Article Type: insights

BMW in the hot seat – opportunities and risks of features on demand

Features on demand (FOD) can open up a world of potential, but not without risk. Sonja Nehls, principal analyst at Autovista24 explores the hot topic.

At the start of July, BMW quietly introduced heated seats as a subscription item to its ConnectedDrive store in several markets. The news sparked an intense debate online, with social media comments ranging from amused to worried.

BMW is in the hot seat, but the topic of FOD is a high-ranking one for all carmakers. Some are more advanced in the process, while others lag behind. Although getting the set-up of FOD right holds certain risks, both on the new and used-car market, there are major opportunities and potential benefits for all stakeholders.

FOD builds on over-the-air update (OTA) technology in a vehicle’s software and adds a commercial angle to it. Through FOD, customers can enhance their car’s set-up and activate certain functionalities for a trial, a limited subscription period, or the lifetime of the vehicle. In a recent video, Autovista24 deputy editor Tom Geggus explains what FOD is all about.

Advantages and opportunities for stakeholders include:

Carmakers can simplify their production processes by unifying the hardware set-up of vehicles. The FOD platform represents a direct customer relationship and a potential revenue stream throughout the lifecycle of a car.
Drivers can experience new features they did not initially order, enhancing and personalising their cars.
Used cars with FOD capabilities can be upgraded individually and therefore appeal to a wider group of potential buyers. Remarketers benefit from increased flexibility and avoid take-it-or-leave-it scenarios.
Fleets do their maths, taking into account the holding period of the car, costs for a FOD subscription compared to the lifetime buy, and implications on remarketing potential.

Not all items qualify for features on demand

Besides the reasonable advantages and opportunities, features on demand face challenges as to the right applications and cost, as well as how to ensure profitability.

Jennifer Bilatscheck, head of Car To Market and consulting at Autovista Group, has worked with a number of carmakers on consulting studies regarding FOD, and identified the main strategic challenges. ‘Selecting the right features at the right subscription price is key. Prices need to be high enough to compensate for the initial hardware investment and attractive enough to secure high take rates. If set up incorrectly, FOD could result in financial loss and impact residual values (RVs) negatively,’ she said.

The team has developed a framework to identify eligible and commercially viable items for FOD, which on the one hand considers the desirability of a feature, represented by the take rate. On the other hand, it reflects the initial hardware investment needed to enable FOD for an item. Functions are commercially viable when there is no additional hardware needed or when the additional hardware is compensated for by a high or growing demand.

Viability of FOD depends on demand and hardware investment

In a recent Autovista24 webinar, Bilatscheck used an example now in the spotlight, heated seats, to explain the risks of FOD. ‘You cannot simply remove an item, which typically is a standard feature with the carmaker’s models, and then offer it as FOD. The basic RV would suffer and the FOD’s potential positive contribution to RVs will not outweigh that impact,’ Bilatscheck explained.

Also, the potential positive impact of the FOD capability depends heavily on the attractiveness of the FOD offer on the used-car market. Used-car buyers are more price-sensitive than new-car buyers.

If FODs are perceived as too expensive, the take rates in the later stages of the lifecycle, and therefore the contribution against initial hardware costs, will be very low and the RV impact of the capacity can even turn into a negative one.

Used-car buyers will deduct the required investment for activating the features they want from the price they are willing to pay for the car. A downward adjustment of prices in line with the overall depreciation of the vehicle will secure relevance for the second or third-hand owner.

Pitfalls for features on demand

The recent criticism BMW faced after it revealed heated seats as a FOD, showed that customers felt robbed of a feature which is already built into cars, but requires additional payment.

BMW UK shared a comment on this saying that ‘where heated seats, or any feature available in the ConnectedDrive store have been purchased when a customer vehicle is ordered, no subsequent subscription or payment is necessary.’ Additionally, there will now be the possibility to enable the heated seats at a later date, for the entire lifetime with a one-time payment of £200 (€235), or a more flexible monthly rate of £15.

In any case, the recent discussion showed that not all items are equally fit for FOD. There is a thin line between offering customers flexibility and putting them off.

FOD has major potential for all software-based functions, which can be truly enhanced and potentially add new features over the lifecycle, including advanced driver-assistance systems (ADAS) or navigation functions. Purely hardware-based items, like the heated seats, struggle with customer acceptance.

In May 2021, Sonja Nehls and Dr Christof Engelskirchen, chief economist at Autovista Group, touched on this in an Autovista24 podcast on the benefits and challenges of FOD. ‘A customer will know that everything is already built in and will assess the value of activating a feature lower than what OEMs hope’, Nehls said.

The podcast named the biggest pitfalls to avoid when it comes to FODs and the used-car market:

Transparency of activated features and available FODs is crucial to find eligible vehicles and identify the equipment level, especially in comparison to conventionally-equipped cars.
Off-lease vehicles will lack some important features due to expired subscription periods. Attractive packages targeting used-car buyers are needed to mitigate an RV risk for these vehicles.
A clear definition and process are still needed as to taxation and benefit-in-kind for company-car drivers.

Features on demand come with opportunities and challenges. The advantages, especially for remarketing, are promising and enable more flexibility. Carmakers benefit from streamlined production processes, a direct customer relationship, and potential revenue streams.

The current debate on heated seats makes it crystal clear that not all features are eligible and that transparent communication with customers is key, regardless of whether a new or used car is being sold.

ACEA’s influence questioned as Volvo also says it will leave

Questions are being raised about the status and influence of the European Automobile Manufacturers’ Association (ACEA) as Swedish carmaker Volvo has said it would leave the powerful group by the end of 2022. This follows the decision last month by Stellantis to quit its ACEA membership this year.

The Brussels-based industry group aims to represent a unified approach among carmakers, especially as Europe is in the middle of debating the Fit for 55 package that calls for stricter climate goals. But cracks are starting to show. Two members are now set to leave, and for different reasons – Stellantis to create its own mobility forum, and Volvo because it sees its sustainability ethos as not in tune with ACEA’s.

Not fully aligned

Both Volvo and Stellantis have been key members of ACEA, which represents 16 major manufacturers in Europe and is headed by BMW CEO Oliver Zipse. While the association’s goal is to ‘progress on the road to zero emissions’, Volvo is pursuing more ambitious sustainability targets that it says are not in line with ACEA’s.

Volvo Cars told Autovista24 its sustainability strategy on becoming fully-electric by 2030 does not match ACEA’s position on the matter.

The EU is striving to implement a de facto ban on new petrol and diesel cars by 2035, with ACEA demanding ‘technology openness.’ The group wants hydrogen and what it calls ‘other CO₂-neutral fuels’ to play a role in decarbonising mobility, it explained.

Volvo Cars’ clear support of an all-electric approach would leave no room for the continued use of fossil-fuel-powered cars beyond 2035.

The Swedish carmaker said: ‘After much consideration, we have concluded that Volvo Cars’ sustainability strategy and ambitions are not fully aligned with ACEA’s positioning and way of working at this stage. We therefore believe it is better to take a different path for now.

‘What we do as a sector will play a major role in deciding whether the world has a fighting chance to curb climate change. At Volvo Cars, we believe that it is incumbent on all of us to step up to the challenge. We have one of the most ambitious plans in the industry, but we cannot realise zero-emission transport by ourselves.’

It also urged its peers to make their mark when it comes to addressing climate change. ‘Whoever does so will find a strong ally in Volvo Cars,’ it said.

Unprecedented change

With ACEA losing two of its members in a matter of weeks, these recent developments are exposing a discord among some of its long-standing members. It shows that some manufacturers follow a more progressive approach to cutting carbon emissions than others.

The potential use of e-fuels beyond 2035 also remains a contentious topic, with opinions being divided on the true environmental friendliness of these products.

ACEA stressed to Autovista24 that it would continue to work on a unified approach. Commenting on Volvo’s withdrawal, the association said:

‘We acknowledge the decision of Volvo Car Corporation to leave ACEA by the end of the year. We are in the midst of unprecedented change. ACEA will continue to drive Europe’s ambitious mobility transformation, building on the industry’s global competitive position throughout the transition. We remain committed to act as the voice of Europe’s car, truck, van, and bus makers, working hand-in-hand with all relevant partners and stakeholders.’

Shake-up

Volvo Cars has been one of the most outspoken manufacturers regarding its sustainability. It aims to be a circular and climate-neutral business by 2040, and says this was its biggest ever challenge. With the automotive industry not traditionally known as a climate protector, Volvo has been vocal about its ethical stance and aims to be a responsible business.

Stellantis’ reason for leaving ACEA seems to differ from Volvo’s as it wants to focus its efforts on a new forum dedicated to the future of mobility.

The move is shaking up automotive lobbying activities in Europe. At this stage, it is unclear whether Volvo would join Stellantis’ new mobility forum. While Stellantis, which includes Citroën, Fiat, Opel, and Maserati, wants to sell only battery-electric vehicles (BEVs) in Europe by 2030, its targets in other markets such as the US is not as high – in contrast to Volvo’s more ambitious goals.

Earlier this year, Stellantis CEO Carlos Tavares said the EU’s proposal to phase out internal-combustion (ICE) engines would carry environmental and social risks. He criticised electrification for being a technology ‘chosen by politicians, not by industry.’

With the EU still more than a decade away from implementing a potential ICE ban, which could be watered down if an allowance for e-fuels is made, opinions in the automotive industry on how to address climate goals remain divided.

Launch report: Volkswagen ID.5 aims to build on electric brand popularity

Volkswagen’s ID. range is now a well-established electric sub-brand, and it is no secret that several new models are to be unveiled alongside the already popular ID.3 and ID.4. The new ID.5 is expected to keep up interest in VW’s ongoing brand electrification.

At first glance, the ID.5 is a pleasing automotive spectacle, yet not dissimilar to the ID.4 in design. The main external differentiator is the coupé-like sweep on the roof, which angles down into a rear spoiler and tricks the eye into believing the car is smaller and sleeker than a standard SUV. This lower roof does not hamper interior space, and there is still enough for even the tallest of rear-seat passengers.

The car is also practical, with increased boot space over the ID.4, albeit just six litres. The interior is uncluttered and spacious, with a low central tunnel also optimising space for rear passengers. Volkswagen’s ID.5 makes use of the carmaker’s software version 3.0, which provides better route planning, faster response times for the 12-inch infotainment display, and increased charging performance.

When it comes to powertrains and charging, the 77KWh battery is sufficient for a range of up to 520km, according to WLTP figures. The ID.5 will be available in three variants, the Pro, Pro Performance, and GTX. The latter is designed to be a nod to the GTI branding implemented on VW’s sporty petrol and diesel vehicles. The Pro version starts with 128kW/174hp, the Pro Performance version has 150kW/204hp, and the all-wheel-drive GTX version has 220kW/299hp. However, without rear-brake discs, acceleration and braking are not as efficient as some of the car’s rivals.

Click to open the interactive dashboard

Not all similarities are pleasing

The ID.5 shares much with the ID.4, acting simply as a sporty upgrade to the older, more established model. Unfortunately, some of those things the cars share are not all positive. The interior materials quality is below what users have come to expect from Volkswagen’s petrol and diesel vehicles. Like the ID.4 and ID.3, the carmaker has lavished a lot of plastic surfaces around the inside of the ID.5. This does not give a premium feel, which is a shame with a vehicle costing so much.

The design of the controls around the driver are also not ideal. Climate controls are operated via the infotainment system’s touchscreen and require multiple steps to amend. Touch-sensitive sliders beneath the screen are also easy to knock when adjusting touchscreen controls. While moving functions into a digital realm allows carmakers to increase the scope of over-the-air updates or functions on demand, the distraction for the driver, having to focus more on a screen than the road ahead, is questionable.

However, software 3.0 does allow Volkswagen to build on some of the functionality seen in the ID.4. This includes black-based lane guidance and Park Assist Plus with memory function, which can autonomously retrace parking processes once they have been saved.

Is brand awareness enough?

Volkswagen has strong brand awareness in key European markets covered in this latest launch report, and this helps residual values. The ID. sub-brand has proven popular with buyers, and even though models are just filtering into the used-car marketplace, such interest is likely to continue with those not seeking a new model.

Ultimately, the ID.5 is a sportier variant of the ID.4, and it remains to be seen whether this will be enough to convince buyers to pick this model over its stablemate or the extended family members Skoda Enyaq and Enyaq Coupé. While the ID. the family remains popular, new models are on their way, seeking to take market share from Volkwagen’s mass-market electrification brand. With other ID. models in the pipeline, the hope is that these vehicles will be differentiated against competitors, but also each other.

The Autovista Group dashboard benchmarks the Volkswagen ID.5 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.

Launch Report: Toyota Aygo X gives A-segment the crossover treatment

The Toyota Aygo X serves as a replacement for the Aygo city car in Toyota’s European lineup. It one of the few A-segment models with SUV/crossover styling and proportions.

The Aygo X has a great aesthetic, with a harmonised exterior and interior. It handles well, thanks to a good chassis and 17-inch or 18-inch wheels, which are standard across all trim lines. The car will be easy to park in the city with its very tight turning circle, but rear visibility is compromised by the design, which makes the boot loading sill high.

Higher ground clearance makes front access into the car easy but getting into the back seats is more difficult due to the narrow rear-door opening. Inside, rear legroom is limited too, although this is a common problem in the city-car segment. While many rivals offer electric windows, the Aygo X’s hinged-rear windows will be safer for small children and are not unusual in the A-segment.

Sleekly styled. the model shares its platform with the B-segment Yaris and has grown in length by about 24cm, to 3.7m, compared to its predecessor. The car is also slightly wider, and the crossover styling makes it a few centimetres taller too. This has a positive effect on seating space, as well as the boot, which holds 231 litres. Although this is about 20 litres smaller than in the Kia Picanto and the Hyundai i10, it is still a competitive size, and 60 litres more than in the Aygo.

There are no hybrid or electric powertrains available for the Aygo X, only a one-litre petrol engine. However, there is a choice between a five-speed manual gearbox or a CVT automatic transmission. The three-cylinder petrol engine, carried over from the Aygo, hums a little and is noisy at higher speeds. Taking 14.9 seconds to accelerate from 0 to 100kph, the model appears to be down on power compared to the competition, but usage costs will be low, with official fuel consumption of only 4.8 litres per 100km.

The interior is dominated by an egg-shaped central display that houses a multimedia system with either a seven-inch or nine-inch touchscreen. Standard equipment includes LED daytime-running lights, a rear-view camera, and Toyota ‘Safety Sense’, which features systems such as collision warning, brake assistant, lane-change warning, adaptive cruise control, high-beam assist and traffic-sign recognition.

