Auto Finance News

Major global downturn in traditionally powered vehicles may prove an opportunity for EVs

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The British Vehicle Rental and Leasing Association (BVRLA) has announced a surge in battery electric vehicle (BEV) registrations at the end of 2019 in its Q4 2019 Quarterly Leasing Survey.

According to the BVRLA, this rush of registrations was a contributing factor to the lowering of the average new lease car emissions to 113g/km CO2, the lowest level since Q3 2018.

The market share of BEVs had grown by 750% compared to the same period the year before, now making up more than 4% of new lease car registrations. This helped to counteract the impact of the WLTP emissions standards, which had increased most petrol and diesel emissions by 10-20%.

Gerry Keaney, chief executive at the BVRLA, explained: “The Q4 survey was the last conducted before the impacts of Brexit, the March 2020 Budget, the April 2020 tax changes and the COVID-19 pandemic. It will be fascinating to see the effect that these huge external factors will have on the shape of the leasing market and the speed of transition to zero emission road transport.”

Key findings from the Q4 2019 report include:

  • The salary sacrifice sector led the way in BEV registrations at 24%;
  • BEVs made up just over 6% of new business contract hire cars;
  • The average lease car registered had 10% lower emissions than the average newly registered car, at 113g/km CO2;
  • The BVRLA lease car fleet shrank by nearly 3% year on year, with a 7.3% increase in consumer contracts failing to offset a 5.4% fall in business leasing;
  • The used vehicle leasing market is growing, responsible for 2.5% of the total car fleet.

Post-COVID electrification

There is still much speculation over whether the pandemic will accelerate or decelerate the trend towards electrification with experts coming to differing conclusions, and there are many factors that will affect the outcome such as targeted incentives to the auto industry although they may be countered by lower petrol prices in the short- to medium-term.

With plug-in EV volumes in Europe up by about 38% in 2019 compared to the year before, reaching a 3.1% market share, the reduced industrial activity and passenger travel due to the pandemic have resulted many accounts emerging from China of urban areas being free from smog. Furthermore, NO2 levels are down by 60% in Paris, and a 20-30% improvement in air quality has dropped us down to a level unseen for the last 40 years.

Despite the significant progress, the auto industry needs to become exceedingly more dominated by EVs for this improvement to be sustained.

Speaking to the Financial Times at a recent conference, Hakan Samuelsson (pictured below), chief executive officer of Volvo Car Group, said: “Electrification will go faster, of that I have no doubt. This will include premium cars, which can be small or big. Premium is no longer defined as a large car.”

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Exploring the issue further, BloombergNEF have released their annual Electric Vehicle Outlook for 2020, and with over seven million passenger EVs now on the road, battery prices are continuing their decline and policy pressure is ramping up in many countries.

Despite this promising start, the pandemic is expected to cause a major downturn in global auto sales in 2020, and is certainly making it increasingly difficult for automakers to fund the transition. While the long-term outcome has remained unchanged, Bloomberg have forecasted that the market will be “bumpy” over the next three years, and the difference in EV adoption between countries is expected to widen dramatically.

The report predicted that global passenger vehicle sales would plunge by 23% this year, and that EV sales would drop for the first time. Pessimistically, global auto sales do not recover to 2019 levels until 2025, and commercial vehicle sales will also fall, recovering again by 2022 due to rising e-commerce and growing freight demand in emerging economies.

A backlog of orders, new models, and supportive policy are likely to support EV sales better than combustion vehicles, although they still drop 18% to around 1.7 million in 2020. EV’s share of global sales is relatively flat in 2020 at around 3%, but rebounds to 7% in 2023 with sales of around 5.4 million.

Post-COVID electrification is set to be discussed at the upcoming IAFN Online conference the COVID-19 legacy: emerging priorities for the European auto finance industry on 26 May.


The safe return to work

With the pandemic death toll here in the UK roughly half that of previous weeks, and falling daily, the BVRLA has also published guidance to aid those in the vehicle rental and leasing sectors as businesses in England begin to resume operations as the lockdown gradually starts lifting.

The guide provides sector-specific advice to help those operating in the industry to resume business in a way that protects employees and customers.

Exempt from business closure, many vehicle rental operators have played a crucial role in providing vehicles to key workers during the crisis, and looking into the future, BVRLA members will undoubtedly play a vital role in supporting the UK economy. This can be seen from the pre-COVID figure work, wherein BVRLA members contributed around £49 million a year to the economy, and supported roughly 465,000 jobs.

Keaney added: “We must all work together to step up to this unprecedented and unforeseen challenge and I have every confidence that our industry, as always, will be innovative and resilient.

“This health crisis is not going to disappear any time soon and we must now look ahead at how we can support businesses in this new, post-pandemic environment. Ensuring that they can operate safely is key and this new guide will support that.”

Readers who are interested in reading the BVRLA’s full guide can use the following link: