Electric car rentals are set to collapse – Labour

Electric car prices fall more than expected

Companies make losses when they sell old

Low resale prices for electric cars have forced the leading rental companies in Europe’s car market to double prices over the past three years, with some threatening to go out of business if regulators force them to switch to electric cars too quickly, industry officials say.

The increase in electric car rental prices comes as subsidy cuts for new electric cars in key markets such as Germany hit sales and risk stalling Europe’s electric transition, rental officials told Reuters.

“If we were pushed very, very hard that everything had to be electric too soon … my shareholders would say ‘we don’t want to take the risk’ and we would be out of it the market,” said Tim Albertsen, chief executive officer of Ayvens, one of Europe’s largest car rental companies. “That’s us, who will take the risk?” he said.

Ayvens, which is the main owner of the French bank Societe Generale, has a fleet of 3.4 million cars, of which about 10% are electric cars.

Rental companies play a major role in Europe, as 60% of new cars of all fuel types are rented. For electric cars, the ratio is 80%.

In 16 European markets, including Germany, the UK, France and Spain, 60% of new EVs go to corporate fleets. These buyers almost always use a lease, and about half of the remaining sales to private buyers are also leases. In markets without subsidies for electric cars, the dominance of corporate buyers is even more pronounced. In the UK and Belgium, private individuals account for just 23% and 8% of new EV purchases respectively.

The lease price takes into account vehicle depreciation over the standard three-year lease period, based on estimated resale prices or residual values. But if second-hand prices turn out to be lower than expected when the lease ends, leasing companies face a financial hit when they repossess the car.

For a variety of reasons, from price cuts on Tesla cars to concerns about charging infrastructure and battery life, as well as more affordable Chinese EVs, electric car prices are falling in Europe after peaking in October 2022.

Electric car resale prices in Germany in July were 24% below pre-pandemic levels, while in the UK they were 30% below. This is in stark contrast to second-hand petrol models, which are still around 15% more expensive in both markets.

“People are becoming more and more accepting of used EVs, but they have to be cheap,” said Gary Cambridge, partner at car dealer Cambridge Motors in London. “If they’re expensive, people don’t want them,” he said.

Hertz reported about $150 million in write-downs on nearly 20,000 electric cars it sells at deeply discounted prices, and Sixt said lower residual values ​​for electric cars were cutting the company’s 2023 profits by €40 million.

In Germany, the largest car market in Europe, electric car rental (EA) has increased in price over the past three years. In August 2021, a €45,000 EA lease cost €284 per month, well below the €473 for an equivalent fossil fuel model. The price of the EA has now doubled to €621 and the price of the fossil fuel car has dropped to €468. Electric car sales in Germany fell 16.4% in the first half of 2024 after the government cut subsidies significantly for purchase in December, and the decline hit the general trend towards electric cars in the EU.