High price positioning

The Aygo X is the freshest offering in the A-segment and competes against older models – the most recent addition was the third-generation Hyundai i10, which launched in 2020. There are also fewer A-segment models in the market, especially since the withdrawal of the former Aygo’s siblings, the Peugeot 108 and Citroën C1.

Open the interactive dashboard

However, the comparatively high list prices of the Aygo X position it at the upper end of the A-segment. This is partly because advanced driver-assistance systems (ADAS) such as active cruise control and lane assist are included as standard, which are arguably unnecessary in a car that is not dedicated to driving outside cities.

There are cheaper city-car alternatives for consumers that do not feel the need for a higher driving position, and this segment is often more influenced by cost than others. However, the Aygo X does benefits from Toyota’s reputation for producing high-quality, reliable cars, and enjoys strong brand loyalty.

City cars in jeopardy

City cars, with their relatively low weight and compact dimensions, are more environmentally friendly than B-segment cars and SUVs. But there is limited room for demand growth in both the new and used-car markets, due to their low versatility and specific use.

However, due to increasingly stringent emissions regulations and safety requirements, they are becoming increasingly expensive, with prices approaching those of B-segment models that offer greater versatility. A case in point is the iconic Fiat 500 that, despite being a smaller rival and a different concept to the Aygo X, is available as a battery-electric vehicle but with B-segment pricing.

There are not many crossover/SUV-style vehicles in the A-segment, although that is likely to increase due to their popularity and the need to accommodate batteries for hybrid and electric powertrains. Nevertheless, as city cars can hardly be produced at an attractive end-customer price, especially with electrified powertrains, they are even threatened with extinction.

View the Autovista Group dashboard, which benchmarks the Toyota Aygo X in Austria, France, Spain, and the UK for more details. The interactive launch report presents new prices, forecast residual values, and SWOT (strengths, weaknesses, opportunities, and threats) analysis.

Delayed delivery of Europe’s electric-van market

While much of the automotive industry stalled during COVID-19, the light-commercial vehicle (LCV) market developed at a pace. Demand for vans increased as shoppers turned to online retail and companies rushed to keep up with the change in purchasing behaviour.

However, the sector now faces the same external difficulties as the entire automotive market. Shortages of semiconductors, component-supply issues caused by the Ukraine war, and pressure to switch to zero-emission technologies are causing a decline in new LCV sales. New-vehicle list prices are rising, and residual values (RVs) are generally remaining positive.

Just like the passenger-car market there is an increasing push towards electrification, particularly as fuel prices rise. The LCV market presents a significant development opportunity for electrification. However, it must first overcome some serious obstacles such as charging times, infrastructure location, and logistical practicality.

There is also a big opportunity for hydrogen fuel-cell technology in the LCV market. The technology offers significant advantages over battery-based propulsion when it comes to zero-emission LCVs. This includes reduced refuelling times and better payload opportunities without the weight of batteries, which could see the market spearhead development of the fuel type.

All these topics were discussed in the recent Autovista24 webinar, Europe’s light-commercial vehicle market – The road ahead for new and used vans. The panellists looked at economic scenarios in Europe, how RVs are faring, outlooks for the UK and German markets, the electric LCV market, and how hydrogen could grow in the segment.https://www.youtube.com/embed/Ravk1RYhe_4?feature=oembed

Infrastructure and other challenges

The LCV market is a sleeping giant when it comes to electrification, Dr Christof Engelskirchen, chief economist at Autovista Group, stated. There are still challenges to overcome, not least with the infrastructure required. The existing electrification infrastructure has been built around the passenger-car market, and charging points can be restrictive for vans, which require larger parking spaces and car-park height clearance. Additionally, van drivers need a fast charging time to avoid delays to deliveries and the resulting impact on business costs.

One answer could be the development of delivery hubs on the edges of urban areas, with last-mile deliveries made by electric LCVs. Christian Schneider, head of analytics at Autovista Group, suggested that such facilities should have dedicated charging points for vans.

Although all manufacturers are introducing battery-electric vehicle (BEV) models, there are few vehicles filtering through to the used-van market, highlighted Andy Picton, chief editor (CV) at Glass’s, part of Autovista Group. Used BEVs may be a better fit for small and medium enterprises and sole traders. These businesses usually have smaller budgets, making these lower-priced models more appealing. Picton added that recent fuel-price increases may speed up the switch to BEVs.

Development of new BEVs is expensive, which is leading to an increasing number of partnerships, such as that between Ford and Volkswagen, Picton added. Andreas Geilenbruegge, Autovista Group’s head of valuations also observed that manufacturers should work on range and charging times if there is to be an uptick in adoption. This, above all, requires dedicated electric LCV platforms, something manufacturers are working on. There is another challenge when it comes to retail, with dealerships needing to explain electric-vehicle technology and its benefits, alongside specifications and pricing.

‘There are three main pressures on vehicle manufacturers, a personal CO₂ reduction, carbon-footprint target, and regulations from the European Commission to reduce emissions to zero by 2035,’ stated Pierre-Yves Combeaud, sales director at Hyvia, a hydrogen mobility company. ‘It is a question of giving possibilities to companies to have an alternative-fuel source for demanding journeys, for big LCVs mainly, or even sometimes medium LCVs.’

Hydrogen option

Currently, more than 80% of LCVs on Europe’s roads are diesel-powered. Green hydrogen offers many of the benefits of diesel, such as short refuelling times and long ranges, but without the harmful emissions. The zero-carbon technology also allows for better vehicle payloads, without heavy batteries taking up crucial weight.

However, like in the early days of the electric-vehicle market, one of the areas delaying the development and deployment of hydrogen is the lack of infrastructure. But this is coming, as Combeaud highlighted: ‘It is possible that there will be 1,000 hydrogen refuelling stations in France and Germany by 2030, while by 2035, as part of the ‘Fit for 55’ package announced by the European Commission, there needs to be one refuelling station every 50km on European motorways.’

Picton pointed out that the LCV market is subject to the same supply-chain pressures as the passenger-car sector, with semiconductors a particular issue. He also stated that it may not be until the middle of 2023 that we see this situation ease.

New-van prices rise, but RVs stable

LCV list prices for diesel models in particular have been rising more than for passenger cars, with increases of 7% compared to 4%. Diesel vans have seen prices rise more than for BEVs. Engelskirchen pointed out that such price increments show manufacturers are heading towards price parity between internal-combustion engines and their electric counterparts, with petrol and diesel going up, rather than BEVs coming down in cost.Autovista24-LCV-webinar-June-2022 Download

The COVID-19 boom led to a shortage of supply in the new-van market. This, together with the semiconductor supply problem, means that very positive RV development has occurred across all countries in Europe, according to Schneider. Additionally, an increase in purchases of motorhomes, driven by the desire for ‘staycations’ during the pandemic, is helping RV development. Motorhome customers are less price-sensitive than business buyers, added Schneider.

The LCV market in Europe is currently resisting change to electrification. This is in part due to the particular charging and range requirements of vans. Also supply issues are putting pressure on new models reaching the market. However, change is coming, with more electric models available, and used BEVs coming through remarketing channels. Although the sector is behind the passenger-car electrification trend, there is a requirement for it to fulfil zero-carbon targets, with hydrogen also a developing option in the years ahead.

