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For a market that is still in its infancy, the UK’s plan for electric vehicles (EVs) is nothing short of ambitious. Taking a cue from the European Commission – perhaps in order to position itself as an equally competitive market following Brexit – the British government has set out a 2030 target of 50% market share for alternatively-fuelled vehicles (AFVs) as part of its “Road to Zero” strategy, a tenfold increase from current levels.

While the strategy is explicitly technology-agnostic – for instance, hybrid cars will retain a place in the transition, and will benefit from an extension of the plug-in grant scheme – the government will allocate £400m to fund the installation of charging infrastructure by companies existing and new, as well as providing EV owners with various incentives to install charging points at home and at the workplace.

It is good news for potential entrants to a space – charging infrastructure – that is already seeing consolidation: last year, Shell bought out charging station provider NewMotion, and set up the Ionity joint-venture with BMW, Daimler, Ford and VW. British Petrol, meanwhile, acquired the UK’s Chargemaster, one of the biggest charging point providers in the country.

The UK already fares pretty well in terms of charging infrastructure – according to lessor OSV, it is the third “most prepared” European country, behind Switzerland and Norway – so it might be better placed to pursue a zero-emission strategy.  But battery-powered electric vehicles are not the only game in town. As Moody’s recently noted: “A dominant – and cost effective – technology [has] yet to fully emerge.”

"The government will allocate £400m to fund the installation of charging infrastructure by companies existing and new, as well as providing EV owners with various incentives."

Range anxiety is also a factor that may push consumers away from pure battery electric powertrains to more familiar “compromises” like hybrids, or perhaps the latest, cleanest generation of internal combustion engines.

All of this creates an extremely uncertain picture for market players, despite governments’ ambitious resolutions. While carmakers that have invested heavily in their electrified ranges will see favourably a government-backed effort to support AFV adoption – particularly with subsidies – the speed of change and the crucial role policymakers need to play mean that future trajectories of car values are extremely tough to predict.

EV and hybrid values are holding well for now, with some EV models even appreciating 30,000 miles down the line, according to cap hpi – but technological obsolescence will be a risk to reckon with, forcing the “financing industry … to transition to accommodating financing products”, Moody’s said.
 
Their note echoed a point made by Eberhard Hackel, senior director at Fitch Ratings, at the 2018 Motor Finance Europe conference: there is simply not enough historical data for AFV to produce meaningful forecasts on residual values and price trends – which hinders, among other things, the ability of finance houses to sell debt to investors through securitisation.

"The speed of change and the crucial role policymakers need to play mean that future trajectories of car values are extremely tough to predict."

EU targets on AFVs, to which the UK’s closely align, have been criticised by the European Automobile Manufacturers’ Association (ACEA). Earlier this month, the Brussels-based organisation called the targets “completely unrealistic”, adding that “consumers looking for an alternative to diesel now often opt for petrol vehicles or hybrid ones, but are not yet making the switch to [electric]”.

On the other hand, Moody’s report forecast AFVs (including both battery EVs and other types of vehicles) to account for between 30% and 35% of market share in Europe by the mid-2020s, and between 60% and 75% by the time 2030 is here. As it turns out, estimates on AFVs vary wildly depending on who you ask in the industry, even at high levels.

History will eventually vindicate either the optimistic side or the cautious one. In either case, major changes are about to sweep the automotive industry – and they are set to go well beyond what powertrain is under future cars’ hood.

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Electric vehicles