of COVID-19 infections may also have a negative impact.

Autovista Group’s base case for 2023 anticipates continued supply chain issues, very low economic growth paired with high uncertainty, and inflation above target zones. This will keep new- and used-car markets under pressure. The current level of contraction on new-car markets is largely caused by supply chain issues – most cars due to be registered were ordered many months ago. Some of the automotive supply-chain issues should ease come 2023, which is the fourth year of the crisis.

New-car registrations should rise versus 2022. Used markets are expected to be stimulated accordingly, as more cars will be supplied. A recovery is expected in 2023 versus 2022 on both, new- and used-car markets, but this does not mean 2023 will be a rebound year for the automotive industry.

Of course, projections into 2023 are sensitive to assumptions on how quickly the abundance of negative factors will ease. There may be more positive scenarios evolving in 2023, for example if a stable ceasefire can be achieved in the Ukraine or if energy prices fall. However, it seems wise to caveat any outlook towards a more negative turn of events. For example, in its economic outlook in July, the IMF stated: ‘the risks to the outlook are overwhelmingly tilted to the downside’.

This content is brought to you by Autovista24.

Seven straight months of decline for UK LCV market

Andy Picton, chief commercial vehicle editor at Glass’s (part of Autovista Group) analyses new and used light-commercial vehicle (LCV) developments in the UK.

In what has been a troubling year so far, the UK new light-commercial vehicle market recorded its seventh straight month of decline in July. Despite full order books for the year, component shortages continue to hamper deliveries of new stock. With registration levels remaining weak, the UK’s Society of Motor Manufacturers and Traders (SMMT) has downgraded its July registration forecast for the year from 328,000 to 307,000 units. This marks a decline of 6.5% on its outlook published in April. As a result, the market is likely to finish 13.7% down on 2021.

There were 18,772 new LCV registrations in July, down 20.7% on the 23,606 units registered 12 months ago. Of that total, battery-electric vehicles (BEVs) accounted for 765 units (up 21.2% on 2021) and represented 4.1% of all new vans registered during the month. Year-to-date (YTD) registrations of 163,106 units were 24.2% down on the same period in 2021. YTD BEV registrations stand at 8,865 units and make up 5.4% of the overall LCV market. This figure is up 55.7% on 2021.

For the fifth month in a row, all sectors recorded declines in registrations. Vans below 2.0 tonnes fell 20.3%, while vans between 2.0-2.5 tonnes gross vehicle weight (GVW) fell 49.8%. The 2.5-3.5 tonne sector – which made up nearly 79% of all vans registered in the month – dropped 11.2%.

In the LCV registration rankings Ford retains top spot, with the Transit Custom registering 2,737 units in July. The Ford Transit was second with 2,024 units, while the Ford Ranger finished in sixth position with 926 units. Volkswagen (VW) claimed third and eighth place with the Transporter and Crafter respectively, while a good month for Renault saw the Trafic land in fifth position. The Peugeot Expert, Citroën Dispatch, and Vauxhall Vivaro from Stellantis filled the seventh (626 units), ninth (543 units) and tenth (534 units) places respectively. The Mercedes-Benz Sprinter claimed the remaining top-10 position.

The shortage of components including semiconductors continues to hamper production, restricting supply and extending delivery times. At the same time, manufacturers are ramping up production of electric LCVs as the industry looks to meet its 2030 obligations in conjunction with tighter CO₂ emissions targets.

Used vehicles slip but cost more

Sales of used stock at auction declined slightly in July. However, due to the lack of quality stock available, buyers had to pay more to take ownership with first-time conversions 3% higher than in June. The average age of those vehicles sold was a month older, but had at least 1,000 less miles on the clock.

Glass’s auction data show that the overall number of vehicles sold decreased by 1.88% versus June and was 14.2% lower than a year ago. The average sales price for the month increased by 1.4% and was only 0.3% lower than in July 2021.

The average age of vehicles sold during July increased by a month to 74.2 months, while the average mileage shrank for the second month in a row to 80,106 from 81,198 miles in June. The average mileage is nearly 4,200 miles higher than 12 months ago. First-time conversion rates for July rose for the fourth consecutive month, up from 71.4% in June to 74.8%.

Used vehicles observed for sale in the wholesale market over the last month rose by nearly 2.0% to almost 42,000 units. In the over £20,000 (€23,673) price range, there was next to no change, with these vehicles accounting for nearly 46.3% of all LCVs on sale. Just over 38% were on sale for between £20,000 and £10,000, 12.1% were on sale between £10,000 and £5,000, and just over 4.2% cost £5,000 or less.

Monthly Market Update: Modest RV growth in July despite stable new-car list prices

Supply constraints in both the new- and used-car markets across Europe, together with rising inflation and energy costs, are playing a part in the development of residual values (RVs). July saw a more stable period, but a recoupling of supply and demand in the used-car market will place more focus on list prices for RV growth in absolute value terms (€RV).

During the last month, new-car list prices were stable across Europe, ranging from a 1.3% month-on-month decline in Switzerland to growth of just 0.3% in Spain. Residual values performed slightly better in value terms, resulting in modest growth of average used-car prices represented as a retained percentage of list price (%RV) in most markets.

The exception was Spain, where the average %RV gained 3% month on month. Used-car sales activity in the country is slowing far more than elsewhere, but supply is even more dramatically impacted, driving up RVs.

Although the June new-car registration figures confirmed expectations of a gradual recovery, Autovista24 downgraded its European new-car market forecasts in July – except for a modest upward revision in France. As the supply of new cars, and subsequently used cars, remains an issue that is expected to persist into 2024, this will continue to support RVs.

However, a steep ascent of raw-material and energy costs because of the Ukraine war, and rising inflation in general, is contributing to cooling demand for both new and used cars. With improving supply and diminishing demand, the %RV is forecast to decline, or at best stabilise, across European markets in 2023 and 2024.

The interactive monthly market dashboard features Austria, Germany, Italy, Spain, Switzerland, and the UK. It also includes a breakdown of key performance indicators by fuel type, average new-car list prices, as well as sales-volume and active market-volume indices.

Supply cannot meet used BEV demand in Austria

The Austrian used-car market continues to be underpinned by low supply. On average across all passenger cars aged two-to-four years, the supply volume in July was 10.8% lower than in July 2021, noted Robert Madas, Eurotax (part of Autovista Group) regional head of valuations, Austria, Switzerland, and Poland. Already in 2021, supply was significantly lower than at the beginning of 2020. However, this situation has stabilised somewhat compared to June, with a slight month-on-month increase of 1.2%.

Diesel cars are still missing on the used-car market, with a 17.2% shortfall compared to the same month last year. But the supply of battery-electric vehicles (BEVs) showed a far stronger downward trend again, with a 50.4 % year-on-year decline. Market activity shows healthy demand for BEVs and hybrid-electric vehicles (HEVs), leaving their supply short and boosting RVs.

Despite the general ongoing context of used-car demand outstripping supply, average days to sell increased slightly, to an average of 57.9 days in July. BEVs are selling the fastest, averaging 51.9 days, followed by petrol cars at 54.5 days and diesel cars at 59.1 days. Meanwhile, HEVs take an average of 71.4 days and plug-in hybrids (PHEVs) are selling the slowest, averaging 83.4 days.

This market environment has led to a further slight increase in RVs of 36-month-old cars, in both absolute value and retention terms. The %RV rose by 20.8% year on year (0.4% month on month) in July, with cars retaining 53.0% of their list price on average. Diesel cars and HEVs are currently leading with a trade value of 53.5%, followed closely by petrol cars (53.2%) and PHEVs (50.1%). 36-month-old BEVs retain the lowest value, at 46.4% of the list price.

The market parameters will not change in the medium term, because new-car registrations are still markedly lower than before the crisis (2021 was down 27% compared to 2019). ‘The supply of new cars will be the key factor in the future development of RVs. Supply chains were already disrupted and together with the semiconductor shortage, the war in Ukraine has led to even longer delivery times for most new vehicles,’ Madas commented.

Due to this undersupply, Madas expects the %RV of three-year-old passenger cars to continue to rise this year, by 11.8%. Only when the new-car market picks up significantly, and thus volumes on the used-car market also increase, are values likely to come under pressure. This will probably not be the case before 2023.

Weak tactical and fleet registrations in Germany

New-car registrations continue to struggle in Germany, especially in the channels that are most relevant for the used-car market. ‘Tactical registrations are now more than 100,000 units below last year’s weak level and fleet registrations, which are known for their relative stability, also show a drop of almost 30,000 units compared to the same period last year,’ highlighted Andreas Geilenbruegge, head of valuations and insights at Schwacke (part of Autovista Group).