Prices of new petrol and diesel cars on the rise – electric vehicles less affected

As inflation continues to rise in Europe, Christof Engelskirchen, chief economist of Autovista Group, explores why carmakers are pushing up the price of internal-combustion engine (ICE) vehicles more than electric vehicles.

Eurozone inflation is rising, with the latest consensus suggesting it will sit around 7% for 2022 in the European Union and the UK. This rise has been spreading into the automotive sector, underpinned by ongoing supply shortages of new and used cars. Price rises are being further compounded by a steep ascent of raw-material and energy costs as a result of Russia’s invasion of Ukraine.

Autovista24 expects the trend of rising new-car prices to continue as long as supply constraints remain ubiquitous. This will positively affect used-car prices as well – if demand cannot be met on new-car markets, buyers will turn to used models and this supports price realisation. Carmakers will have no other choice than to increase prices to support their margins.

Not all vehicle powertrains are affected in the same way, however. Prices for ICE models have been rising more than those of electric vehicles (EVs) over the past year. There are substantial segment differences too, as can be witnessed in the German market.

Gross list-price changes by segment in Germany – April 2022 year on year

Prices for diesel and petrol vehicles rise on a similar scale within the same segment. For example, in the mid-size segment (e.g. BMW 3-Series, Audi A4 and Mercedes-Benz C-Class), both powertrain types have risen by 7% over the past year. In the large-vehicle segment, prices for each rose by 4%, while in the compact-vehicle segment petrol and diesel-vehicle prices rose by 6%. This was no coincidence. In fact, they appear to be equally affected by rising costs of materials and are treated similarly from a carmaker’s pricing-strategy perspective.

There was one exception to the parity in this development. Diesel prices in the small-vehicle segment (e.g. Opel/Vauxhall Corsa, Volkswagen Polo and Renault Clio) have jumped on average by 16%, which has been driven by the added costs to emissions treatment, which weigh more heavily on cars in this segment. Petrol-vehicle prices only rose by 8%.

Steering customers towards electric powertrains

OEMs are shifting their portfolios towards battery electric vehicle (BEV) and plug-in hybrids (PHEVs). It is no surprise, therefore, that price rises for BEVs were more moderate than those of petrol and diesel vehicles: 3% in the small-vehicle segment and 2% in the mid-size segment.

In the compact-vehicle segment, the average price rise of 11% for BEVs can be attributed to the launch of the Hyundai Ioniq 5, which changed the mix and drove average prices up. Similarly, the 12% increase in the large-size segment was driven by the Taycan Cross Turismo debuting in May 2021.

PHEV price rises are also substantially more moderate than for ICE vehicles, given their contribution to meet EU CO₂-emissions standards. The exception was a 14% price increase in one year in the large-SUV segment, which was driven by price increases from BMW. Overall, the number of PHEV-powertrain offerings was still relatively small, so every new launch affects vehicle-price averages significantly.

While price rises for BEVs and PHEVs have been more moderate, the prices of ICE vehicles are almost exactly trailing annual inflation rates (around 7% to 8%). Higher price rises for ICE vehicles than for BEVs and PHEVs are evidence that most carmakers are steering customers towards electric powertrains.

Higher inflation in eastern-European countries

Annual inflation stayed at a high level in April 2022, driven by price rises for food and energy. April’s Eurozone annual inflation remained stable at a high 7.4%, while inflation in the UK was 7%. Prices have been rising since the beginning of 2021, but it is worth noting that the Ukraine war has driven energy and food prices through the roof. If you take these out of the equation, annual inflation would have been around 3.5% in April.

Inflation was much higher in eastern than in western-European countries. For example, in the Czech Republic, annual inflation rose to 14.2% in April. In Estonia it was 18.9%, Lithuania 16.8%, and Poland 12.4%.

Spain was one of the few countries where inflation fell in April, to 8.3% from 9.8% in March. Countries that are less dependent on energy (and food) imports, like Spain, show lower inflationary tendencies. Other examples include Norway at 5.4%, and France at 4.8% in April.

Inflation outlook above 6% in Europe

Inflation is expected to surge to around 7% in both the EU and the Eurozone for the full year of 2022, with some central and eastern-European countries likely to see double-digit price rises in this timeframe. For 2023, the EU’s inflation will likely fall to 2.7%, but still sit above the European Central Bank’s (ECB’s) 2% target. Interest-rate rises in July are very likely in the Eurozone.

It is worth noting that the next possible escalation of the Ukraine war could result in a stoppage of oil and gas supply from Russia, which would trigger a gloomier scenario. The EU expects gross domestic product (GDP) growth to come down from an already subdued 2.5% in 2022 to 0.2%, and inflation would be 3% higher than in the base case, perhaps approaching 10% in that scenario this year. In 2023, inflation would be one point higher than in the base case, i.e. around 4%.

Volkswagen Group prices higher than others

Across all powertrain types, and controlling for changes in the model mix, Volkswagen (VW) Group brands led the way in terms of price rises. Audi, Cupra, Seat, Skoda and VW have increased prices more than other carmakers (see chart below). There are two possible reasons for this:

They are pushing customers towards electric powertrain types, via price rises for ICE vehicles
They are particularly affected by supply constraints, which leads the brands to consolidate their margins via price rises more than other OEMs.

New-vehicle price index in Germany by brand January 2019 to April 2022

*Source: Autovista Group* –
(*graphic opens in new tab)*

In terms of price development, Kia and Hyundai are at a comparably low 102.9% and 102.4% level respectively. They are apparently less exposed to supply issues than VW Group brands and are building market share with their more moderate pricing strategy. According to Germany’s national ministry of vehicle transport, the KBA, Kia’s market share in the country in April 2022 was 3.8%, compared to 2.4% in April 2021. Hyundai grew its April market share from 3.3% to 4.1%. VW, on the other hand, dropped from an 18.8% market share in April 2021 to 16.6% in the same timeframe.

Used-car transactions cool for most of Europe’s big five markets in first quarter

Autovista24 deputy editor Tom Geggus considers the cooling of Europe’s big five used-car markets in the first three months of 2022.

With all the first quarter results of the year revealed, the used-car markets of France, Germany, and Spain look to be cooling as transactions slow. However, not all of the big five experienced the same chill, in fact, Italy appears to have enjoyed a heatwave, while the UK also posted positive results. However, when compared with the artic results of the new-car market, Germany was the only country to see comparatively colder used-car market conditions.

Used-car markets have enjoyed a long summer of increased transactions as the new-car market froze. COVID-19 saw semiconductors redirected to the consumer electronics market, leaving the automotive industry scrambling when restrictions were lifted.

Meanwhile, the Russian invasion of Ukraine resulted in a shortage of wiring harnesses alongside an increasingly troubled geopolitical climate. Rising inflation and costs of living are also putting new cars out of reach for many. So, production is problematic, delivery times extended, and more people are opting not to buy a new car.

This is now having a knock-on effect, as many are abstaining from buying a new car and not passing their current vehicle over to the used-car market. Therefore, a lower level of supply is being met by a shrinking demand across Europe’s major automotive markets, which is helping bolster residual values (RVs).

France and Spain slump

In the first three months of 2022, France saw its used-car market decline by 11.2% year on year, recording 1,395,230 transactions, according to figures from AAA Data. But this was still an improvement on its new-car market which dropped further, by 17.3% in the same period.

The number of used-car transactions in Spain dropped by 1.8% in the first quarter of the year, down to 449,086 units, GANVAM revealed. Meanwhile, the country’s new-car market tumbled into a double-digit decline, down 11.6% year on year.

Compared to the first three months of 2021, Germany’s used-car market only saw a decline of 7% in the first quarter of this year with 1,472,042 transactions. However, its new-car market faired better still, only dropping by 4.6% year on year, the latest figures from the KBA have shown.

Italy and the UK positivity

Italy’s used-car market stood out as a clear winner in the first quarter of 2022 as 1,205,939 transactions represented a growth of 34.9% year on year. But its new-car registrations saw the biggest drop among the big five markets, declining 24.4% against the first quarter of 2021, according to ANFIA.

The UK’s used-car market also saw an increased number of transactions in the first three months of the year the SMMT reported. With 1,774,351 units moving hands, the country recorded a growth of 5.1% against the first quarter of 2021. However, its new-car market did decline in the reporting period, but only by 1.9% with 1,687,755 registrations.

Residual values stay warm

The latest Monthly Market Update (MMU) confirmed that key European markets saw cooler used-car transactions in April, compared with the previous months in 2022. Autovista Group’s monthly market dashboard covers Austria, France, Germany, Italy, Spain, Switzerland, and the UK. It also considers fuel type, average new-car list prices, sales volumes, and active market-volume indices.

RVs have held firm as individuals and companies hold on to their vehicles for longer due to the difficulty of acquiring a new car. This extends across the automotive spectrum, from purchased models to leased vehicles, and fleet cars. So, as the supply of used-cars dries up, demand is dropping in parallel, which means residual values remained boyant.

Looking at the MMU for April, Autovista Group’s RV outlook for this year has been upgraded in Austria, Italy, and Switzerland. Meanwhile, the UK’s forecast was downgraded as market activity is notably subdued. The outlooks for France and Spain are maintained, so too is Germany after an upward revision last month.

Great Wall Motor’s ORA Cats set to become a challenger in Europe

Newcomers used to be easy prey for the giants in the automotive market, but with the disruption of electrification, they have become hunters. José Pontes, data director at EV-volumes.com, considers the strategies of one of the most daring Chinese EV makers, Great Wall Motor’s ORA brand.

Created as a dedicated battery-electric vehicle (BEV) brand by Great Wall Motor Co. of China, ORA, which stands for “Open, Reliable and Alternative”, started out in 2018 with two distinct models, the R1 city car and the larger iQ5 crossover.

Unlike the weirdly proportionated iQ5, the cheeky little R1 became a success, which allowed the ORA brand not only to survive its first steps, but to expand its line-up with the R2. This successor is a slightly larger city car, with a design not unlike some Japanese and Korean high-roofed city cars.

The first ORA cats are born

In the second half of 2020, the compact Good Cat was introduced, and with it, Great Wall Motor’s ORA cat-family theme was unleashed, with the R1 being renamed as Black Cat, and the R2 as White Cat. The names come from a Deng Xiaoping quote: ‘No matter if it is a white cat or a black cat; as long as it can catch mice, it is a good cat.’

If the previous models already had their distinct personalities, the Good Cat took ORA’s design one step beyond, thanks to design director Emanuel Derta, who worked for Porsche for five years.

Derta was probably a frequent visitor to Porsche’s Museum, because the front design of the Good Cat is somehow reminiscent of the Porsche 356, or early Porsche 911s. The rear of the vehicle is more its own design, taking cues from what a Toyota Corolla could look like in 2030.

The interior is also innovative and retro-futuristic, but this is not a case of ‘all show and no go’ – the specifications support the distinctive design, as proven by the 143hp (171hp in GT spec) electric motor and 63kWh NMC battery (a 48kWh LFP battery is also available), allowing the Good Cat to have an electric range of 420km WLTP.

This compact (4.24m) model is ORA’s first EV planned to be taken to overseas markets. It is already present in markets like Thailand and Costa Rica.

Europe is also in ORA’s sights, with the Good Cat, or simply 01 Cat, as it will be known in Europe, set to land during the summer 2022 in top specification (171hp electric motor, 63kWh battery). With prices expected to start at around €30,000, the initial list price does not seem to be as low as one would expect, but given the comprehensive standard equipment, it becomes attractive, as it is in the same segment as the VW ID.3 or Nissan Leaf.

But if ORA wants to make an impact in Europe, just one model will not be enough. This is why Great Wall Motors has confirmed that the upcoming Lightning Cat midsize sedan will eventually be made available in Europe, as the 03 Cat.

This is another ORA Cat model where Porsche’s inspiration is visible, not only from the front (911), but also from the profile (Panamera), and once again the specifications follow the striking design with decent numbers. There is an 82kWh battery pack, allowing some 450km WLTP range, and 300kW electric motors, giving a 0-100km/h time of 3.5 seconds.

These days, an SUV crossover is mandatory for every self-respecting carmaker. Hence the third model for Europe will be the Cherry Cat, a compact crossover that might seem less design-driven next to its ORA Cat siblings. In reality, it is not an ORA model but a reskinned model from WEY, another Great Wall Motor brand, specialised in more premium-like crossovers.

ORA has a number of challenges ahead when it comes to establishing itself as a significant EV manufacturer in Europe. These include, but are not limited to:

Great Wall Motors has little visibility in Europe and most potential purchasers will not have seen a Great Wall car in the flesh. The ORA name is even more unknown.
If the Good Cat and Lightning Cat have passing resemblances to Porsche models, other ORA Cat models, namely the Punk Cat and Ballet Cat, are unashamed modern interpretations of the classic Volkswagen Beetle Despite their own virtues, they do not help the brand break the western preconception about Chinese cars being cheaper versions of known models.

It will be interesting to see if ORA dares to bring the Punk Cat to Europe. In other markets, Volkswagen has already indicated that it reserves the right to take legal action against any perceived model or design violations.

While the ORA Cat specifications are not necessarily bad, there are models in the same category that present higher range (VW ID.3). Most direct competitors have higher charging speeds than the (Good) Cat, which tops out at 80kW. ORAs are cars that attract because of their overflowing personalities, with their respective specifications doing enough not to be deal breakers, not the other way around.

No customer base or dealer service

One challenge for Great Wall Motors in bringing ORA to Europe is that, like a start-up company, it will have to start from scratch to build a customer base and dealership network. Added to absent brand recognition, it will have to work harder to make itself known and win the trust of the public.

BEVs are not attractive without dense, reliable charging infrastructure (CI). Drivers should be able to plug in while on the road, avoiding charging anxiety, which can be as damaging for BEV adoption as range anxiety. CI differs greatly from country to country. For example, in the Netherlands, the density and availability of EV charging points allow drivers to travel without major concerns. In most other countries, CI is sparse, limiting BEV success.

This is something that Tesla has completely prepared for in any given country, as it deploys its top-notch supercharger network simultaneously with the start of official sales.

Due to aerodynamics and skateboard-compliant batteries and platforms, BEVs tend to have similar looks and profiles, thus making them harder to distinguish in a crowd. Not so with ORA. Despite having elements inspired by models of other brands, Great Wall Motors has managed to create models that are cute, original inside and out, and appealing to both genders, something many brands have struggled to do successfully.

