Widespread use of personal contract purchase (PCP) agreements has changed the way British consumers approach decisions about car ownership, giving them a more in-depth understanding of the economics involved, writes Sheena Patel, director and automotive sector specialist at management consultancy Vendigital.
However, when it comes to deciding whether or not to buy a new battery electric vehicle (BEV), limited access to accurate and reliable user data, as well as a lack of incentives, are holding back sales.
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Many motorists are familiar with the concept of total cost of ownership (TOO) and understand the importance of looking beyond the sticker price when comparing the cost of a new BEV with an internal combustion engine (ICE) vehicle of a similar size and specification. However, the complex factors involved in making a cost comparison could be dissuading consumers from switching.
Variable insurance premiums and uncertainty surrounding maintenance, repair and servicing costs have made it more difficult for consumers to calculate the total cost of ownership, and a lack of information about available charging infrastructure is adding to range anxiety.
The latest new car sales data released by the Society of Motor Manufacturers and Traders (SMMT), shows that despite sales of new BEVs increasing strongly overall in April 2024, private retail demand has fallen significantly – down 22% year-on-year. In April 2024, fewer than one in six new BEVs were sold to consumers and the overall reduction in retail consumer demand is a growing concern for Britain’s expanding EV industry.
A lack of accurate and reliable information about BEV running costs has become a critical factor for consumers when considering the total cost of ownership. For example, research shows that 60% of European consumers would like to see a minimum driving range of 500km before switching to a battery-electric passenger vehicle. However, a lack of available data about how much a bigger battery would cost in terms of increased energy consumption means they can’t be certain how this decision would impact the total cost of EV ownership.
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By GlobalDataA lack of accurate and reliable information about BEV running costs has become a critical factor for consumers when considering the total cost of ownership.
A data-based simulation model developed by Siemens, based on the Volkswagen iD3, shows that while larger battery sizes increase energy consumption for all motorists, only those covering long distances benefit from a substantial reduction in charging stops. It also shows how factors such as driver style and ambient temperature affect the vehicle’s energy consumption. Arming consumers with more accurate and reliable data about what to expect from a specific EV model could enable them to make more critical and informed decisions.
Another factor that is suppressing consumer retail demand for BEVs currently is the lack of visibility surrounding maintenance and servicing costs. While most models are sold with a three-year warranty, in many instances these costs are being inflated due to a lack of empirical data about the cost of servicing and/or replacing critical EV components, such as electric motors and battery packs. In some models, removing components to either repair or replace them can be challenging due to nature of EV powertrain architecture. There is also a shortage of mechanics in the UK with the right skillsets to deal with an expanding EV car parc.
The Government’s decision to remove consumer incentives has come at a particularly challenging time for Britain’s underdeveloped EV industry, with Chinese export activity booming and UK-based manufacturers stretching to industrialise production. In April 2025, Vehicle Excise Duty (VED) will apply to new zero-emission cars for the first time, which could dampen consumer retail demand further. In addition, decisions by dominant Western countries to impose trade barriers to control the influx of Chinese imports could serve to inflate production costs in the short term, as alternative sources of supply for some content that can currently only be sourced from China have not yet been found.
Rather than blocking Chinese imports, Saudi Arabia is embracing global EV makers as part of a strategy to fast-track the development of a Middle Eastern EV value chain. The country’s rulers have established a $700 billion sovereign wealth fund – the Public Investment Fund (PIF) – and set a goal to produce 500,000 EVs annually by 2030. Partnerships have been struck with several EV makers, including VW, Tesla and Changan Auto, all of which are importing cars into the country from China. As well as investing in new battery materials processing plants and rolling out EV charging infrastructure, the PIF owns a dominant stake in a new Lucid Motors production facility, which is aiming to manufacture 50,000 EVs each year.
While replicating Saudi Arabia’s expansive strategy is probably unrealistic, the UK Government could be doing much more to accelerate the development of a robust EV supply chain through investment and industry collaboration. With the industry’s sights set on the introduction of more affordable EV ranges in the next few years, incentives could be used to boost demand for cars made in the UK. Industry leaders could also help to drive demand for new EV ranges by investing in bespoke analytical tools that provide consumers and insurers with accurate and reliable data.
Sheena Patel is Director and automotive sector specialist at Vendigital.
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