What's next for the UK's electric vehicle market?

Looking back

2023 was in many ways a year characterised by challenge and change, from the enduring cost-of-living crisis and global supply chain disruption to major government policy shifts and difficulties in the used EV market, with values depreciating faster than expected.  

Most significant was the decision to delay the ban on the sale of new petrol and diesel cars from 2030 to 2035. 

Importantly, the decision should not negatively affect Lex Autolease. According to Paul: “This change will have no impact on our business, and it’s been fantastic to see OEMs show an unwavering commitment to their own targets, which will have a positive impact on the market as a whole.”

Another focus point for fleets is the Zero Emissions Vehicle (ZEV) mandate, which requires that Original Equipment Managers (OEM) sell an increasing percentage of their cars as pure BEV, starting at 22% in 2024 and rising to 80% by 2030 with 100% of car sales being fully electric by 2035. Paul also outlines that this has only served to encourage fleet managers and businesses to accelerate their adoption of EVs.

The latest findings from Lex Autolease’s first bi-annual Future of Transport report for 2024 show that fleet managers have significantly shortened their forecasts for full fleet electrification, despite the delay, to an average of four years, down from seven years in the previous survey in July 2023. 

He attributes a large part of this shift to the commitment OEMs have made to produce a certain proportion of EVs every year, with the target set at 22% for 2024. 

Paul says: “Clearly we do not manufacture cars, but with the consistency in the ZEV mandate and the unwavering commitment from OEMs to electrify their ranges has meant businesses have felt no requirement to pause or delay their own plans for fleet electrification.”

But while the appetite for EV adoption among businesses with car fleets is accelerating, uptake among the broader population of retail and used-car buyers is not keeping up. Paul believes that more needs to be done in the coming year and beyond to encourage people to make the switch.

Businesses with van and light commercial vehicle (LCV) fleets have also been naturally hesitant towards electrification due to their’ reliance on their vehicles. Last year’s challenges, Paul says, demonstrate that Lex Autolease must continue to enhance its support for these customers to generate confidence that switching to electric vans will have no operational impact and deliver cost and environmental benefits. 

The year ahead

Looking forward, Paul acknowledges that 2024 could be challenging to predict. “With an election this year and a potential change in government, it’s possible we could see significant change to policy that directly impacts the EV market and there is potential that the 2035 deadline could be pushed back or brought forward.”

However, this isn’t changing Paul’s outlook. He is confident that, in the first quarter at least, “the market should remain stable, especially for used electric vehicles”, and hopes the current or any new government remain committed to the ZEV mandate. 

New electric vehicles will remain more expensive than their Internal Combustion Engine (ICE) counterparts until new, cheaper models come on to the market. But according to Paul, “it seems we have achieved price parity for used vehicles, and that seems to have stabilised the value of used EVs. This will allow us to have a bit more confidence going forward which we can reflect in how we go to market with used electric cars.”

Confidence in this area is important for Lex Autolease. As Paul says, “we want to be a stable partner for everybody, including buyers of used EVs.”

Beyond this, there remains the challenge of enduring economic headwinds. “Will interest rates remain stable? Are we going to see the cost of living persist or will it alleviate? All of these questions must be dealt with consciously and seriously but predicting what will happen and when with 100% accuracy is impossible”, Paul explains. Like any business, Paul underlines the need for a strong economy to support growth.

Taking the right approach

Through Lex Autolease, Black Horse, and Tusker, Lloyds Banking Group has provided more than £6bn in funding for new EVs and plug-in hybrid vehicles – part of an £8bn commitment - since 2022 - and is responsible for more than one in eight EVs registered on the UK’s roads and one in five BEVs registered last year.

This means it has a significant role to play in supporting the electric transition, and Paul is concentrating on a number of areas to support customers in switching. 

A key focus is enhancing Lex Autolease’s van offering. Paul acknowledges that support for electrification in this market is a challenge considering the slower uptake in electric vans compared to cars. Despite reaching the 50,000 milestone in the UK last year, Paul says that the van market remains about five years behind the car market in terms of electrification.

The reason for this is that vans are a fundamental asset to their owners and can be critical to the business’s day-to-day running - “you can’t simply flip a whole van fleet and turn it electric in one go”, says Paul.

