Written by Ian Plummer
Interest in electric vehicles (EVs) has enjoyed a period of strong growth over the last two years, with the 2030 ban on the sale of new petrol and diesel vehicles and spikes in fuel prices all serving to peak consumer interest.
However, this period of soaring growth now looks to be in jeopardy as consumer interest is waning.
2021 saw one in four new car sales being electric but 2022, a year when new car sales have seen some recovery from the supply shortages seen in 2021, just one in seven new car sales were for EVs.
We’ve seen this decline playing out on Auto Trader, the UK’s largest automotive marketplace, as well. You can see on the below chart that advert views for electric cars have seen significant growth in the last two years and peaked at the height of the UK “fuel shortage” where we saw almost 27% of all new car advert views being for an EV. However, since this peak over a year ago, we have seen interest steadily decline to just 14% as of November 2022, the same as it was a year ago.
What’s more, this period has seen the supply of new EVs gradually rising. With demand falling and supply rising we may soon find ourselves in a situation we have more new EVs available than there is demand
So, what’s causing this decline, and what can be done to get us on track as we approach 2030?
The primary factor behind the recent drop in interest is the much-publicised rise in electricity prices which has depressed demand for electric vehicles.
It’s important to note that, whilst the rise in electricity prices naturally impacts the running cost of an EV, EVs still do offer significant savings in running costs vs. internal combustion engine (ICE) vehicles, with our latest analysis indicating that, on average, an EV will save owners £124 per 1,000 miles driven (based on home charging costs) even with inflated electricity prices.
It’s these savings that we need to highlight to consumers to drive interest in the years ahead.
But whilst EVs do represent a saving when it comes to running costs, they still remain prohibitively expensive for many consumers thanks to a far higher upfront price point. This“green premium” translates to the average new EV price tag being 36% more expensive than an equivalent ICE vehicle.
Whilst the cost differential has declined over the years, it has risen since the start of 2022 due to the rise in battery costs.
The higher upfront cost is also a limiting factor when it comes to who can afford an EV, with EVs very much the preserve of the wealthy. The launch of more affordable options such as the hugely popular MG4 will help to draw in a new buyer demographic but, unless we see upfront costs fall significantly and a far wider range of affordable EVs enter the market, we are at risk of alienating the majority of car buyers and seeing new EV sales slow down even further.
The challenges I’ve so far outlined have focused on the new EV market, but these challenges are also present in the used market.
Demand for used EVs has followed a similar trajectory to that of new EVs with the previously mentioned issues dampening new demand also having the same impact on the used market.
Of more concern however is the fact that the supply of used EVs, which has doubled in the last year as more vehicles return to the market, has now overtaken levels of consumer demand.
This rise in supply and fall in demand has resulted in EVs sitting for far longer on retailers’forecourts. In fact, used EVs are now the slowest-selling of any fuel type and this has led retailers to start cutting prices in order for them to sell their EV stock. For three consecutive months, used electric car retail prices have fallen on a month-on-month basis, whereas petrol and diesel prices have followed pre-pandemic seasonal trends.
Whilst this may sound like good news for consumers, these price drops are relatively minor(-2.6% in November), and used EVs, like new, still command a premium over their ICE counterparts with the used EVs being on average £10,000 more expensive than their ICE equivalents.
Looking ahead, used EV values will continue to depend on supply and demand dynamics. The question is whether demand will keep pace with supply as the absolute number of EVs registered increases over the next decade.
Based on the latest projections, there will be over a million EVs on the road in the UK by 2024, up from less than 400k at the end of 2021. By 2030, there will be nearly eight million registered, accounting for nearly a quarter of the total car parc.
The rate of change will be even faster in younger age cohorts. By 2030, over half of all under-five-year-old cars on the road will be electric.
It’s clear then that are many challenges ahead of us as we approach 2030 and that action is needed to ensure that we see mass adoption of EVs ahead of the 2030 ban.
There is no single solution to the issues facing the EV market and it remains the responsibility of industry and government to make the switch a viable solution for consumers.
At Auto Trader, we believe that there are three fundamental areas we all need to focus on to address the issues I have raised here in order that we drive consumer adoption levels
Making the switch to electric more affordable
It may take years until battery costs fall below the level needed to achieve price parity, but there are still actions that can be taken to make EVs more affordable in the short-term.
Creating trust in second-hand electric vehicles
With supply ahead of demand, the used electric vehicle market needs urgent attention to address the imbalance.
Accelerating the rollout of public charging infrastructure
Beyond the headline, the UK needs a low-cost, reliable, and accessible charging solution for those without a home charger and those going on long journeys. Until this is resolved, a large proportion of UK households will not switch to electric.
By focussing on these three areas, we will ease consumers’ transition to EV ownership and ensure a smooth journey as we continue along the road to 2030.
You can find out more in our regular report, entitled: The Road to 2030.