June 22, 2024

ZEV mandate leads to lower prices for new electric vehicles

Auto Trader’s most recent Road to 2035 Report, which monitors the UK’s progress in embracing EVs, reveals the influence of the Government’s Zero Emission Vehicle (ZEV) mandate, which has come into effect this year despite the delay in the headline sales ban until 2035.

New data from the UK’s largest automotive marketplace indicates that three-quarters of new electric vehicles (EVs) are currently being advertised with discounts, and average prices are decreasing for seven out of 10 new electric models as the industry endeavors to create sufficient demand to meet the ZEV mandate – a requirement that mandates manufacturers to ensure 22% of their UK vehicle registrations are electric, or else face substantial financial penalties.

Sales of new electric cars have seen an overall increase, primarily driven by the fleet and business sector, while interest from private car buyers has stagnated as EVs represent less than 1 in 10 new cars sold to private buyers. Since the peak in June 2022 where electric vehicles accounted for 36% of advert views on Auto Trader amidst record petrol prices, demand for EVs has hovered around 14% of new car advert views on the platform.

The Report highlights the efforts of the car industry to enhance affordability and propel the UK’s transition forward. Recent consumer research conducted by Auto Trader in April reveals that over a third (34%) of car buyers are contemplating electric cars for their next purchase, a notable increase from a quarter (26%) in consumer research conducted in August 2023.

The used electric vehicle market is set to experience the majority of this surge in electric consideration, given that two-thirds of UK drivers opt for used cars. Positively, the share of advert views and enquiries for 0–5-year-old EVs reached record highs of 9.2% and 8.5% respectively in April.

A promising development in the transition is the widening interest in electric vehicles beyond the wealthier AB social groups, who have historically led electric adoption. The proportion of consumers from the combined C1 and C2 groups – constituting half the population – considering electric cars has increased from 47% in 2022 to 61%. Additionally, nearly two-thirds (63%) of younger drivers aged 17-24 are open to making the switch.

Despite the expansion of electric interest, affordability remains the primary barrier to mass adoption, even in the used electric market which has witnessed 20 consecutive months of price reductions. Auto Trader’s latest analysis reveals that one in 10 used electric cars sold in 2023 were priced under £15,000, compared to seven in 10 of all used car transactions in the same year. The average price of a 0–5-year-old EV in April 2024 was £28,562, in contrast to £21,038 for petrol cars in the same age bracket.

Auto Trader’s marketplace also highlights the lack of affordable options in the used electric segment, with just 10,000 EVs available for less than £15,000 (the most searched price point for used cars on Auto Trader), compared to 350,000 petrol and diesel cars in the same price range. Similarly, there are only nine new electric cars with starting prices under £30,000, as opposed to 76 petrol and diesel models.

The Road to 2035 report sheds light on the impact of negative narratives surrounding electric cars. With 72% of consumers familiar with the “electric cars catch fire” narrative, 44% believe it to be true, leading them to be less inclined towards electric vehicles. Moreover, 70% have heard the claim that “EVs are not cheaper to run,” with 33% accepting this as true and citing it as a deterrent to buying an electric car.

Ian Plummer, Auto Trader’s Commercial Director, expressed, “The increasing trend towards considering electric vehicles is encouraging, but for this transition to be fair and effective – and for heightened interest to translate into sales – it is crucial to ensure that when potential buyers are ready to make a purchase, there are electric cars available across various budget ranges.

“New insights into the misinformation surrounding EVs and its impact on consumers are concerning, underlining the importance for retailers to educate themselves on these prevalent myths so they can reassure customers.

“Progress on affordability is essential to stimulate retail demand, especially considering the cessation of exemptions from vehicle excise duty and the expensive car supplement for EVs next year. Financial assistance from the government in the used electric market is imperative to facilitate a smooth and equitable transition.”

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