Paul emphasises Lex Autolease’s commitment to providing uniform support across van, LCV, and car fleets. “We have hundreds of van and LCV customers across the UK”, Paul says, “and we want to ensure they receive the same market-leading service that we deliver to all our car customers.” 

Full electrification is coming for van and LCV fleets, as well as for cars. And to support this, Paul says Lex Autolease is providing full wrap around care for customers with van fleets, using data to demonstrate the benefits of using electric models, from cost savings to optimising mileage and saving on emissions. 

“We understand why our customers aren’t all changing now but we need to help them see the benefits. At Lex Autolease, we have a significant opportunity to support here. We have a large van fleet and a long list of customers that we can use our capabilities to support switching to electric.”

Technology driving the transition

New technology has the potential to reshape the EV market, and Paul is excited to see what is coming down the track. 

One area generating significant discussion across the sector is the use of AI and its potentially transformational applications. “It’s a fascinating area of research”, Paul says. “The potential of AI to accelerate the development of new models of battery and self-driving capabilities is immense. For consumers, it could create new selling points that make EVs more desirable for drivers across the UK.”

And it is specific improvements to battery technology that could have the greatest impact on the market. Paul envisions a future where car batteries can be charged in a few minutes and deliver more miles than current technology allows. “It’s only a matter of time before this sort of Battery Electric Vehicle (BEV) is on the market. And when that happens, it will be a game changer for those drivers currently put off by range or charging anxiety.”

Fortunately, we won’t have to wait long to see progress. “Solid state battery technology is always improving. Your next car might still not be able to do a three-minute charge, but it will be better than it is today and will get you much further or deliver the same range as is currently available but at a lower price point.”

Additionally, Paul emphasises the pivotal role of data in driving the transition. With the increasing connectivity of modern vehicles, the abundance of data is becoming an increasingly strategic asset. 

As Paul explains, “A lot of vehicles are now connected and we need to able to harness that information, whether that be from the car or through aftermarket telematics, to help them build and structure fleets more effectively. 

“We want to help more of our customers use data to optimise their mileages across their fleets and make emission savings, while also looking at safety issues and opportunities to improve driver behaviours. And we want to help them do that more easily by integrating all the different data sources into interactive, real-time dashboards that help customers better understand their fleets and support them with predictive maintenance to keep their vehicles on the road as much as possible.”

Making use of these technologies will be a priority for Paul in continuing to develop Lex Autolease’s proposition for customers moving forwards. 

The potential of used EVs

Strengthening the used electric market is another major priority for Paul. A partnership with Telent, an IT services provider to the defence, rail, traffic and public safety sectors, has been an important step in realising the potential of returning EVs.

Paul highlights Lex Autolease and Telent’s pilot scheme as a “really exciting initiative aimed at improving vehicle availability and reducing costs”, which involves leasing out returning EVs on 24-month contracts to help prevent Telent drivers from experiencing any delays. 

Collaboration has been key for the pilot. Paul says, "while it’s just starting with one particular model of used EV, we’re excited to see how this approach can be applied to our entire used electric fleet. But it’s important not to rush these things. We’re piloting the process of taking the car from its first home, getting it checked, making sure it’s safe and attractive to another user, making sure it’s available to be reallocated and then getting it to its new driver, which is no easy feat.” 

He explains, “in the second half of 2024 we expect to see much higher numbers of EVs returning from their first life. That’s when we’ll have this great window of opportunity to roll this out in a much bigger way. In the meantime, we’re able to learn from our pilot with Telent, bring on the right supply chain partners and make sure that fundamentally we’re giving our customers a great experience, which is the most important thing.”

Ultimately, Paul says, “we rely on a strong used market for our leasing business. Expanding and developing our used electric vehicle offering is a logical step and something we need to do going forward.” This shouldn’t be too hard, he says, “we’ve got a strong used car supply because of the scale of the Lex Autolease business.” Making the most of that resource delivers stability and predictability in 1st life residual values, so is, in fact, “the most important part of our business.”

Developments like these are a key part of Lex Autolease’s strategy, and the whole Lex Autolease team are incredibly focussed on delivering them.