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EV grants damage used values and owner viability, study finds

By Kyle Linsay
Tuesday, September 10, 2013 - 12:00

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EXPERT: Author Mark Norman

Subsidies for new electric vehicle purchases slash second-hand values and threaten the viability of the future EV market, a study has shown.

The independent pan-European study, led by CAP Consulting, discovered EVs already typically depreciate around twice as heavily as a conventional car.

However, it was also emphasised that used values are forced down even further by the government subsidy.

CAP Consulting analysed the used market performance of the Nissan Leaf in the UK, Germany, France and Italy to compare values in countries with and without a purchase incentive subsidy.

They found a direct correlation between stronger used values in Germany and Italy – where there are no plug-in car grants – and weaker values in the subsidy-heavy UK and France.

France – the country with the highest subsidy – also saw the lowest used values for the Leaf.

The report also concluded that the removal of subsidies will widen the gap between new and used values so far as to threaten the economic viability of choosing a new EV in the future.

Mark Norman, author of the report, said: “Our analysis of used market values across markets with and without a subsidy clearly shows that grants are ineffective as a means of reducing ownership costs and, worse still, their inevitable eventual removal will cost new EV owners thousands in additional depreciation.

“This is because the used value is now established in each market and when the subsidy is removed in the UK and France, the additional cost of a new vehicle will never be retained by a higher residual value.

“As it stands, 12month depreciation levels in the UK already amount to almost half the subsidised new price for a Nissan Leaf.

“Without the original £5,000 subsidy, total 12months’ depreciation over the first year would amount to over £17,000.

“With average depreciation for a comparable specification diesel Volkswagen Golf or Ford Focus currently standing at around £7,000, this would make the economic argument for buying the Leaf all but impossible to make even with the potential fuel cost savings.”

The report argues that government investment to encourage take-up of ultra-low emission vehicles would be better directed in future toward supporting provision of ‘in life benefits’.

These include incentives such as ‘green badge’ parking schemes, permission to use bus and multi-occupancy lanes and exemption from many city centre driving restrictions.

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