Editor's letter: Retailers must focus on used electric cars

Used electric car values have dropped 18% in the past 12 months

Head of UK’s largest dealer group, Sytner, notes there is "work to be done" for manufacturers

Values of used electric cars are plummeting, as Nick Gibbs’ analysis last week laid bare. His report details that values have dropped 18% in the past 12 months and 20% since September, according to Cap HPI data, and worse could be yet to come.

This has fast become the dominant topic of discussion in the car retail world, and is the latest in a series of events that all started with Covid. Car makers stopping production during Covid caused semiconductor chips to be diverted to other industries, and then a shortage of them when car production did return.

This led to car makers prioritising production of EVs to meet CO2 targets, sending used car prices artificially high (sometimes above list price) due to the shortage of new cars. Now comes the correction, which can be painful for EV owners looking to change cars and seeing their car is worth far less than expected on part exchange, and for car makers trying to control residual values. 

Sytner is the UK’s largest dealer group, with new car franchises from the likes of BMW, Mercedes-Benz, Jaguar Land Rover, Audi and Porsche, and also a vast used car business, CarShop. Earlier this week, Sytner Group boss Darren Edwards, a man who knows all there is to know about car retail in this country, discussed the “challenge” facing used electric vehicles, something he is working through with his franchises and their customers now.

He noted that early adopters had seen the benefits of favourable taxation towards electric vehicles, while the rest of the population was waiting to see how the simple equation of range and affordability of electric cars played out. “There is a fear of buying new technology that becomes outdated,” he told me, with the range of an EV holding great sway over its value.

“As technology improves at a rapid pace, a 300-mile range becomes 350, 400, 500 – so what does that do to the 250- and 300-mile cars?”

There is “work to be done” for manufacturers overall on the used electric car proposition, or else it could end up undermining the hitherto positive upward trend in sales of new electric vehicles. “If OEMs can’t get used and new as strong, then the new proposition won’t be as compelling.” Indeed, why would you buy a new electric car at a price far above a combustion-engined equivalent when you know that its value will soon plummet?

Edwards spoke of conversations that dealers were having to have with customers in light of this fall in values, something that’s amplified by the wait times on new cars. “If you ordered your car a year ago, your car as part exchange will have devalued since. It’s a challenging conversation to have, but it’s a conversation that needs to happen.”

Car dealers will now be looking to manage used stock carefully, says Edwards, adding EV inventory only at the right price and reducing prices of old stock to ensure it is moved on. Gibbs’ story reports Auto Trader data showing EVs were the slowest-selling fuel type in February, with Audi Q4 E-trons taking almost three months on average to sell. 

However, there’s far better news on the new car side, where Edwards says Sytner is “selling every car we can get at the moment”. Enquiries have remained constant throughout the supply shortage, and although supply was improving “marginally” it was still a year-long wait ahead of many models.

The other hot topic in retail is agency, and Sytner dealers were among those affected by Mercedes-Benz’s switch to the agency sales model at the start of the year. Edwards said the success or otherwise of agency “was yet to be seen” but agency “sounded good in theory” and added: “done well, it will be more transparent and seamless”. He commended Mercedes on doing a “good job” with “good collaboration”. 

That collaboration between OEMs and retailers will be needed more than ever as they both work to navigate the current pressure on used electric car values before it becomes a crisis.