Accordingly, the market for very young used cars will continue to be undersupplied this year and next. The buyback years 2024-2026 will also be relatively weak for cars aged between two and four years. ‘Only dwindling purchasing power is preventing the further unchecked increase of used-car prices. Volumes on offer are slightly increasing again despite lower replenishment, which is due to high price levels and growing stock days. Purchasing decisions seem to be postponed in view of tighter and unsafe budgets or are being shifted to cheaper models’ Geilenbruegge added.

The RV outlook for the rest of this year and the coming years remains stable, but this does mean that the forecast 19.9% increase for 2022, i.e. the comparison of December 2022 versus December 2021, is disproportionately higher than for the coming years.

Even though value retention has been dampened for a short time, the used-car price development of HEVs continues to be optimistic. However, a strong discrepancy is building up between initial pricing and achieved transaction prices, which will no longer be supported by buyers in the foreseeable future and will then lead to stagnation.

‘As HEVs are more affordable than other electrified vehicles, fuel consumption is lower than for internal-combustion engines (ICEs), and the technological change is limited, these are obviously good arguments for the respective models from Toyota, Hyundai, and Honda, among others,’ concluded Geilenbruegge.

Divergent performance of new and old technologies in Italy

In July, the average %RV of a vehicle with 36 months/60,000km was 50.1% in Italy. This is essentially stable compared to a month ago but up on last year (+15.7%). This stability is the result of a slightly positive trend for petrol and diesel RVs, whereas values of HEVs, PHEVs and BEVs are down by 1.5% to 2% compared to June.

‘Although used-car prices are still strong compared to last year, it is surprising that in this generally positive situation, new technologies are on a downward trend, while traditional engines continue to grow in value, albeit only slightly,’ commented Marco Pasquetti, forecast and data specialist, Autovista Group Italy. ‘Even if there are many drivers to consider, the higher average list prices of these technologies and current concerns about high inflation and economic instability are part of the picture.’

Used-car sales are up both on last year (+5.9%) and June (+41.1%), with the sales-volume index of 148 a clear indication of a healthy second-hand market. ‘This is another reason why we see, neither in the short nor in the medium term, the preconditions for a reversal of the trend and a return of the used-car market to 2019 levels,’ explained Pasquetti. Accordingly, he has revised the RV outlook for 2022 upwards, with expected growth of 9.4% compared to December 2021, followed by a slight further increase in 2023 and a slow reduction in RVs from 2024.

Stock levels depleting in Spain, despite import boom

The picture that emerged in the first half of 2022 in Spain is very different from the one envisaged in the middle or end of 2021. ‘It was just a year ago that we saw used-vehicle transaction prices soar, driven by the shortage of supply caused by the COVID-19 pandemic, coupled with the semiconductor crisis,’ explained Ana Azofra, Autovista Group head of valuations and insights, Spain.

Azofra expected this scenario to start to stabilise in the first half of 2022 and adjust in the second half of the year. However, the war in Ukraine and the ensuing economic crisis have made the situation more adverse. The Spanish new-car market has endured a cumulative decline of 11% and the used-car market has fallen by 4.5%. Stock levels continue to deplete and are less than half of what they were last year, cushioned only by a boom in imports.

‘Naturally, all this has impacted the average value retention of used cars, which is up 20% compared to July 2021 and even 30% when considering petrol-powered cars. In general, the RV increases are affecting all powertrain types. This started with ICE cars, while HEVs joined the positive trend a few months later. In 2022, BEVs and PHEVs have also joined this evolution, with high fuel prices and the lack of availability of ICEs and HEVs orienting demand to electric vehicles,’ commented Azofra.

Despite the price craze experienced in recent months, the trend of the last two months is confirmed, which already points to a certain stabilisation of prices. The average number of days to sell a used car continues to rise, inflation continues to soar, and it is expected that the rise in interest rates announced by the European Central Bank (ECB) will weigh on the purchasing power of households. Accordingly, demand is forecast to recede in the coming months, for both new and second-hand cars, lowering RVs.

List prices fall but RVs stable in Switzerland

For over two years, the Swiss used-car market has been defined by healthy demand, low supply and rising used car-prices. ‘Across all two-four-year-old passenger cars, the supply volume in July was in line with the level of a year earlier. Already in 2021, the supply was significantly lower than at the beginning of 2020,’ noted Hans-Peter Annen, head of valuations and insights, Eurotax Switzerland (part of Autovista Group).

The sales-volume index in July was 3.9% higher than in June, but 18.2% down year on year. Nevertheless, RVs remain stable whereas list prices are down 1.2% compared to June. This market environment has led to a further modest increase in the average %RV of 36-month-old passenger cars in July, to 50.3% (up 19.1% compared to June 2021). Petrol cars posted strong year-on-year %RV gains of 18.5%, to 51.2%, as too did diesel cars (up 21% to 49.3%) and BEVs (up 18.6% to 47.2%).

BEVs and diesel cars in particular are less offered on the active market, with supply down 39.9% and 16.4%, respectively, compared to July 2021. For petrol cars, there are currently 10% more two-to-four-year-old cars offered than a year ago. The active-market volume of PHEVs is around 28% higher than in July 2021, whereas the volume of HEVs is stable.

The average days to sell increased in July compared to June, with a passenger car aged two to four years in stock for 63 days. BEVs are selling quickest, after an average of 58 days, followed by petrol cars after 62 days, diesels after 65 days, and PHEVs after 79 days.

The disrupted supply of new cars, exacerbated by the war in Ukraine, as well as recent list-price increases, are key factors in the future development of RVs. Supply chains are heavily affected, leading to long delivery times for most new vehicles.

‘As new-car registrations in 2022 are markedly lower than before the COVID-19 pandemic (2021 was down 23.4% compared to 2019), the market parameters will not significantly change in the medium term. The %RV of three-year-old used cars will remain high this year and is forecast to end 10% up on December 2021, before declining over the years 2023 and 2024,’ Annen concluded.

UK used-car market ‘on a rollercoaster ride’

‘Since the start of the COVID-19 pandemic, the UK’s used-car market has been on something of a rollercoaster ride, with unexpected peaks and troughs in demand. This rollercoaster ride continued into the first half of 2022 with a downturn in residual values,’ explained Jayson Whittington, Glass’s (part of Autovista Group) chief editor, cars and leisure vehicles.

The UK’s unusual trading conditions continued throughout June and into July, with both poor demand and supply evident. As a result, hammer prices at auctions across the country began to stabilise, and whilst overall sales volumes are below the level seen last year, this strange supply and demand dynamic has resulted in a steadying development of RVs.

Used-car prices in the UK were essentially static in July with only a 0.1% movement compared to June, although comparisons with the same period last year show growth of 19.5%. The average number of days it took a UK dealer to retail a car also remained static in July, at almost 49 days.

‘This is 9.6 days longer than last year and gives a good insight into why auction activity is somewhat subdued – because dealers do not need to replenish stock as frequently,’ Whittington concluded.

The July 2022 monthly market dashboard provides the latest pricing, volume and stock-days data.

Can e-fuels save the internal-combustion engine?

E-fuels are being touted as a carbon-neutral alternative that some hope could keep internal-combustion engine (ICE) cars on the roads despite a looming ban, writes Autovista24 journalist Rebeka Shaid.

Do we want to save the planet or the internal-combustion engine? That question might sound provocative, but policies around transportation and mobility have centred on the environmental impact of diesel and petrol cars for years.

Fully-electric vehicles are seen as the solution as they have no tailpipe emissions. Still, ICE cars will not disappear from the roads in Europe any time soon, despite the EU planning to phase out the sale of new fossil-fuel-powered vehicles by 2035. This is where e-fuels come in – combustibles that have found both fans and critics.

What are e-fuels?

Simply put, e-fuels are synthetic fuels with their production based on hydrogen and CO₂. Labelled as climate-neutral, these fuels use carbon dioxide from the atmosphere and can, ideally, be produced using renewable energy resources.

Proponents, including automotive associations and some carmakers, argue e-fuels can relieve the climate of CO₂ and may replace conventional fuels altogether. E-fuels also have a high energy density, are easy to store, and can be distributed by an already existing network of petrol stations.

Advocates tend to pitch synthetic fuels as a sustainable way to transform the transport sector. The eFuel alliance, whose members include numerous automotive suppliers such as Bosch, Mahle, and ZF, told Autovista24: ‘We strongly believe that the climate targets cannot be achieved without e-fuels. E-fuels are climate friendly, contrary to what critics claim. To produce e-fuels, CO₂ is used from the air and liquefied using water and renewable energy.’

Mazda was the first carmaker to join the alliance, arguing that CO₂-neutral fuels could contribute to automotive manufacturers’ emissions reduction efforts. With the EU reviewing carbon emissions standards for cars and vans, e-fuels have once again become a hotly debated topic.

