Fears over residual value of ICE vehicles driving fleets towards EVs

Fears over the future residual values of petrol and diesel cars are encouraging fleets to switch to electric, according to an industry body.

Andy Kirby, customer success director, said that worries were being expressed across its outright purchase user base that demand for used petrol and diesel vehicles might start to substantially fall in the second half of the decade.

He explained: “There is a general feeling that, as we head towards the 2030 end of ICE production, no-one really knows what is going to happen to used vehicle buyer sentiment and therefore residual values (RVs).

“There are extremes of belief – some saying that petrol and diesel demand will hold up because those vehicles offer definite advantages and will be in limited supply, while others believe that they will be seen as yesterday’s technology and discarded.

“Because of this uncertainty, there is a feeling that ICE is increasingly a gamble when it comes to future RVs. The logic is that EV demand is now a solid bet for the future, while petrol and diesel will certainly fall away at some stage.”

Kirby said that the situation was being made more acute by the current long delays affecting vehicle supply.

“If you order a car today and are given a delivery date of late 2022 then, if you are operating on a four year cycle, that takes you right up to 2026 as a disposal date, which feels very near to the 2030 deadline. The fear is that the used market will be quite different by then.

“The situation is even more marked when it comes to van operation. We have some fleets who operate LCVs on a six year cycle. That means if you place an order now, you’ll be potentially looking to sell that van in 2028, when it is likely that electric will be the fleet norm.

“When faced with these kinds of scenarios, we are increasingly seeing people choose electric today become it looks like the safer RV bet. This is a way of thinking that can only become more dominant as time passes.”