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Glass's Guide Says EV Batteries Should Be Leased

The new breed of electric vehicles (EVs) soon to be launched in the UK will have

residual values well below those of rival petrol and diesel models, unless

manufacturers properly address customer concerns regarding battery life and

performance.  The warning comes from Glass's, which has conducted a detailed

analysis of the factors that will affect depreciation for EVs.  The company has been

working closely with three of the manufacturers who will produce cars featuring in

the first wave of EV launches.

 

"After one year of ownership we would expect EV residual values to be above the

segment average expressed in terms of pound values," explains Andy Carroll, Managing

Director at Glass's.  "But, if the battery is owned rather than leased, and lacks

the appropriate extended warranty, the value of the typical EV will then fall

dramatically until the vehicle is five years old, at which point the car will have a

trade value little more than 10 per cent of the list price."

 

This alarming rate of depreciation is, says Carroll, a function of customer

recognition that the typical EV battery will have a useful life of up to eight years

and will cost some £8,000 to replace.  "Potential used EV buyers fear this cost, but

the key issue is that buyers will assume that their specific battery will need

replacing in the near future regardless of the manufacturers' predictions of battery

life.  Our RV predictions are therefore based on this worst-case scenario - which is

exactly how we believe that prospective customers would perceive the costs of owning

an EV."

 

Manufacturers can however address this problem.  Carroll cites the example of an EV

in the lower-medium segment.  "If the anticipated £8,000 cost of the battery in such

a car were taken off the list price, and recovered instead through a long-term

£100-per-month battery lease scheme, the retained value in monetary terms would make

it one of the best performing used cars in its segment, rather than one of the

worst."

 

Through such an arrangement, any anxiety surrounding battery life would be

dispelled, argues Carroll, by ensuring that a guarantee of minimum battery

performance is a feature of the lease agreement.

 

"Volume production of EVs will not get fully underway until 2012, and we anticipate

that demand over the next few years will outstrip supply, especially in the used

market.  In 2015 we forecast sales of new EVs to outstrip the sales of used EVs by

five to one, and this has also positively affected our forecasts of EV residual

values."

 

The EV package lease option

Carroll advocates that, while the EV market is in its infancy, manufacturers should

also consider leasing the car and battery together as a single package.  "For a

limited period car makers should consider underwriting the capital cost of the

vehicle, the battery lease, and servicing, as one package to bring on board early

adopters and win over a sceptical buying public."

 

Carroll says this kind of lease proposition should be in place until there is wider

market experience and acceptance of EV products.  "We have over a hundred years of

experience of owning vehicles with internal combustion engines.  Until the facts

prove the manufacturers' claims regarding battery life and performance in real world

conditions, they need to put their money where their mouth is, and take all risk and

uncertainty away from the end consumer."

 

More at Glass's Guide

 

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