Opinions are split

In Germany, transport minister Volker Wissing recently emphasised that new ICE cars should still be relevant beyond 2035 if they can be topped up with e-fuels. This opinion has caused a rift, not only among politicians but also among carmakers.

Volvo Cars is leaving the European Automobile Manufacturers’ Association (ACEA) because its sustainability strategy does not match ACEA’s. The powerful lobbying group supports the use of what it calls CO₂-neutral fuels while the Swedish car manufacturer is betting on an all-electric future.

Others are not jumping ship despite considering the future of mobility to be broadly electric. Mercedes-Benz told Autovista24 that while it is preparing to go fully-electric by 2030 where market conditions allow, it was: ‘intensively involved in ACEA’s positioning on the EU Commission’s “Fit for 55” legislative initiative.’ The manufacturer added it was ‘continuously committed to a more progressive positioning of ACEA on the way to climate-neutral mobility.’

Meanwhile, German rival BMW wants to keep its options open. The group’s CEO Oliver Zipse is backing the use of e-fuels as opinions on them remain divided – even within the same company.

The head of Volkswagen (VW) Group, Herbert Diess, told a German media outlet that the efficiency of synthetic fuels was extremely poor. He also questioned the cost effectiveness and high-energy consumption required to produce them.

VW subsidiary Audi once seemed convinced by e-fuels but appears to have changed tack, saying synthetic fuels are not the future. But Porsche, which has been part of VW Group for more than a decade, is still heavily investing in the synthetic fuel. The sportscar maker has teamed up with Siemens Energy and other companies to build an industrial plant in Chile, which will be dedicated to the production of an ‘almost carbon-neutral e-fuel.’

Porsche plans for 80% of its sales to be made up electric vehicles (EVs) by 2030. The company told Autovista24: ‘Climate protection must be considered holistically. Synthetic fuels are a useful addition to electromobility to make a contribution to CO₂ reduction. We must also offer the owners of existing vehicles a perspective. Compared to pure hydrogen, e-fuels made from water and carbon dioxide extracted from the air for automobiles, airplanes or ships have the advantage that they can be transported more easily.’

While Germany’s carmakers are following different approaches, the country’s powerful association of the automotive industry (VDA) is in favour of synthetic fuels. ‘E-fuels could become a permanent fixture in transport in the future and make an important contribution to climate protection,’ it states.

Is carbon-neutrality enough?

After a key meeting among environment ministers last month to debate the phase-out of ICE cars in Europe, the EU has now left a door open for carbon-neutral fuels. In other words: synthetic fuels could be used past the 2035 deadline.

A spokesperson for the European Council told Autovista24 that the agreement: ‘includes a recital, giving the possibility to the Commission to make a new proposal to allow the use of CO_2-neutral fuels beyond 2035.’

Supporters of e-fuels want to keep the internal-combustion engine alive. After all, synthetic fuels could not only continue to power ordinary passenger cars, but also hyper- and sportscars, with Porsche planning to use synthetic fuels in motorsports. But this approach does not come without criticism.

Synthetic fuels will likely be considered in sectors where electrification is currently not plausible, but critics warn that the automotive use of e-fuels would send the wrong signal to car manufacturers and consumers. They suggest that using synthetic fuels in the long term would do more harm than good and delay the transformation to electromobility.

The shortcomings

There are clear downsides to e-fuels, as campaigners point out that these fuels still emit pollutants. Energy loss is also an issue as the efficiency of e-fuels is lower compared to battery-electric vehicles (BEVs). Energy gets lost when converting electricity into synthetic fuel, giving these combustibles an efficiency of around 15%.

To make e-fuels carbon neutral, renewable energy has to be used. This would mean depending on countries that have the capacity to produce enough green electricity. Additionally, producing e-fuels is expensive and consumers are going to feel those costs.

‘The production cost of the amount of e-fuels required for driving a combustion engine car 100km is nearly 10 times the production cost of the amount of renewable electricity for driving a battery-electric car the same distance,’ according to the International Council on Clean Transportation (ICCT).

The eFuel alliance is rejecting critics and told Autovista24: ‘The biggest criticism levelled against e-fuels is the apparent inefficiency, because a lot of renewable electricity is needed to produce e-fuels. However, this argument can be invalidated if we think globally. E-fuels can be produced worldwide in places with abundant sun and wind and transported via the existing infrastructure.’

So, will e-fuels be able to save the combustion engine? The German Climate Alliance told Autovista24 that synthetic fuels would, at most, be a niche in the future.

‘E-fuels are not yet available in significant quantities, are inefficient and very expensive. The best alternative – it is cheap, efficient and can already be implemented today – is called electrification. E-fuels only make a contribution to climate protection if it can be guaranteed that they are actually produced exclusively with renewable electricity and are only used where there are no better alternatives. This is not the case on the road.’

Synthetic fuels may provide a lifeline for companies that have their business models threatened as the industry switches to electric. These fuels could potentially have their merits under the condition that their production relies solely on renewable energy. They would also need to be accessible and economical. But even if these criteria are met, it does not mean e-fuels are good for the environment. Realistically, they might only be used as a bridging technology.

Ukraine war means forecast tightens for Europe’s big five new-car markets

Autovista24 has downgraded its forecasts for Europe’s big five new-car markets. Senior data journalist Neil King explains why.

Western Europe’s major new-car markets endured double-digit declines in March as the war in Ukraine destabilised supply chains and delayed vehicle deliveries. The Ukraine war is expected to have a negative impact throughout 2022, and although a significant impact on new-car sales, i.e. order intake, is not expected, supply challenges could persist until 2024.

Beyond the production stoppages announced by the Volkswagen (VW) and BMW groups shortly after Russia invaded Ukraine, Mercedes-Benz has confirmed to Autovista24 that it is ‘temporarily adjusting shift plans at some plants.’

The conflict is also indirectly affecting manufacturers as lower neon-gas supplies from the region compound the pre-existing shortage of semiconductors.

‘Ford has very limited direct sourcing from Ukraine and Russia. We have worked with our suppliers to move tools to other locations or supply parts from other regions,’ the carmaker told Autovista24. Nevertheless, Reuters reported on 21 March that Ford ‘will idle its German plants in Saarlouis and Cologne, mostly due to the global chip shortage.’

Volvo Cars told Autovista24 that it has ‘very limited direct relationships with suppliers in the affected areas and so far, we have not seen any impact on supply or production volumes.’ However, the Swedish carmaker ‘is experiencing a temporary worsened production situation, expected to last throughout the second quarter due to lack of a specific type of semiconductor.’

Modest improvement in the second half

In this context, Autovista24’s new-car registration outlooks for the second quarter have been revised further downwards in four of the five major Western European markets. The exception is Spain, where there is a backlog of orders to be fulfilled following the additional dramatic impact of a truckers’ strike in the country from 14 March.

Monthly new-car registrations, Germany, April 2020 to December 2022

*(Click image to view – opens in new tab)*

The full interactive dashboard presents the latest and previous monthly forecasts for 2022, as well as the annual outlook for the big five European markets to 2025.

The disruption to production is expected to diminish as carmakers secure alternative supplies of raw materials and components, although this typically takes weeks not months. Fundamentally, the outlook for new-car registrations hinges on vehicle deliveries and the anticipated improvement in the supply of semiconductors is weaker than before the invasion of Ukraine.

‘We still see a structural undersupply in 2022, which is only likely to ease somewhat in the third or fourth quarter,’ Volkswagen’s chief financial officer, Arno Antlitz, said in an interview with Germany’s Börsen Zeitung.

In conjunction with the lagged registration of the additional losses that have been factored into the second quarter, the outlook for the second half of the year has been modestly improved compared to last month. Italy also stands to benefit from the reintroduction of incentives for electric and low-emission vehicle purchases. A total of €650 million will be made available until 2024.

However, not all losses are forecast to be recovered by the end of the year. The net effect is that the combined 2022 forecast volume for the big five markets has been reduced from 8.58 million units last month, to 8.35 million units. This marks a reduction of over 230,000 units, or a 2.7% downgrade, and equates to year-on-year growth of just 1.2% in 2022 after two consecutive annual contractions of 25.4% and 2.2%. Compared to the February forecast, prepared prior to the invasion of Ukraine, the 2022 outlook for new-car registrations is about 600,000 units lower.

The new-car markets of France, Spain and Italy are forecast to contract between 2% and 4% in 2022. Autovista24 now expects around 2.75 million new-car registrations in Germany this year, an increase of 4.9% year on year, but this follows the 10% downturn in 2021. The forecast for the UK has been reduced further to below 1.74 million units, representing year-on-year growth of 5.4%.

