European Lease Companies Hit by BEV Low Resale Values

Shockingly low resale values of battery-electric vehicles are threatening the life-blood of European commercial fleets as vehicle leasing companies are doubling contract costs and some threatening to quit the market altogether.

Those are the finding of a special investigation by the Reuters news agency with major leasing companies warning government regulators and automotive industry executives that the market is not ready for the speed of change to BEV vehicles, causing the poor value of second-hand models.

We have already reported on many U.K. dealers refusing to take used BEVs from private owners but now the problem threatens leasing companies who are losing too much money on their used BEVs to run their businesses at a workable profit.

Currently, most new BEV registrations are from commercial fleets and leasing companies as businesses seek to benefit from lucrative BEV tax subsidies and to bolster their ‘green’ marketing credibility.

However, according to figures provided to Reuters by data firm Autovista, resale values for BEVs in Germany in early July are 24% below pre-pandemic levels and 30% lower in the U.K. By contrast, second-hand gasoline internal combustion engine models, which remain about 15% more expensive in both markets.

The result of this is that Hertz reports losses of about $150 million for the approximately 20,000 BEVs it has been selling off at greatly reduced prices, while Sixt says lower residual values for BEVs cut its 2023 earnings by €40 million ($44 million).

In response, leasing companies are having to raise lease costs to customers. For example, in Europe's biggest auto market of Germany, data provided to Reuters by think-tank CAR Center Automotive Research show that BEV leases have jumped in the last three years.

In August 2021, a lease for a €45,000 BEV cost €284 a month, well below the €473 for an equivalent ICE model. Now, the cost for the BEV has more than doubled to €621 euros while the fossil-fuel car has fallen to €468.

This, and the axing of consumer BEV incentives in several European countries including Germany and the U.K., goes some way to explain the steep slowdown in BEV take-up. Sales of fully electric vehicles in the European Union rose to 14.6% of new car sales in 2023 from 6.1% in 2020 but that slumped to 14.4% in the first half as BEV sales rose an anemic 1.3%.

Now leasing companies are calling for governments and industry executives to slow the speed of transition to fully electric transportation, especially if incentives are not being supported.

Tim Albertsen, CEO of Ayvens, one of Europe's largest auto leasing firms, tells Reuters: “If we were pushed very, very hard, that everything has to be electric too soon ... my shareholders will say 'we don't want to take the risk' and we'd be out of the market. Let's be honest, without us, who will take the risk? [on BEVs]”