Analysis
3 Oct 17

War on petrol and diesel threatens RVs

The residual values of cars with internal combustion engines are a ‘ticking time bomb’ across Europe, according to a new report.

The European Automotive Report 2017 Q2, commissioned by benchmarking specialist ExpertEye, warns that the hostile political mood music surrounding diesel expanded to include petrol models, threatening the prospects of used petrol and diesel cars.

ICE time bomb
The experience of Madrid illustrates how swiftly government action can change consumer behaviour. The Spanish capital’s plans to ban diesel cars from 2025 has seen diesel’s share of the new car market fall to 49.4% for the first eight months of 2017, from over 70% in 2011.

At a national level, France and the UK have both proposed bans on the sale of new ICE powered vehicles by 2040, while other countries have set earlier goals for when they would like to see a zero-emission new car market. This is as soon as 2025 in Norway, 2030 in Germany and 2035 in the Netherlands.

However, “the existing infrastructure in terms of electricity
generation, electric national grids, and charging points would be unable to meet the demands of such a ban,” warns the report.

“The war on diesel has become an ICE time bomb with politicians appearing to come up with evermore ill thought out policies and ambitious targets without proper consultation and planning, sending out confusing and conflicting messages to vehicle buyers and manufacturers.”

Sales of electric and hybrid cars remain ‘niche’, according to the report, accounting for just 4.2% of the new car market this year across the 31 European countries, although those 356,455 registrations do represent a 49% increase on the same period of 2016.

Norway represents an interesting case study, with diesel still securing 30% of new car sales despite the heavy promotion of electric vehicles. This indicates that consumers fully understand the benefits of different fuel types in terms of practicality, usage and longevity, said the report.

Remarketing concerns
In the used car market, the buoyancy of current residual values contrasts with pessimistic forecasts for major economies in three years’ time, with the ExpertEye RV index dropping in the UK, Germany, Spain and Portugal.

Forecasters are already concerned about the impact of the high volumes of pre-registered cars in certain markets, such as the UK, Germany and France, deflating used values. The used car sales website Autoscout24 has reported a 32% increase in the volume of cars being advertised aged under one year in France.

“We are seeing increased activity across a number of high discount sales channels, with some OEMs in the UK reportedly doing 30% or more of their sales with daily rental businesses,” said the report.

The uncertainty and risk surrounding Brexit is also concerning RV setters, with exchange rate volatility and the risk of trade tariffs having the potential to destabilise used values.

Across the continent there has been a softening of used diesel values among smaller (C1) cars, where annual mileages are typically lower. But in large car segments, diesel’s torque and frugality is maintaining values, said the report. In France, there has been a divergence in the residual values of petrol and diesel cars, with the former posting a two percentage point uplift in prices, while diesel has suffered a 0.5pp downturn.

The one glimmer of light comes in the van sector where an upswing in several European economies is leading to higher demand and stronger residual values of LCVs.

“We see demand for good quality commercial vehicles from across the industrial spectrum including home delivery companies, the self employed as well as
the traditional construction and industrial sectors,” said the report. 

The report was written for ExpertEye by Dean Bowkett, managing director of Bowkett Auto Consulting.

If you would like to know more about the residual value forecast for diesel vehicles compared to alternative powertrain vehicles, then register for the free to attend Fleet Europe webinar on 12 October in partnership with cap hpi. You can register here.

Authored by: Jonathan Manning