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If consumers don’t want the EV, companies pushed to offer them take a hit. Since the increase in demand wasn’t organic or natural, severe financial consequences are the result. Tesla is having to slash prices so the market is feeling it, with leasing companies in Europe being hit hardest. Fleet emissions in the UK are much more stringent with 22% of all vehicles sold this year needing to be at zero.
Leasing companies struggling
Next year’s emission standards will be worse, with 28% of all vehicles sold needing to have zero emissions. Volkswagen can’t do it.
The European Union wanted to phase out gasoline powered vehicles by 2035 but with the EV market tanking, that goal might not be attainable. It’s bad for manufacturers and even worse for leasing companies.
Leasing companies might sell them back
Companies might offer buy backs but manufacturers need to ensure leasing companies can sell or rent them at a reasonable price. Otherwise there are financial penalties.
Fortune explained that agreements are made based on the ability to earn back the value of the car over the time of the payments being made to rent a car. That value is based on what the car is expected to be worth at the time the contract ends. If the value of that vehicle drops more than expected, the company will lose money.
Companies facing declining values
Analyst Philippe Houchois explained based on the automobile market, “[in] the end it is the difference between new and used price that is the real cost of a car.” With that in mind, rental companies like Hertz are offloading their EV’s. Tesla will no longer be offered by December.
Ursula Weigl, a partner at McKinsey consultancy said the demand was misrepresented or skewed, “[the] EV market is extremely distorted by incentive schemes around the world.” It was “artificially stoked, and it currently ends with the second-hand market.”