Disruption persists in 2023

With more new-car registrations displaced into 2023 than previously assumed, higher double-digit growth rates are expected in the five countries next year. However, semiconductor shortages are certainly expected to persist into 2023 and probably beyond. ‘The situation should improve in 2023, but the structural problem will not yet have been fully resolved,’ VW’s Antlitz told Börsen Zeitung.

This opinion is echoed by BMW Group CEO, Oliver Zipse. ‘The investment cycle for semiconductor producers to build new capacity is between 24 and 48 months,’ Zipse explained to the Swiss newspaper Neue Zuercher Zeitung. ‘Currently, we are still in the peak phase of the chip shortage. I expect that we will see an improvement next year at the latest. But we will still have to deal with the fundamental shortage in 2023,’ Zipse added.

Autovista24 forecasts that the volume of registrations across the five key Western European new-car markets will rise above 10 million units in 2023, but this is still 11% lower than in pre-pandemic 2019.

A return to comparative normality is expected in 2024, a year which is also expected to benefit from a pull-forward effect as automotive manufacturers and consumers seek to register cars ahead of the EU Commission’s target of a 55% reduction in CO₂ emissions in 2025, compared to 2021 levels.

Autovista24 expects a modest correction in Europe’s leading new-car markets in 2025, except in Spain as the anticipated slower recovery means the market will be the furthest adrift in 2024.

There are significant downside risks to this challenging forecast. The outlook ultimately depends on the duration and severity of the conflict in Ukraine, whether it extends to the west of the country, including the critical port city of Odessa, and even beyond its borders. This would add greater supply and logistical challenges.

Unlike previous crises, such as the global financial crash of 2008-2009, the registrations outlook for Western European markets hinges far more on new-car supply than any economic impact on new-car sales.

The new Dacia Jogger: an unlikely residual value hero

Autovista24 principal analyst Sonja Nehls digs into the new Dacia Jogger and its remarketing potential.

The new Dacia Jogger might seem an unusual choice in a series focused on remarketing potential, residual values (RVs), and fleet relevance of new-car launches, but there are many good reasons for choosing it. Together with the Dacia Duster, the Jogger represents a new generation of Dacia models with improved quality and design. Just like its stablemates, it will enter automotive markets at benchmark new-car prices, maintain low depreciation throughout its lifecycle and will reach used-car markets with strong residual-value potential.

The low depreciation makes it a total cost of ownership (TCO) champion. Rising list prices and energy costs, as well as a shortage of used cars and soaring residual values, all add to a climate of economic uncertainty. Smaller businesses in particular need to look more closely at their costs and buying or leasing decisions. Backed by a convincing cost performance the Dacia Jogger has the potential to win over commercial customers, but the brand’s image and reputation will be its biggest obstacle.

Dacia Jogger remarketing potential

Remarketing upsides	Remarketing downsides
Low list prices and strong residual values (RVs) result in benchmark depreciation and TCO	Brand perception and image
Improved quality and design	110hp petrol and 100hp LPG engines are slightly underpowered, especially with a fully-loaded car
Occupies a niche segment and combines characteristics of a van, estate and SUV	Unusual silhouette and roofline
Modularity and roominess, seven-seater option
Liquefied-petroleum gas (LPG) engine available as an alternative to diesel with additional cost-saving potential

Three body styles in one model

The new Dacia Jogger replaces not just one but three previous Dacia models and combines characteristics of a van, an estate, and an SUV – all in one. Add to that the possibility of up to seven seats and this is a unique model. The Dacia Jogger has no truly comparable rivals.

As the focus for potential purchasers is getting plenty of car for their budget, other models in the relevant segment will be the likes of a Kangoo passenger van, a Fiat Tipo estate or a Skoda Scala. The typical seven-seater vans like a Grand Scenic or Volkswagen Touran or SUVs exist in a different league price-wise.

Specifications and dimensions versus main rivals

Click to expand (opens in new tab)
Source: Autovista Group specification data

The new Dacia Jogger joins the Duster in demonstrating how far the Romanian car manufacturer has come, working hard on overcoming the reputation of being cheap and delivering poor quality.

Due to the unusual combination of several body shapes in one car, the Jogger looks a bit quirky, especially from the side and towards the rear. It is reminiscent of classic estates from the 1990s, but with a higher roofline. In any case, it is instantly clear that this car is all about space and versatility.

The interior greets drivers and passengers with a conventional style, including traditional control elements and instruments as well as an eight-inch touchscreen (not standard on the entry version). Material selection is aiming towards the simpler end of the spectrum, as you would expect, but the dashboard and door panels are cleverly styled and well executed. The third row seats adults comfortably enough and the two additional seats can be built in and out individually. With models of this size and price, the seven-seater option is a unique selling point (USP).

Initially, the Jogger is available with a 110hp petrol engine and a 100hp LPG engine. In some markets, such as Poland or Italy, LPG is very popular and in the light of soaring energy costs, the alternative fuel type offers additional saving potential. To put this into context, a spot-check calculation of fuel costs in Germany in March 2022 results in €11.50 per 100km for the petrol engine and €8.30 per 100km for the LPG engine (calculated with the WLTP consumption figures). A hybrid version will follow in 2023 and the smaller sibling Dacia Spring caters for battery-electric vehicle (BEV) demand.

Benchmark new-car price

Price is obviously the strongest selling point for the Dacia Jogger as you can buy a top version of it for under €20,000. Entry versions start at around €14,000. How convincing the price argument is becomes obvious when looking at the list-price development in the C-segment across Europe.

New-car price development (all fuel types, C-segment), unweighted, 2019-2021

Click to expand (opens in new tab)
Source: Autovista Group. Note: Green 95% percentile, orange mean price, blue 5% percentile.

Since 2019, list prices in the C-segment increased by 15-20% in most markets, with the exception of a more moderate 7% in France and a 26% surge in Hungary. France also saw a stronger increase of 16% for the cheaper 5% of models (the blue line) offered in the segment, but a less pronounced increase for the more expensive and better-equipped versions.

With list prices exceeding inflation levels, increased economic uncertainty and rising energy costs, private and commercial customers will look more closely into the affordability of their mobility needs and the TCO of new cars.

TCO driven by depreciation

The depreciation of a vehicle typically accounts for the largest share of its TCO. A lower depreciation, therefore, brings down TCO significantly, resulting in better leasing rates and lower monthly costs.

As a reference, the below example shows the TCO of the Dacia Lodgy TCe 100 seven-seater compared to three potential rivals on the French market. The overall TCO is the lowest, by a margin of almost €2,000 to the Skoda Scala 1.0 TSI. At €5,910 the depreciation only makes up 25% of the Lodgy’s TCO, 15 percentage points less than for the Skoda Scala (€10,160). The Dacia then loses some of its initial advantages due to fuel consumption and insurance costs. Keep an eye out for the TCO data of the Dacia Jogger included in Car Cost Expert upon its official arrival in the market.

TCO comparison Dacia Lodgy versus competitors, France, 36mth/60kkm, March 2022

Residual values are a major advantage

Dacia models repeatedly won the Schwacke and AutoBild Wertmeister Award in Germany thanks to their high relative RVs and subsequently low depreciation. The Dacia Jogger seems to be willing to follow their lead. Thanks to strong residual-value forecasts in combination with low list prices, the depreciation for the Dacia Jogger will be its major advantage across markets. In the countries shown in this interactive dashboard, depreciation will range between only €4,700 to €6,700 over two years and 60,000km in Germany and Hungary and go up to €7,500-10,000 in Italy.

Dacia Jogger forecasted depreciation, 36mth/60kkm, March 2022

Open the interactive dashboard

While the situation in Italy looks less favourable in the cross-country overview, this is mainly rooted in general differences in RV levels between countries. When compared to rivals in Italy, the Dacia once again manifests its advantage in terms of an extraordinary RV strength and therefore low depreciation.

Dacia Jogger forecasted depreciation versus competitors, Italy, 36mth/60kkm, March 2022

Open the interactive dashboard

Strong new-car registrations and RVs in Eastern Europe

In Romania, Dacia’s domestic market (not shown in the dashboard), the situation is even more beneficial than in Germany or Hungary, with residual values around 74% and a depreciation of below €5,000 on any model.

Ulmis Horchidan, Autovista Group’s chief editor in Romania, explains that Dacia ‘made a big step forward in terms of quality and design and carved out a new segment for the Jogger, which does not have any direct competitors. The Dacia Jogger has the potential for family and commercial use and, most importantly, it is a good match for the economic reality of people.’ He explains that due to continuously rising residual values, energy costs and new-car prices, many brands simply become too expensive – as new cars and on the used-car market – and the Dacia Jogger is a good option in this market environment.

