How used BEVs can drive the EU’s climate goals

The upcoming year marks a pivotal point for the European Union as the European Commission (EC) gears up to introduce a new 2040 climate target. A key focus of this ambitious plan is the reduction of CO2 emissions, particularly from the road transport sector, which currently contributes to over a quarter of the EU's total emissions. The transition from internal combustion engine (ICE) vehicles to battery electric vehicles (BEVs) is identified as a critical step in this journey.
The spotlight in this green transformation is not only on new car sales but significantly on the second-hand car market, a segment that often remains in the shadows of mainstream environmental policies. This market is crucial, considering that about eight in ten EU citizens purchase their cars second-hand, making it an essential gateway for low- and middle-income families to participate in the green transition.

Leasing companies emerge as potential game-changers in this scenario. These companies manage large fleets, usually for a period of three to four years before these vehicles enter the second-hand market. The rate at which these companies adopt electric vehicles directly influences the pace of electrification in the used car sector. Despite their pivotal role and substantial profits, leasing companies have been slow to lead this transition, with their uptake of BEVs matching only the general market trends. None of the top leasing firms have yet declared a commitment to eliminate fossil fuel cars from their fleets.

Transport & Environment (T&E), in their latest analysis, paints a picture of the transformative potential of a faster electrification of the leasing sector. If the major leasing companies switch to 100% electric by 2028 and the entire sector follows by 2030, an additional 18 million BEVs could be introduced into the used car market by 2035. This would mark an increase of over 50% compared to the current trajectory. Significantly, this influx could make electric cars more affordable, with millions of these vehicles projected to be priced under €10,000, aligning with the average spending capacity of middle-income households.

The financial benefits of used BEVs are substantial. Studies have consistently found that they have a lower total cost of ownership (TCO) than their petrol counterparts. For example, a medium-sized BEV purchased new in 2020 could offer more than €8,000 in savings to its subsequent owners. The analysis reveals varying degrees of savings across different EU countries, with Germany and France leading in potential cost reductions.

These savings stem from several factors, including lower initial purchase prices due to the significant depreciation new cars face in the first few years. Additionally, operating costs for BEVs are lower, given their fewer moving parts and lower maintenance requirements compared to ICE vehicles. Tax incentives and government subsidies further contribute to making BEVs a financially sensible choice.

Battery degradation, often a concern for potential buyers, is addressed in the report. The latest data indicates an average battery capacity degradation of just 2.3% per year, reinforcing the longevity and reliability of used BEVs. Moreover, the expanding charging infrastructure across Europe is easing concerns about range and accessibility, making electric vehicles increasingly practical for everyday use.

The briefing from T&E concludes with a call to action for both leasing companies and policymakers. It advocates for leasing firms to adopt a green leadership role by phasing out fossil fuel vehicles by 2028. At the national and EU levels, it suggests policy reforms such as increased taxation on fossil fuel cars and binding electrification targets for corporate fleets by 2030.

In summary, the report highlights the significant role of used BEVs in not only meeting the EU’s 2040 climate goals but also in offering a cost-effective, environmentally friendly option for European citizens. The electrification of the used car market holds the key to making sustainable mobility accessible and affordable, presenting a win-win scenario for the environment and the economy.

Source: How leasing companies can become a key driver of affordable electric cars in the EU | Transport & Environment

Source: How leasing companies can become a key driver of affordable electric cars in the EU | Transport & Environment
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