The UK has become Europe’s largest market for electric vehicles (EVs) thanks to the ZEV Mandate, but this shift is presenting challenges for car dealers. According to Preston Rogers, Consumer Distribution Director at Black Horse, while the mandate is accelerating the industry’s transition to EVs, some manufacturers and dealers are struggling to adapt.
Recent amendments to the ZEV Mandate have provided more clarity and certainty for businesses, allowing them to plan and allocate production more effectively. However, the market faces headwinds, including private buyers being hesitant to purchase new EVs due to high prices. Historically, EVs have been significantly more expensive than their internal combustion engine (ICE) counterparts, making them difficult to sell in the retail channel.
Challenges in EV Sales
Fleets remain the primary market for new EVs, with many customers opting for leasing over traditional finance products. This shift is changing the sales process for dealers, with residual value guaranteed products like Personal Contract Purchase (PCP) and leasing becoming increasingly popular for EVs. ‘For EVs, retail finance is not where it’s at,’ Rogers notes. ‘It’s quite hard to shift cars in the retail channel.’
The gap between EV and ICE prices is narrowing, but it has been a significant barrier to adoption. Black Horse is seeing more customers choose residual value guaranteed products for EVs, as these offer a guarantee that can alleviate customer uncertainty. The EV market is still evolving, with technology in its early stages and customers cautious due to past price falls in used EVs.
Used EV Market Dynamics
In contrast, the used EV market is more traditional, with customers more likely to accept Hire Purchase (HP) products due to lower risk. Despite consumer uncertainty, Black Horse is financing more EVs, with the proportion rising from one in 12 in 2023 to one in 10 last year. Non-traditional brands, such as Chinese-owned MG, are gaining traction, now featuring among Black Horse’s top financed brands alongside Ford, Vauxhall, BMW, and Mercedes.
Rogers believes the shift towards EVs in the used market will continue, albeit gradually. ‘The Ford Fiesta isn’t on sale anymore, and yet there’s still huge demand for it. As more factories switch from ICE to EV, those ICE cars won’t be available, but customers will still want them.’ However, once customers have tried an EV, especially with home charging, they tend to remain loyal.
Future Momentum
Looking ahead, Rogers predicts that when major car dealers fully embrace electric vehicles, the used market will pivot towards EVs. ‘When the biggest players are buying EVs en masse, that’s when we’ll see solid ground in residual values and that’s when there’s going to be real momentum towards EVs.’
The industry is expected to see continued growth in EV adoption, with momentum building towards the end of the decade. As Rogers states, ‘During 2025, there will still be question marks over EVs, but once we get into 2026/7, the narrative will change – consumers will be saying “I’m going to get an EV at some point”. Then there will be unstoppable momentum.’