Strategic partnership with Mini

Great Wall Motors has a partnership with Mini’s parent company, the BMW Group, called Spotlight Automobile, owned in equal terms by both carmakers. This is a cheeky deal considering there is some similarity to the Mini with ORA.

The deal establishes that the next-generation Mini Cooper BEV, said to arrive next year, will share mechanics (batteries too?) with the Good Cat, but in a smaller, more premium format.

This different positioning should prevent cannibalisation while also lowering development costs and increasing parts purchasing power. An indirect benefit is that ORA’s product planners gain access to Mini’s (and BMW’s) marketing and engineering skills.

Competitive pricing

Pricing of the ORA starts at £25,000 (€29,800) in the UK and €30,000 in mainland Europe, targeting more expensive rivals like the VW ID.3 or Renault Megane E-Tech.

And expect a long list of equipment, even in base trim, like standard LED lights (front and rear), 18-inch alloys, a pair of 10.25-inch screens with smartphone mirroring, rear parking sensors, a 360-degree camera, facial recognition, and a suite of driver aids. So, it could become a cut-price alternative to Mini’s electric offerings.

Fast ramp-up processes and model launches

Two of the most impressive characteristics of many Chinese EV makers, among them ORA, is that they have prolific new-model launch calendars. Despite being just four years old, ORA has already launched four models (iQ5; R1/Black Cat; R2/White Cat; Good Cat) and with a few more on the way, it has ramped up model production fast. The R1 ran from 0 to 4,000 units/month in just three months and the Good Cat from 0 to 3,500 units/month in six months.

When launching a new brand in Europe, ORA should be able to respond accordingly if it faces surging demand, thus avoiding the formation of year-long waiting lists that plague many European carmakers.

Market more open to new players

With the ever-growing share of leasing registrations and numerous new ownership models, there is a new automotive trend of ‘giving it a go’.

Customers are not as risk-averse as they used to be and are more willing to try new brands and new concepts. The shorter the holding period, the less risk-averse customers are. Also, ORA includes a five-year vehicle warranty as further encouragement.

One of the reasons why ORA is flexible with its production flow is because its battery supplier, the innovative SVOLT, is part of the Great Wall Motor group. It was one of the first battery makers to have cobalt-free lithium manganese cobalt oxide (NMC) and this means that ORA is a preferred battery customer and benefits from not being subjected to the current volatility of supply and demand that is troubling many vehicle manufacturers that are dependent on third-party battery suppliers.

It is a little-known fact that Chinese brands were responsible for over half of the BEVs registered in 2021 globally. With the exception of the already-established MG brand, which is part of Chinese carmaker SAIC, 2022 will be the first year that Chinese car manufacturers export to Europe in significant volumes. Great Wall Motors is looking to be one of the first to surf this wave, with the 100% BEV brand, ORA.

The ORA Cat family looks to be a promising line up in a rapidly-increasing market and their cuteness and personality could appeal to a public that has not yet been drawn to any particular brand or does not find a satisfying electric model among established brands.

With the right price and/or finance deals, the ORA Cats could prove to be quite popular on the continent. Last year, MG sold 52,546 units in Europe, serving as a guideline for the future.

Electric-vehicle charging: How many and which cables does an electric car need?

A complete set of charging cables for electric cars is no longer a standard item with all models. Autovista24’s principal analyst Sonja Nehls looks at the challenges that charging cables present for electric-car drivers.

People buying an electric car for their personal use will simply purchase the cables they are potentially missing. However, with so many battery-electric vehicles (BEVs) being sold as leasing cars, via subscription schemes or other new ownership models, buying an additional cable is not always a viable option. Despite the hype, electrification is still new for most people and many are yet to drive, own or lease their first BEV. The one thing car makers need to avoid is disappointing customers and making their BEV transition anything but smooth. One way to a hassle-free experience is to include all the necessary cables with the car as standard equipment.

When Tesla announced it would no longer include the mobility connector cables for slow charging as a standard feature with its new-car deliveries in the US, it faced a major backlash online. Elon Musk explained via Twitter that ‘usage statistics were super low’ and it thus ‘seemed wasteful’ to deliver them with every Tesla. The fact that the mobility connectors are sold out on the official website suggests that customer demand is high despite the low usage.

In Europe, drivers receive both charging cables, the Mode 2 cable for household sockets and the Mode 3/Type2 cable for public slow chargers, when ordering a Tesla. There is no general approach to EV-charging solutions and the situation differs largely between brands, models and countries.

Volvo in Germany lets customers choose between either the Mode 2 or the Mode 3 cable as standard, while customers in the UK or Sweden will always receive both. Mercedes-Benz equips the EQB with a Mode 3 cable and charges €286 for an additional Mode 2 cable. Audi has a similar approach, but asks for an additional €650. The BMW iX3 or Hyundai Ioniq5 come with all cables as standard.

Peace of mind is the main thing drivers of electric vehicles need to overcome charging anxiety, which increasingly replaces range anxiety as one of the hurdles for the transition to electromobility. Once the real range of an EV reaches a certain threshold – and discussions where exactly this threshold lies can entertain car enthusiasts for hours on end – speed of charging, availability, charging-points locations, and whether these are accessible become paramount. Accessibility, on the one hand, is down to various apps and providers. On the other hand, it depends on which charging cable you carry with you.

Charging flexibility is key

‘On a recent extended test drive with the Volvo C40 Recharge I did not have the Mode 3 cable with me’, said Sonja Nehls, Autovista 24’s principal analyst. ‘That meant that none of the public slow chargers typically found in city centres etc. were available to me. At least in Germany that ruled out a lot of medium-distance destinations for a day trip, unless I wanted to add another 30 minutes at an inconveniently placed fast charger on the way back home.’

One of the reasons for the backlash Tesla faced when it revealed it would no longer include the mobility connector cable is the fear of losing charging flexibility. And this is not about charging a vehicle at home, where BEV drivers will most likely have installed a wallbox. It is also not about charging on a longer trip, where people can rely on fast chargers.

The issue lies with charging at your destination, wherever that might be, and making efficient use of your time while you are there. ‘Charging your electric car does take longer than fuelling up with petrol and ideally you can do it while running errands, meeting friends for dinner or visiting your family’ said Nehls. ‘Not having both the Mode 2 and Mode 3 cables with you will limit this flexibility and potentially reduce the time you can spend on the things you enjoy or simply have to get done.’

After-sales not always a viable option

As the owner of a BEV you will probably buy a missing cable from the car-maker’s accessory list or turn to a solution from an independent supplier. Ideally, the buyer already made an informed decision during the ordering process and was advised by a dealer or sales agent. If not, they are in for a disappointment when finding out about the missing cable. People leasing the vehicle or using it via a subscription model will not be willing on buying an additional cable. Also, a future used-car buyer will be confronted with the same situation, if the charging cables are not part of the standard equipment of the vehicle.

While Elon Musk certainly is right about usage statistics, he seems not to be taking into account how important it is for customers to know they have options, flexibility, and fall-back solutions.

Ukraine conflict cuts 2022 forecast for Europe’s big five new-car markets

Russia’s invasion of Ukraine has led Autovista24 to cut its forecasts for Europe’s big five new-car markets, senior data journalist Neil King explains.