‘The Dacia Jogger has the potential for family and commercial use and most importantly it is a good match for the economic reality of people.’
Ulmis Horchidan, chief editor Romania, Autovista Group

Poland is the biggest Eastern European automotive market and with a 10% share, Dacia ranks third in private registrations, only exceeded by Toyota and Kia. However, when it comes to commercial registrations Dacia’s share drops to 3% and the Duster is the only Dacia model in the top 20.

Marcin Kardas, head of valuations and specification with Autovista Group in Poland, states that ‘the Dacia Jogger will not be a typical fleet car, but there still might be some potential due to current economic circumstances and increasing costs. The battery-electric vehicle Dacia Spring already sees rising commercial registrations, mainly with car rental companies.’

Jędrzej Ratajski, Autovista Group market analyst in Poland, adds that Polish customers see Dacia models as ‘cheap, practical and best value for money. The Jogger might change this point of view as it also looks nice and is well built. It can fill the gap that the phase-out of some vans leaves. For example, the passenger versions of Renault Kangoo and also Citroën Berlingo are at least temporarily not available.’

An option for car fleets

Does the improved quality, low depreciation and benchmark TCO make the Dacia Jogger a perfect model for car fleets?

So far, commercial registrations for Dacia vehicles remain the exception and the clear focus is on private customers. The Jogger will appeal especially to families in need of space and versatility at an affordable price. And this focus on private customers is one of the drivers of the strong RV performance.

However, Dacia has come a long way and there might be a small window of opportunity opening for a new target group of commercial buyers. Economic uncertainty, increasing costs and energy prices will make smaller businesses, in particular, look into their cost structures and seek improvements. The Dacia Jogger will certainly not be the car attracting user-chooser fleets, but for non-user chooser fleets or white fleets in need of cars as ‘workhorses’, as Ulmis Horchidan said, it could be a viable and rational option.

Not evoking desirability

The one thing that stands in the way of rising commercial registrations and fleet adoption is the brand Dacia itself. Being the rational choice and a sign of understatement does not leave much room for automotive emotions.

But in the end, every technician or craftswomen also takes pride in the quality and reputation of the tools they use, so maybe also the non-user-chooser fleet purchase decision is a more emotional one than you would initially think. The brand of tool or car an employer provides for working hours, but oftentimes also for personal use, helps with employee satisfaction and retention. While Dacia has improved significantly on so many levels, it remains a brand not evoking desirability.

How much further will new-car prices rise?

Christof Engelskirchen, chief economist of Autovista Group, explores how much further new-car list prices could increase on the back of recent global developments.

Disrupted automotive supply chains and semiconductor shortages cut a quarter off new-car registrations in 2021/2020 versus 2019. Scarce supply and pent-up demand propelled new-car prices to record highs. The war in Ukraine and sanctions on Russia are causing more disruption as costs for raw materials, energy, and logistics are rising.

Inflationary trends drive up prices, including those of new cars – and vice versa. However, list prices for new vehicles rose more steadily than inflation rates during the past years. The last decade was characterised by record-low inflation in the Eurozone and the UK. In an attempt to move the needle towards healthy inflation levels (grey corridor in the chart below; around 2%), the European Central Bank (ECB) rates went negative. Inflation remained unimpressed, dropping further and even going negative in several Eurozone markets and Switzerland during the second half of 2020.

The pandemic depressed private spending across several sectors and oil prices were in freefall during the first half of 2020. COVID-19 reactive VAT reductions also played a role in many markets. Three factors reversed this trend in 2021. First, there were base effects compared to periods of very low prices. Second, energy costs rose substantially in 2021, beyond pre-COVID-19 levels. Third, CO₂ prices were added to fuel, oil and gas in January last year. By the end of 2021, monthly inflation hit 5.3% in Germany, 5.7% in the Netherlands, 6.5% in Spain and 4.8% in the UK.

Monthly inflation rates (y/y) by country

*Source: OECD, Autovista Group analysis*

Steady rise of new-car prices during the pandemic

Between Q1 2019 and March 2022, average prices in the D-segment (e.g. BMW 3-series, Mercedes-Benz C-class, Volkswagen Passat) rose by 16% in Spain, or €7,183. In Germany, new-car prices surged by 14% in the segment, while France increased slightly less – by 11%. Sweden topped this comparison with a steep 23% list-price jump over the three-year-period.

These price increases were not due to a change in mix. It is consistent across the more expensive versions of a model (turquoise coloured line in the chart below) as well as the cheaper ones (blue line). Not visualised, but noteworthy, smaller-vehicle segments increased even more than larger-vehicle segments. OEMs took the opportunity to increase prices, as supply was short and demand was building. These price rises were also seen in used-car markets.

Average new-car list price development, indexed and unweighted, D-segment

*Source: Autovista Group*. *Note: Green 95% percentile, orange mean price, blue 5% percentile*.

Best-case scenario: stagflation in 2022

Eurozone inflation hit a new high of 5.8% in February and this could increase further. Analysts are reviewing their inflation forecasts upwards – and outlooks will be suspect to frequent changes. Reviewing different year-on-year forecasts for 2022, Autovista24 expects inflation for the Eurozone to hit 3.5% to 4% (versus 2.6% in 2021); double this for the UK (7% versus 2.6% in 2021). In the US, inflation is expected to be around 4.5% to 5% in 2022 after an already substantial 4.7% inflation in 2021. One underlying assumption of these forecasts is that there will be no complete ban on Russian energy imports into Europe.

Stagflation is a likely scenario for many developed economies and is difficult to manage for central banks. It represents a period where prices keep rising (e.g. oil, gas, wheat, raw materials, other agricultural products, logistics, used-car prices, new-car prices), but the economy is not growing, or only slightly. Central banks face the question of how interest-rate increases would help bring inflation down.

This would probably have a limited impact because the prices for commodities like oil and gas are not rising because of an overheated economy. The real dilemma is if central banks do not act, consumers, employees, companies will get used to high inflation, which risks fuelling inflation even further. The ECB decision at the beginning of March, to maintain its interest rate at -0.5% and to reduce bond purchases is in line with stagflation expectations.

A recipe for rising list prices

Several major factors, depicted below, point towards further additional increases, with Autovista24 expecting list prices to remain on the growth trajectory depicted in the charts above.

Semiconductor bottlenecks have not gone away and have become systemic. Demand for chips is rising beyond the automotive industry
Supply chains continue to be fragile. The Russian invasion of Ukraine has exposed some OEM supply-chain issues in the areas of neon (critical for semiconductor production) and wire harnesses, which are model-specific. Ukraine-based companies assemble many of them
Demand for cars will outstrip supply in the coming years. There may be a dent in demand versus any pre-war scenario, but pent-up demand, which has been building up over the past two years, will more than compensate
Prices for raw materials, energy, production and logistics have risen substantially and this will wash through to higher prices.

Of course, there is a limit to how much consumers and companies will be able to pay for vehicles. An expected dip in economic growth will affect personal incomes and profits. Some car consumers may put a purchase on hold, or consider downsizing or buying used. It all depends on how successful the containment of the Russian invasion of Ukraine is. Should the war escalate further and the EU invokes a full Russian energy embargo, a deeper recession is probable. This would reduce the demand for cars, which may halt the rise of new-car prices, but it does not mean that they will come down.

What is an automotive over-the-air update?

Cars are becoming increasingly digital, with new software capabilities redefining what was once a feat of engineering. This creates an opportunity for continual development as system updates provide fresh features, while also squashing bugs long after a model leaves the showroom. But what are over-the-air (OTA) updates, how do they work, and perhaps most importantly, what do they mean for the future of cars? Autovista24 journalist Tom Geggus explains in the latest ‘What is?’ video.

Make sure to subscribe to the Autovista24 YouTube channel and sign up for notifications. If you enjoy a video, make sure to like and share it too. Let the Autovista24 team know if there are any other automotive terms you would like defined. Reach out in the comments, on Twitter or LinkedIn. Previous ‘What is?’ videos have explained bi-directional charging, electrically-chargeable vehicles (EVs), type approval, autonomous technology, seasonally-adjusted annualised rate (SAAR), total cost of ownership (TCO), and residual values (RVs).

All up in the air

The automotive industry is surging with OTA software updates. For example, Volkswagen (VW) passenger cars hopes to update its ID. model range of battery-electric vehicles (BEVs) every 12 weeks.

‘Volkswagen combines the best of two worlds – safe, appealing hardware and intelligent software,’ said Klaus Zellmer, member of the VW brand board of management for sales, marketing and after-sales. ‘We will exploit the potential of this fusion more than ever before through continuous over-the-air updates.’

