Next wave of BEVs approaching with force
The first two waves of battery electric vehicles (BEV) in 2011 and 2017 washed through Europe almost unnoticed. Market shares towards the end of 2019 were still well below 2%. The usual suspects for this underperformance are range, infrastructure, price and choice.
Market conditions are changing fast. Most recently launched BEVs demonstrate ranges above 400km and falling prices. Infrastructure is growing notably in the economically stronger countries; those will lead the transformation. OEMs have a serious stake this time in making electric mobility work; they are motivated by European fines of up to €35 billion, annually, for missing CO2 targets.
Hard to calculate without the host
Success on the new-car market is only possible if a model is successful on the used-car market. Why? A low price realised in the used-car transaction establishes a high loss in value that drives leasing rates up and in turn makes the car unattractive as a new car. However, high up-front incentives may stimulate demand for BEVs as a new car, particularly as in Germany, BEVs receive a €6,000 BEV bonus when purchased new and company car drivers can save up to 75% of a sizeable benefit-in-kind tax.
Nevertheless, the used-car buyers are the hosts of this party. Their willingness to pay a high price for the BEV as a used car will be low, if they fear that battery quality and range have deteriorated fast or will drop soon. Considerable information asymmetries exist between the buyer and seller of a BEV. OEMs have only partially addressed these concerns with extended battery warranties. By not providing transparency on the quality of the battery, they are missing an opportunity to develop the market and to create value.