All of Europe’s big five automotive markets showed signs of improvement in February, but Russia’s invasion of Ukraine will curtail the anticipated 2022 recovery. Although a significant impact on new-car sales, i.e. order intake, is not expected, the conflict is already adding further disruption to beleaguered automotive supply chains.

This is causing production stoppages far beyond Russia and Ukraine, with numerous carmakers affected. These include BMW (as well as its Mini operations in the UK), and Toyota, which has announced ‘additional production suspension in March’ at one of its plants in Japan.

Volkswagen (VW) Group’s Dresden and Zwickau plants in Germany are also contending with component shortages. Audi and Porsche production in the country, as well as Skoda output in the Czech Republic, is similarly afflicted.

‘The war in the Ukraine is dramatic and causes human tragedy and economic upheaval that we thought we had overcome throughout years of multilateralism and diplomacy,’ said CEO Herbert Diess at VW‘s annual earnings press conference in Wolfsburg on 15 March.

These disruptions will impact deliveries of some new cars and delay registrations in the short term. Accordingly, Autovista24’s new-car registration outlooks for the leading west European markets have been subtly revised for March, with greater reductions reflected in April.

Wiring harnesses ‘a dominant constraint’

However, the supply-chain issues will inevitably persist in the coming weeks and months. For example, the Financial Times reports that Ukraine ‘accounts for about a fifth of Europe’s supply of harnesses, which also come from other parts of eastern Europe as well as north Africa, according to estimates from AutoAnalysis.’

In response to a question at the VW media conference, Diess commented that ‘the dominant constraint is indeed wiring harnesses. We receive wiring harnesses from Ukraine from nine to 11 plants. Nine of them are working on reduced capacity so that means we are able to produce in most of our plants, but in a reduced rate of capacity.’

‘This is why we initiated relocation programmes for all those components, but which will take time. Currently, we are trying to get the most out of the wiring-harness production in Ukraine but in parallel, right from the start of the conflict, we started to work on alternatives, which are on the way. This affects most of our German plants.’ However, Diess added that ‘the overseas plants and also the West European plants in Spain and Portugal are not affected.’

Furthermore, the anticipated improvement in the supply of semiconductors that was factored into Autovista24’s forecasts, especially in the second half of the year, is jeopardised. Reuters reported on 11 March that ‘Ukraine’s two leading suppliers of neon, which produce about half the world’s supply of the key ingredient for making chips, have halted their operations, threatening to raise prices and aggravate the semiconductor shortage.’

Downward revisions to 2022

Autovista24 assumes that the disruption to car production will reduce throughout the year, albeit after securing alternative supplies of critical raw materials and/or components that are sourced from Russia and/or Ukraine. Nevertheless, the monthly forecasts for new-car registrations have been revised downwards in all five of Europe’s major markets from May until the end of the year.

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

Open the interactive dashboard

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.

As 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 over 8.9 million units last month, to below 8.6 million units. This marks a reduction of over 360,000 units, or a 4.1% downgrade, and equates to year-on-year growth of just 4% in 2022 after two consecutive annual contractions of 25.4% and 2.2%.

The previous positive 2022 forecasts for France, Spain and Italy are now negative, albeit only modestly. Autovista24 now expects around 2.8 million new-car registrations in Germany this year, an increase of 7.7% year on year, but this follows the 10% downturn in 2021. The previous forecast of 1.9 million new-car registrations in the UK has been slashed to 1.83 million units, although this still represents year-on-year growth of 11.3%.

Displacement into 2023 and beyond

With the expectation of even more new-car registrations displaced into 2023 than previously assumed, double-digit growth is expected in the five countries next year. However, Autovista24 forecasts that the new-car markets will all be at least 8% smaller than in pre-pandemic 2019.

A return to comparative normality is unlikely until 2024, a year which is 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 25% reduction in CO₂ emissions in 2025, compared to 1990 levels.

Autovista24 expects a modest correction 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, and whether it extends beyond the country’s borders. 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.

Monthly Market Update: Modest residual-value growth in European car markets in February

Used-car sales were greater in February than a year ago in most automotive markets, although this compares to a low base as COVID-19 restrictions were in effect. In conjunction with ongoing car-supply constraints, residual values (RVs) enjoyed modest growth, except for stability in the Spanish car market and lower car prices in the UK.

Autovista Group’s used-car coverage 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.

Ukraine jeopardises supply improvements

Following Russia’s launch of military action in Ukraine on 24 February, fuel and gas prices have risen sharply, which is adding to the inflationary pressure on household budgets across Europe. Furthermore, the sanctions imposed on Russia will also have economic implications, which will put pressure on new-car markets and may entice more automotive consumers to switch to used cars.

The situation is already disrupting automotive supply chains, with several car manufacturers announcing plans to suspend or halt production. This threatens to derail the anticipated recovery of new-car supply and, in turn, stock levels of used cars. RVs could therefore rise further, but this also assumes used-car demand is unaffected.

Greatest RV growth in Austria

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, last month’s supply volume was 8.6% lower than in February 2021, highlights Robert Madas, Eurotax (part of Autovista Group) regional head of valuations, Austria, Switzerland, and Poland. This also compares to a low base in 2021, when vehicle supply was already significantly lower than in 2020.

Diesel cars in particular are missing from the market, with a drop of almost 20% compared to February 2021. The supply of petrol cars has increased year on year but remains on a low level compared to market activity. The supply of all hybrid types and battery-electric vehicles (BEVs) has increased as well, but market activity shows strong demand for these vehicles, leaving the supply somewhat short.

As used-car demand continues to outstrip supply, average days to sell increased slightly compared to January, to an average of 70.6 days. Hybrid-electric vehicles (HEVs) are selling the fastest, averaging 63.2 days, followed by petrol cars with 65 days. Plug-in hybrids (PHEVs) are selling the slowest, averaging 91.7 days.

This environment has led to the greatest growth in RVs of 36-month-old cars among the seven countries covered in the monthly market dashboard. They have risen by 11.9% year on year, with cars retaining 47.9% of their list price on average. Petrol cars are currently leading with a trade value of 49.1%, followed by HEVs (48.4%) and diesel cars (47.6%). 36-month-old BEVs are the lowest with 40.8% value retention.

Madas assumes that the market parameters will not change in the medium term, because new-car registrations are still markedly lower than before the COVID-19 crisis (2021 was down 27% compared to 2019). Due to this undersupply, RVs for three-year-old passenger cars are forecast to rise again this year and the RV outlook has been upgraded to 3.5% growth. Only when the new-car market picks up significantly, and volumes on the used-car market also increase, are values likely to come under pressure. This will probably not be the case before 2023.

List prices boost RVs in France

There was a significant increase in the sales-volume index in France in February, with growth of over 25% compared to a year ago. In sharp contrast, the market-volume index reveals that supply was 20% lower than in February 2021. Furthermore, list prices are 2.3% higher due to the introduction of a weight-based car-registration tax and changes to the malus (penalty) on 1 January, which now applies to all cars with CO₂ emissions over 128g/km.

These factors combined to result in higher RVs, which average 6.5% higher in value than a year ago and are up 4.1% in terms of value retention (RV%). ‘The healthy month-on-month increase in BEV RVs in February goes against the trend of recent months and suggests a better acceptance of BEVs on the used-car market, which may be confirmed in the coming months,’ noted Ludovic Percier, RV and market analyst, Autovista Group France.