Meanwhile, Jaguar Land Rover (JLR) recently confirmed it would roll out Amazon’s Alexa voice assistant to over 200,000 existing owners via an OTA update. ‘The seamless integration of Amazon Alexa with our Pivi Pro infotainment system gives customers simple, intuitive voice control of regularly-used features, making the driving experience even more enjoyable,’ said Alex Heslop, director of electrical and electronic engineering at JLR. ‘The fact we can also offer this new feature to existing customers proves the value of our software over-the-air-updates.’

In October, Volvo’s offshoot Polestar unveiled its P1.7, update which was mapped out to improve performance. It sported an in-car range-assistant app for improving efficiency, an eco-climate mode that allows the driver to reduce power demand, and battery-preconditioning improvements. ‘The connected nature of Polestar 2 means we can continue developing new features and improving existing attributes on a continual basis,’ said Polestar CEO Thomas Ingenlath. ‘Since our first update late in 2020, we have released several upgrades that have improved range, efficiency, connectivity and the driving experience.’

In September last year, Renault explained its take on firmware over-the-air (FOTA). Firmware is a digital package that is stored on a hardware device to ensure it runs properly, whereas software describes a program or piece of data with which the user interacts, but both can be updated OTA. Edouard Valenciennes, FOTA project manager at Renault explained that ‘the new technology means 85% to 90% of vehicles will have up-to-date software, compared to the previous levels of 60%, at best, through our dealerships.’

Battery-electric, vehicle-based tax deficit could lead to UK road-pricing scheme

The UK could look to introduce road-pricing schemes in order to avoid a £35 billion (€41.4 billion) black hole in motoring-taxation income by 2050.

Currently, most of the tax the UK government receives through vehicle usage comes via fuel duty and vehicle-excise duty (VED). The latter is an annual payment to use a vehicle on the country’s roads, based on its emissions. However, with battery-electric vehicles (BEVs) not requiring fuel, and being zero emission, the Transport Committee is calling for an urgent reform in motoring taxation.

The new report, Road Pricing, sees the committee warn that it has not seen a viable alternative to a road-charging system, based on technology that measures road use. There are currently limited forms of local road-pricing schemes in the UK, including toll roads, bridges and crossings, congestion charging and ultra-low emission zones (ULEZ) in major cities.

Low-tax expectations

The report warns that if zero-emission vehicle (ZEV) drivers become accustomed to low-tax motoring, it may be socially and politically difficult for the government to levy higher rates of motoring taxation from them in the future.

A similar situation was seen in Norway during 2017. The government, wanting to lessen the impact of subsidies and tax breaks for ZEVs on the country’s budget, suggested introducing a one-off tax on vehicles weighing more than two tonnes. This would have seen an additional €8,800 in tax placed on the price of a BEV over the minimum weight limit. This would have helped lessen the exemption of the 25% VAT the country offers purchasers of new BEV models. Following an outcry over the plans, they were quietly dropped.

Therefore, the Transport Committee believes that introducing road pricing sooner, rather than later, would prevent a similar outcry in the UK while increasing the amount of taxation generated.

Yet the scheme could have the opposite effect. Drivers of internal-combustion engine (ICE) vehicles would end up paying a third tax, on top of VED and fuel duty. While it could be argued that this would enhance the opportunity for drivers to switch to BEVs, the currently higher costs of new models, the lack of incentives, and the patchy infrastructure in the UK, means there are still significant barriers to entry for much of the population.

Therefore, the report recommends that should a scheme be introduced, it is applied to all drivers in a fair manner, with the abolition of current taxation methods.

Recommended routes

The committee states that technology to help introduce road pricing is already available, through telematics – currently used in the insurance industry. This would allow for a ‘price-per-mile’ charging system to be introduced.

Its report makes four recommendations that the UK government must act on as soon as possible to avoid both a funding crisis and alienating the population:

Introduce an ‘honest’ conversation with the public on how to maintain funding roads and other essential public services once revenue from fuel duty and VED declines;
Ensure that any new motoring taxes entirely replace fuel duty and VED, rather than being added alongside these taxes;
Examine the role that telematics technology can play in a new road-pricing mechanism that sets the cost of motoring based on duration and the time of day the journey takes place, alongside vehicle type and size; and
Set up an ‘arms-length’ body tasked with recommending alternative road-charging mechanisms to replace fuel duty and VED by the end of 2022.

‘The government’s plans to reach net zero by 2050 are ambitious,’ stated Huw Merriman MP, chair of the Transport Committee. ‘Zero-emission vehicles are part of that plan. However, the resulting loss of two major sources of motor taxation will leave a £35 billion black hole in finances unless the Government acts now – that’s 4% of the entire tax-take. Only £7 billion of this goes back to the roads; schools and hospitals could be impacted if motorists don’t continue to pay.

‘Work should begin without delay. The situation is urgent. New taxes, which rely on new technology, take years to introduce. A national road-pricing scheme would avoid a confusing and potentially unfair and contradictory patchwork of local schemes but would be impossible to deliver if this patchwork becomes too vast. However, net-zero emissions should not mean zero-tax revenue.’

Monthly Market Update: Used-car pricing boom across Europe extends into 2022

Sales of used cars in a number of European markets grew in January 2022 compared to a year ago. In the UK, activity was stable and Italy and Spain experienced downturns. However, the ongoing issues in the automotive supply chain dictate that residual values (RVs) of three-year-old models rose further in January 2022, compared to December, and remain firmly higher than a year ago.

Autovista Group’s coverage of used-car markets in the monthly market dashboard features Austria, France, Germany, Italy, Spain, Switzerland, and the UK. It also includes a breakdown of key performance indicators by fuel type, average new-car list prices, as well as sales-volume and active market-volume indices.

The upward trend in the prices of cars with internal-combustion engines (ICE) and hybrid-electric vehicles (HEVs) is forecast to continue in Europe in 2022, but not in the UK. The outlook also points to ongoing RV rises for plug-in hybrids (PHEVs), except in France and the UK, as they make up for the lack of ICE cars and HEVs. However, transaction prices of battery-electric vehicles (BEVs), especially those with a limited range, will continue to struggle as there is not enough demand from private used-car buyers to absorb the growing supply.

Austria supply down 10% year on year

The Austrian used-car market continues to be underpinned by stable demand and low supply. On average across all passenger cars aged two-to-four years, the supply volume in January was 10.7% lower than a year ago, highlights Robert Madas, Eurotax (part of Autovista Group) valuations and insights manager, Austria and Switzerland.

Diesel cars and BEVs are especially missing from the market, with drops of almost 20% compared to January 2021. The supply of petrol cars and PHEVs has increased year on year, but standard hybrids are slightly down.

In the ongoing context of used-car demand outstripping supply, average days to sell decreased by 5.6 days compared to December, to an average of 69.9 days. HEVs are selling the fastest, averaging 62.1 days, followed by petrol cars with 62.8 days. PHEVs are selling the slowest, averaging 88.6 days.

This market environment has led to a further increase in RVs of 36-month-old cars. They have risen by 10.4% year on year in value terms, with cars retaining 46.6% of their list price on average. Petrol cars are currently leading with a trade value of 47.5%, followed by HEVs (47.2%) and diesel cars (46.4%).

Madas assumes that the market parameters will not change in the medium term, because new-car registrations are still markedly lower than before the crisis (2021 was down 27% compared to 2019). Due to this undersupply, RVs for three-year-old passenger cars will probably continue to rise this year. Only when the new-car market picks up significantly, and thus volumes on the used-car market also increase, are values likely to come under pressure. This will probably not be the case before 2023.

New regulations inflate prices in France

January saw new regulations come into effect in France, with an increase in the malus (penalty) for registering cars with CO₂ emissions of 128g/km or more, up to a maximum of €40,000 for cars with emissions higher than 224g/km. This means that list prices of many new cars have artificially increased.

This also comes at a time when there is lower supply than usual and consumers are postponing their purchase of new cars and young used cars due to the price increases and indecision as to which fuel type to opt for, explains Ludovic Percier, residual value and market analyst, Autovista Group France.

Furthermore, OEMs are offering new cars with a lack of options due to the semiconductor crisis, which is also deterring customers from buying, even when the car itself is available. The combination of price increases and the restricted availability on the new-car market has driven RVs higher, even for 24-month-old cars. However, customers that opt for a new car with a lack of required equipment will lead to a decrease in RVs in 36-48 months, Percier adds.

The increase in list prices also largely explains the 1% decrease in RVs, in value-retention terms (RV%) compared to December. Higher prices are raising buyers’ expectations and, in turn, the number of stock days, especially as there is an increasing number of vehicles with configurations that do not fit with demand.

Diverse fuel-type impact

Diesels RVs have risen further in value terms, compared to both January and December 2021, but petrol cars and PHEVs have seen greater gains. PHEVs are especially dynamic in terms of RVs as de-fleeting has been limited, although this will increase in 2023. Nevertheless, prices are high on the used-car market and stock days are much higher than last year too.

