Labour has been urged to intervene and offer more support for used electric vehicles, with experts warning that without support, the car finance sector risks losing "hundreds of millions" of pounds due to lapsing driver demand.
The need for intervention comes as experts warned that due to interest in used electric cars falling, car finance companies have been forced to pass on higher interest rates and car financing costs to consumers.
Earlier this month, the British Vehicle Rental and Leasing Association (BVRLA) sent a letter to the Government stating that demand for used EVs is "struggling to keep pace" with supply, which could rise to 178 per cent over the next three years.
The letter stated that the imbalance has meant that EV residual values have dropped by 50 per cent in the last two years, with it expected to decline by a further 28 per cent by 2030.
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The BVRLA warned that used electric cars risk losing their value due to the ZEV mandate
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This would coincide with the Zero Emission Vehicle mandate, which requires 80 per cent of new car sales to be electric by 2030, with the sale of new petrol and diesel cars being banned from then.
Under the new measures, hybrid vehicles will be allowed to be sold until 2035, while car makers will see fines for non-compliant vehicles reduced from £15,000 per vehicle to £12,000.
But the BVRLA warned that weak residuals in the used electric car market have created "financial pressure" on car finance firms, which base their pricing models on optimistic residual value forecasts. This, in turn, has meant that used EVs are worth much less now than expected.
The letter stated: "The difference between the price of the new vehicle and its value on disposal determine the cost of financing, leasing or rental for a customer. This depreciation is costing fleets hundreds of millions and being passed on to new buyers in the form of higher motor finance costs."
It noted that the second-hand EV market remains under pressure, before calling on the Government to provide residual value support across the automotive value chain.
This could help keep new electric vehicle retail sales lagging behind fleet levels, "straining the automotive ecosystem", the letter claimed.
It added: "Without a stronger used BEV market where values are stable, the future of the entire transition to electric vehicles is at risk. Cars, vans and trucks all require used market demand at levels that create pricing stability.
"For the transition to electric commercial vehicles to hit its stride, the current position must be improved. There are no silver bullets, and this change can be delivered only through wide-ranging and aligned policy steps."
To combat this, the BVRLA recommended that Labour introduce targeted grants to support the used BEV market, which could help more households access greener vehicles.
"We also need to see clear and standardised battery healthinformation which consumers can access to help them make the switch," the association shared.
The letter concluded: "We would appreciate the opportunity to engage further with you and the Committee at this critical period.
"It's vital that we explore how to improve the health of the used BEV market and, in turn, safeguard the overall UK transition to BEVs."
LATEST DEVELOPMENTS:
Labour unveiled a number of changes to the Zero Emission Vehicle mandate earlier this month
PAThe ZEV mandate changes aim to ensure flexibility and support for UK manufacturers by extending the current ability to borrow through to 2030 as well as exempting supercar brands, including McLaren and Aston Martin, from some of the CO2 targets.