RVs of PHEVs also rose, linked to the increase in car list prices, and sales volumes are growing every month too, although they remain low in absolute terms. HEV RVs were stable last month but are at a high level, especially in absolute car-price terms. Toyota, which sells mostly to private car customers, dominates the sector. Buyers are favouring hybrids over petrol cars so they can access city centres, but at significantly lower prices than for PHEVs. Despite the higher selling prices on the used-car market, HEVs are also selling slightly faster than petrol cars.

Nevertheless, RVs of petrol cars remain stable, albeit following rises in previous months. Diesel-car values increased slightly compared to last month as the fuel type is still popular on the used-car market, with reduced supply, but this is also related to the hike in list prices.

Given the latest developments, the RV outlook for France has been revised upwards, with 1% growth forecast for 2022 and a modest uptick expected in 2023 too.

‘Favourable pricing power’ in Germany

Despite hardly any COVID-19-related restrictions, January was the worst month for fleet and tactical new-car registrations in Germany for at least 20 years, and was comparable to lockdown-driven January 2021, highlights Andreas Geilenbruegge, head of valuations and insights at Schwacke (part of Autovista Group).

‘Due to the ongoing supply crisis, undersupply in the used-car market will continue, which will determine the available volumes of cars of different ages and thus cause favourable car-pricing power in the coming years,’ Geilenbruegge surmised.

The availability of three-year-old petrol cars is comparatively stable in Germany due to the strong fleet year of 2019. This ensures less pronounced price increases than for diesel cars, supply of which is well below demand.

In the case of PHEVs, there has recently been a ‘stabilising adjustment’ in the online car-retail prices of dealers. ‘Offer prices for older cars exceeded sales prices to such an extent that the dealer’s desired price could increasingly no longer be achieved by potential buyers. We expect a similar levelling effect on young used PHEVs. This is a situation that has not been seen for a long time with internal- combustion-engine vehicles,’ commented Geilenbruegge.

The first half of 2022 is likely to remain a seller’s market for most used cars, with further slightly weakening tendencies for PHEVs and a ‘wait-and-see scepticism’ for the further development of BEV prices.

RV stability in Italy

As the country awaits information about when and how incentives for the purchase of new cars will be reintroduced, RV growth slowed in Italy in February, remaining broadly stable compared to last month, explains Marco Pasquetti, forecast and data specialist, Autovista Group Italy.

This situation applies to all car fuel types, except for BEVs, RVs of which grew by 2.5% last month compared to January. Sales volumes of BEVs are up 150% year-on-year, far exceeding the growth in the volume of advertised vehicles, which rose by 46.1%. Accordingly, stock days remain high – at 89 days compared to a market average of 51.8 days – and have increased by 10 days compared to last month. Pasquetti expects this trend to continue throughout 2022.

HEVs are the fastest-selling cars in the country. At less than 48 days, this is almost three days fewer than a month ago and broadly in line with 2021. The situation is different for PHEVs, however, which remain in stock for an average of 71 days, up 34 days on last year.

Diesel engines are still very popular on the used-car market, retaining an average 52% of their value after 36 months and 60,000 km. ‘It is worth highlighting that the volume of adverts for diesel cars has decreased considerably, with 24.5% fewer last month than in February 2021,’ Pasquetti added.

Spanish registration taxes accelerate RV growth

2021 closed with a further uplift in used car prices, which has accelerated since the beginning of 2022 due to price inflation caused by the end of the six-month moratorium on car-registration taxes. The higher car-registration tax has increased list prices of new cars by 4.5% on average, affecting almost half of the models on the market, explains Ana Azofra, Autovista Group head of valuations and insights, Spain.

This price inflation is also reflected in the used-car market, whereby the average purchase price of a three-year-old car stood at €17,381 in February. This is almost 7% higher than a year ago, with large differences depending on the powertrain. ‘The biggest beneficiaries in this maelstrom have been petrol cars, which are 13% higher. They have also continued to see their stocks dwindle but not as much as diesel cars, of which the volume of adverts is almost half of what it was in February 2021,’ Azofra commented.

HEVs, which were more stable in 2021, have made a strong start to 2022 too, with the highest month-on-month RV growth. Three of the five fastest-selling cars in February were Toyota hybrid models, representing different segments.

The lack of car stock continues to cause an improvement in selling days, which averaged 1.2 days fewer last month than in January. Although RVs continue to rise, they appear to have peaked showing signs of a tendency towards stability. ‘Many car dealers are starting to have difficulties, having bought at a high price during the maelstrom, and are now finding it difficult to maintain a high retail-price level,’ Azofra concluded.

Switzerland BEV demand outweighs supply

For one and a half years, the Swiss used-car market has been characterised by stable demand and low supply and, therefore, rising used-car prices. On average across all two-to-four-year-old passenger cars, the supply volume in February was 9.2% below the level compared to a year earlier, emphasises Hans-Peter Annen, Autovista Group head of valuations and insights, Switzerland. Annen adds that the supply was already significantly lower early in 2021 than at the beginning of 2020.

Diesel cars are especially missing from the market, with supply 29.1% down compared to February 2021. For petrol cars, there are currently 1.6% more two-to-four-year-old examples offered than a year ago, and for hybrids of all types, market activity is particularly high in relation to the supply available. For BEVs, supply is far higher than a year ago (up 21.7%) but still significantly lower than demand, notes Hans-Peter Annen, Autovista Group head of valuations and insights, Switzerland.

The average days to sell rose slightly last month: a passenger car aged two to four years is currently in stock for 62 days. Petrol cars are selling quickest with an average of 59 days, followed by HEVs with 63 days, diesels with 66 days, BEVs with 73 days, and PHEVs with 86 days.

This market environment has led to a further increase in the average RV% of 36-month-old passenger cars, to 47% (up 15.6% compared to February 2021). Petrol cars posted strong year-on-year gains of 15.9%, to 48.1%, as too did diesel cars (up 14% to 45%).

Car 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 of three-year-old used cars are forecast to rise 4.7% this year, before eventually stabilising and declining over the years 2023 and 2024.

Lacklustre UK used-car activity

The average RV of a three-year-old car in the UK was 1.4% lower last month than in January yet remained 41.9% higher than in 2021. ‘As Glass’s predicted last year, car values in the UK are stabilising, no longer experiencing demand-driven monthly increases. In fact, whilst the UK’s car-auction market continues to achieve strong hammer prices, sales are converting at a much lower rate than vendors would normally expect in February,’ explained Jayson Whittington, Glass’s (part of Autovista Group) chief editor, cars and leisure vehicles.

Whittington added that subdued activity of this nature ordinarily points to a change in the supply and demand dynamic. There has not been a noticeable influx of used cars into the market recently, as reinforced by the active-market volume index, which shows that the volume advertised for sale on dealer forecourts in February was about 20% lower than a year ago.

It also took dealers over one week longer on average to sell a used car in February than in January. ‘Dealers could sell a car 4.5 days quicker than in February 2021, but we need to remember that the UK was enduring a period of lockdown then. It seems a fall in retail demand is the likely cause of lacklustre used-car activity,’ Whittington concludes.

The outlook for RVs remains positive despite the subdued start to the year. They will need to fall significantly to lose the ground made throughout 2021, and that seems extremely unlikely with the ongoing prospect of restricted used-car stock supply.

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