There is a broad decline in RVs of BEVs, although Percier notes that vehicles such as the Tesla Model 3, Mini Electric, and Korean contenders like the Hyundai Ioniq 5 are less impacted. BEVs offering a higher range are in greater demand and therefore perform far better than those with a low range. Too many incentives and discounts on the new-car market and weak demand on the used car-market is generating more advertisements in France. Furthermore, the lower new prices have contributed to the decrease in RVs, as well as a rise in stock days as demand on the used-car market is simply insufficient.

Unstoppable RV growth in Italy

The growth in RVs seems to be unstoppable in Italy. During January 2022, a 36-month-old used car with a mileage of approximately 60,000 km was purchased at an average of 49.7% of its list price, an increase of 13.5% compared to a year ago, notes Marco Pasquetti, forecast and data specialist, Autovista Group Italy.

This is the result of the balance of supply and demand, which has been radically changed by the impact of the COVID-19 pandemic on the automotive sector. Among other effects, this has also considerably speeded up the time it takes to sell a used car. In January, an average of just 51.5 days passed between a model being advertised online and its sale, two days faster than last year.

There are no signs of a change in the trend in the short term, although Pasquetti expects the growth curve to gradually stabilise over the course of 2022. By the end of the year, he foresees a slight increase in RVs of around 0.7% compared to 2021. A slight fall in RVs, of just 0.1%, is envisaged for 2023, which is expected to mark the start of a slow descent towards pre-crisis values from 2024 onwards.

There has been an especially sharp increase in the RVs of HEVs in January, which grew by 25% compared to December. Toyota is a key player in this segment, accounting for the three fastest-selling models in Italy. Premium brands, on the other hand, dominate when it comes to PHEVs, which, with an average list price of €62,000 (compared to €31,000 for HEVs), are more oriented towards wealthier consumers.

In absolute value terms, RVs of BEVs have fallen by 25.4% year on year, although the sales-volume index has increased by almost 150% and a BEV is now sold after 89 days. The sales process is 14 days faster than a year ago, but this is still high compared to ICE vehicles.

Used cars up 9% in Spain

Spain was marked in 2021 by a shortage of both new and used cars. Registration figures for new cars were at a similar level in 2021 as in 2020, but used-car transactions were 9% higher, although they did not exceed pre-pandemic levels, says Ana Azofra, Autovista Group head of valuations and insights, Spain.

The shortage of supply is especially pronounced in younger cars up to a year old. This is partly due to the lack of new cars because of production stoppages, which transferred some demand to young used cars. Furthermore, there was a shortage of cars coming from the rental channel (down 26% in 2021), which is one of the main entry channels for young used cars in the Spanish market.

A small part of used-car demand has been met by used imports, which increased by 30% in 2021, but the most direct impact of the supply shortage has been the growth in RVs. Although milder than the impact on young used cars, average transaction prices for cars aged three years increased significantly in 2021. Azofra expects the growth trend to slow during 2022 as the problems caused by the semiconductor crisis are resolved.

All this is reshaping the profile of the used-car market in Spain, mainly in terms of the age and weighting of each brand, with an impact on average prices. The strongest increases in RVs occurred in the oldest vehicles, i.e. those aged 10 years or more. Their effect on pricing is significant as they still account for 60% of used-vehicle transactions, Azofra emphasised.

EV demand exceeds supply in Switzerland

For more than a year now, demand has exceeded supply in the Swiss used-car market. On average across all two-to-four-year-old passenger cars, the supply volume in January was 9.3% below the level at the beginning of 2021.

Diesel cars are particularly lacking, with supply 29.2% down compared to a year ago. There are also fewer HEV offers on the market than in January 2021 (down 14.8%), and sales activity is particularly high in relation to stock availability. The supply of plug-in hybrids and especially BEVs has increased compared to the beginning of 2021, but even demand for used examples of the two EV powertrains is exceeding supply, notes Hans-Peter Annen, Autovista Group head of valuations and insights, Switzerland.

The average days to sell rose slightly for a short time but are now declining again: a passenger car aged two to four years is currently in stock for 58 days only. PHEVs are selling the quickest, with an average of 52 days, followed by HEVs with 53 days, petrol cars with 55 days, and diesel with 65 days.

Stubborn demand and supply shortages have led to a further increase in the average residual-value percentage (RV%) of 36-month-old passenger cars, to 46.3% (up 12.3% compared to January 2021). Petrol cars posted strong year-on-year RV gains of 12.6%, to 47.4%, as too did diesel cars (up 10.8% to 44.3%).

Supply will be a key factor in the future development of RVs. As new-car registrations are markedly lower than before the crisis (2021 was down 23.4% compared to 2019), Annen assumes that market parameters will not change in the medium term. RVs for three-year-old used cars will continue to rise this year, before eventually stabilising and declining over the year 2023.

Lull in UK wholesale activity

Auction activity in the UK was subdued in December 2021, which is not uncommon in the run-up to the festive period. Auction hammer prices were in line with Glass’s trade values, confirming that dealers were still prepared to pay strong prices, but poor conversion rates, which rarely rose above 50%, suggest they did not need to buy in bulk to fill forecourts, surmises Jayson Whittington, Glass’s (part of Autovista Group) chief editor, cars and leisure vehicles.

Activity throughout January 2022 has been similar, and it took dealers on average 1.4 days fewer than last year to retail a used car, suggesting that dealer stock remains high. Despite the lull in wholesale activity, RVs remain eye-wateringly high, with the average RV of a three-year-old car over 40% higher than in January last year, Whittington notes. The average RV increased by 5.7% compared to December, based on the mix of three-year-old used cars sold to consumers.

Nevertheless, the UK’s used-car market does not appear to be firing on all cylinders. Although the sales-volume index shows that a similar number of 24-to-48-month-old cars were sold in the 30 days to 26 January, as last year, it is worth remembering that the UK was in lockdown last January. Supply constraints in the new-car market are disrupting the flow of used cars, so there is less choice for consumers, which may account for the comparatively low sales rate according to Whittington. The active-market volume index supports this view, showing that only 75% of last year’s volume is being advertised for sale.

The outlook is still healthy for RVs in the UK by historic standards, however, as used-car supply issues are expected throughout this year, giving vendors the confidence to hold out for strong reserve prices. Glass’s expects values to lose some of the impressive gains made in 2021, albeit only falling by around 4-5%.

View the January 2022 monthly market dashboard for the latest pricing, volume and stock-days data.

CATL rolls out ‘one minute’ EV battery-swap service in China

Contemporary Amperex Technology Co. Ltd. (CATL), one of China’s fastest-growing companies, has rolled out a battery-swap service in its home market, allowing consumers to change batteries of electrically-chargeable vehicles (EVs) in one minute.

The company announced the news at a launch event, where it presented the new service under the name EVOGO. The modular battery-swap solution is made up of battery blocks, fast battery-swap stations, and an app. It will initially be rolled out in 10 cities across China, which keeps promoting infrastructure-related facilities such as charging and battery-swapping stations.

Battery-swapping is more prevalent in China than elsewhere in the world, with carmaker Nio planning to add an additional 100 battery-swapping stations to its network of 700 in the country by 2025. But the service is gaining traction elsewhere, with the manufacturer recently partnering with Shell to introduce battery-swapping stations in Europe in a pilot project from 2022.

Battery as a shared product

‘We consider the battery as a shared product, instead of a consumer product for personal use,’ said Chen Weifeng, general manager of CATL’s subsidiary Contemporary Amperex Energy Service Technology Ltd. He added that the new product would help EV drivers beat range anxiety while also getting rid of the ‘inconvenience’ to recharge batteries, as well as high purchasing and driving costs.

Its mass-produced battery, designed to look like a bar of chocolate, has especially been developed for EV battery-sharing. It can achieve a weight-energy density of over 160 Wh/kg and a volume energy density of 325 Wh/L, enabling a single block to provide a driving range of 200km.

CATL gives customers the opportunity to rent one to three blocks to meet different range requirements at swap stations. One block is typically sufficient for inner-city commuting, while the battery maker recommends two to three blocks for longer journeys.

The batteries are compatible with many battery-electric vehicles (BEVs) from different OEMs, suiting a range of vehicles, from Class-A00, Class-B, and Class-C passenger cars to logistics vehicles.

Compatibility and competition

‘The battery-swap station highlights high compatibility, need-based battery rental, and complementarity with charging services. With a footprint equivalent to three parking spaces, a standard EVOGO battery-swap station can house up to 48 Choco-SEBs and allows one-minute swapping for a single battery block, ensuring fully-charged batteries for customers at any time without a long wait. Moreover, EVOGO offers a variety of swap stations to suit the climates of different regions,’ CATL said.

The company launched 10 years ago and has quickly become a darling of investors, helping to give China a lead in EV batteries. It supplies batteries to most of the world’s carmakers, including Volkswagen, BMW, and Tesla. The New York Times found it holds one third of the global EV-battery market, with its biggest competitor being LG. Elsewhere, competition is heating up as carmakers keep pushing into the battery business by building their own batteries or investing in a range of companies to diversify the supply chain.

Last year, Geely, the parent company of Volvo Cars, announced plans to set up 5,000 battery-swapping stations globally by 2025. The company showcased the technology behind this service at the 2021 Wuzhen Internet Conference, with the process taking less than a minute. Tesla at one point explored battery swapping, but withdrew its plan to focus on its network of fast chargers instead.

Battery recycling builds momentum in Germany and UK

As the automotive industry strives to go green, electromobility has become synonymous with sustainability. The aim is for environmentally-friendly factories to build electrified models that will eventually run on renewable energy. But what happens when an electrically-chargeable vehicle (EV) comes to the end of its lifecycle? Companies are considering how an EV’s battery can be re-used, recycled and repurposed.

In Germany, RWE brought a new energy-storage facility online which uses lithium-ion batteries from electric Audi models. The pumped-storage power plant on Lake Hengstey in Herdecke employs 60 battery systems and will be able to temporarily store roughly 4.5MWh of electricity. Meanwhile, in the UK, Veolia announced its first battery-recycling facility. The resource-management company predicts it will have the capacity to process 20% of the country’s end-of-life EV batteries by 2024.

Carry-over capacity

Decommissioned batteries from Audi’s e-tron development cars are the focus of RWE’s project. After primary use, the battery-electric vehicles’ (BEVs) power-storage components maintained a residual capacity of more than 80%. Depending on specific applications, these units can go on to have 10 years of service life. All this for a significantly cheaper amount than new cells.

Oliver Hoffmann, member of the board for technical development, explained that while Audi plans to launch more than 20 BEVs by 2025, its carbon-neutral goals stretch beyond the vehicle. This creates a potential for collaboration with companies from the energy industry.

‘This partnership with RWE is intended to demonstrate the possibilities that exist for the resource-friendly use of second-life high-voltage batteries and their intelligent integration into the power grid of the future,’ said Hoffmann. ‘In addition, we are already thinking about the time after this utilisation phase and are stepping up our efforts to ensure that batteries are recycled effectively.’

RWE expects to start marketing the capacity of the storage system early this year. Initially, it will look towards supporting the grid as part of frequency maintenance. Long-term, findings from the project will help the company build and operate larger facilities in the future.

‘Powerful battery storage plays an essential role in the energy revolution. Flexible storage technologies are needed to compensate for short-term fluctuations in renewable energy and to stabilise the grid. Battery-storage systems are ideally suited for this purpose,’ Roger Miesen, CEO of RWE Generation commented.

‘Together with Audi, in Herdecke we are testing how end-of-life high-voltage batteries from electric cars behave as stationary energy-storage devices when connected together. The continued use of such ‘second-life’ storage is a sustainable alternative to brand-new batteries. The experience gained from this project will help us identify the applications in which we can most cost-effectively operate such battery systems.’

UK processing

We are proud to announce that we have launched our first electric vehicle battery recycling plant in the UK!🔋

With Veolia's urban mining processes, we will be extracting all the different precious elements from end-life batteries. Read more https://t.co/3CwMNQ9Iz4 #UrbanMining pic.twitter.com/ReJFqil3M0
— Veolia UK (@VeoliaUK) January 10, 2022

Veolia’s new Minworth facility is the company’s first step towards developing its recycling technology and treatment capacity in the UK. Given that the country is estimated to have 350,000 tonnes of end-of-life EV batteries by 2040, this approach could turn potential waste into a valuable resource.

Initially, the site will discharge and dismantle batteries before the completion of mechanical and chemical separation stages. Veolia also plans to establish a circular economy in the next five years to produce battery precursors in Europe.

‘We will not reach carbon neutrality without increasing our investment and development of new technologies and recycling opportunities,’ said Gavin Graveson, Veolia senior executive vice-president for the northern Europe zone. ‘As the demand for electric vehicles increases, we will need this facility – and more like it in the UK – to ensure we don’t hit a resource crisis in the next decade.’

‘Alongside other projects across the globe, bringing Veolia’s expertise to the UK recognises the size of the national market and appetite to recycle locally and responsibly. Urban mining is essential if we are to protect raw materials and will, in turn, create a new, high-skilled industry,’ he concluded.

ALD buys LeasePlan in €5 billion deal

ALD Automotive, the car-leasing business of French bank Société Générale (SocGen), plans to acquire its Dutch rival LeasePlan for €4.9 billion in cash and shares. The purchase will create Europe’s biggest car-leasing group, dubbed NewALD.

Once established, the new company would manage the biggest fleet of electrically-chargeable vehicles (EVs) in Europe. The businesses expect to close the deal by the end of the year, with SocGen holding a 53% stake in the new entity.

Based in France, NewALD will have a combined fleet of 3.5 million vehicles. ALD manages around 1.7 million cars while LeasePlan has a fleet of 1.8 million in more than 29 countries. Both companies said the acquisition would allow them to build a leading global mobility player as they hope to profit from trends, such as the shift to zero-emission vehicles and changing patterns of ownership.

New chapter

‘Today marks the beginning of a new chapter in our history as a first step towards creating NewALD,’ said ALD CEO Tim Albertsen. ‘By combining the multiple strengths of ALD and LeasePlan, we would transform our industry and value propositions to our enlarged client base. This transaction would create multiple opportunities to the joint management teams and talents of both companies, across geographies, underpin our focus on sustainability with a clear path to zero-emissions mobility.’

One of LeasePlan’s previous majority shareholders was Volkswagen (VW) Group. The German carmaker sold its 50% stake in the business in 2016 as part of cost-cutting measures. Since then, it has been held by a group of investors that includes TDR Capital.

With the planned acquisition, SocGen is betting on the electromobility boom. Amid the shift to EVs, more consumers and companies are expected to opt for flexible arrangements, such as renting and leasing, to try out different vehicles, including electric ones.

NewALD aims to provide increased services to meet future market needs and client expectations. It plans to invest and develop new mobility products to build digital business models. The company wants to focus on sustainable mobility, aiming to support the transition to EVs by creating global partnerships around electromobility.

Synergies

‘The combined business would be instrumental in moving the automotive industry from ownership to subscription models and zero-emission mobility,’ said Tex Gunning, LeasePlan CEO. ‘NewALD would be operating one of the largest fleets of electric vehicles and will continue to set the standard for ESG (Environmental, Social, and Governance) in the mobility industry.’

The deal shows how European banks are branching out activities to cash in on profitable business opportunities. For SocGen, the leasing business is particularly lucrative as the French bank plans to make vehicle leasing a major pillar of its operations alongside retail and investment banking. It added the transaction would generate operational synergies amounting to €380 million of annual profits before tax. SocGen also said it is committed to remaining the long-term majority shareholder of NewALD.

Other banks are also showing growing interest in leasing operations. Last month, Stellantis said it was in exclusive talks with BNP Paribas, Crédit Agricole and Santander over the reorganisation of the carmaker’s leasing and financing operations in Europe. The deal is subject to approval from the relevant authorities.

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Article Type: Insight

BEVs struggle on used-car market

Selling BEVs takes dealers longer

Changing expectations

Rapid rise continues

Consequential consumer confidence

Agency model enables pricing discipline

Substantial challenges for agency model

Growing appetite for zero-emission cars

Challenges for used-car market but no crash

Going against the flow

Low-volume production

Commercial vehicles

Electrifying the E-segment

Converting E-Class owners

Consumer confidence at all-time low

High prices reduce willingness to compromise

Uncertain outlook for 2023

Used vehicles slip but cost more

Supply cannot meet used BEV demand in Austria

Weak tactical and fleet registrations in Germany

Divergent performance of new and old technologies in Italy

Stock levels depleting in Spain, despite import boom

List prices fall but RVs stable in Switzerland

UK used-car market ‘on a rollercoaster ride’

What are e-fuels?

Opinions are split

Is carbon-neutrality enough?

The shortcomings

Modest improvement in the second half

Disruption persists in 2023

Three body styles in one model

Benchmark new-car price

TCO driven by depreciation

Residual values are a major advantage

Strong new-car registrations and RVs in Eastern Europe

An option for car fleets

Not evoking desirability

Steady rise of new-car prices during the pandemic

Best-case scenario: stagflation in 2022

A recipe for rising list prices