Why UK used car dealers should shift focus to EVs

It might seem like the electric vehicle (EV) hype has cooled off. After record-breaking EV sales in 2022, momentum in the UK has levelled out, with only modest growth between 2023 and 2024. But don’t be fooled – this is just a brief pause in an inevitable shift. The Zero Emission Vehicle (ZEV) mandate is still in play, requiring at least 80% of new car sales to be electric by 2030. So, for those in the used car market, the question isn’t if EVs will dominate, but when.

What does this mean for used car dealers?

The used car landscape is set to undergo a significant transformation, a trend we identified in our first four-year, fuel-type forecast back in Q1 and which has informed our revised used car forecast through to the end of 2024. With nearly 40% of new cars sold this year being electric or hybrid, it’s only a matter of time before these vehicles start flooding the used car market. By 2028, internal combustion engine (ICE) vehicles are expected to reduce by over two-thirds, while EVs and hybrids will take up more space on forecourts.

However, consumer demand hasn’t fully caught up yet. We’re likely to see an oversupply of EVs in the used market as manufacturers, driven by policy and legislation, shift to electric ahead of consumer readiness. Financial concerns, infrastructure challenges, and lifestyle adjustments still keep some buyers hesitant. But used car dealers who ignore this trend risk being left behind.

Opportunity for the savvy dealer

This shift presents a golden opportunity for proactive dealers. Now is the time to start educating your customer base. While you may not be ready to dive headfirst into the EV market, laying the groundwork today can pay off in the near future. The customers buying used petrol cars from you now might be ready to trade up to a used hybrid or fully electric vehicle in three to five years. And, with the pool of available used ICE vehicles shrinking, your future inventory will likely need to lean heavily towards EVs.

The post-pandemic vehicle shortage

If you need another reason to consider the move, think about the post-pandemic impact on vehicle availability. Between 2020 and 2023, the automotive industry saw a shortfall of 3.1 million vehicles that were never manufactured due to lockdowns and supply chain disruptions. These missing cars aren’t in the new market, which means they won’t be entering the used market either. The result? There’s less good-quality used stock to go around. 

The choice: adapt or get left behind

Used car dealers are facing tough choices in an increasingly volatile market. Do you stick with older stock, pay a premium for younger vehicles, compromise on margins – or do you embrace the change? While it’s understandable to have reservations, especially when the market isn’t fully there yet, waiting too long could leave you out of the game.

Consumer sentiment is warming

There’s good news too: consumer attitudes toward EVs are gradually improving, as evidenced by Auto Trader’s research for The Road to 2035 report. Despite ongoing concerns like range anxiety, social media is full of stories about successful long-distance EV trips. Stats from ZapMap show the UK now boasts over 66,000 EV charging points at more than 34,000 locations, far surpassing the 8,000 or so operational petrol stations. This growing infrastructure supports the 1.8 million battery electric and plug-in hybrid cars already on UK roads. 

Indeed, the industry and consumers are starting to better understand battery lifecycle management, something David Gray of EV Battery Solutions discussed in the latest Insight Quarterly. While EVs generally require less maintenance than ICE vehicles, they do require specialist knowledge of how to handle high voltage systems. The ecosystem of trained service providers, breakdown companies and technicians is growing. 

Residual values for EVs are also stabilising, and prices are nearing parity with ICE vehicles – though this is partly due to rising ICE prices as much as falling EV prices. Consumers are realising their current budgets won’t stretch as far as they did pre-pandemic, which might prompt some to explore finance options, delay their next purchase, or – crucially for dealers – consider an EV.

Seizing the EV opportunity

This is where smart dealers can make their mark. Those who rely on a steady turnover of ICE vehicles need to be prepared for the stock squeeze that’s coming. Managing customer expectations around the cost of ownership and guiding them through the transition will be key.

If your forecourt is currently 90% ICE vehicles, think ahead to how it will look a year from now, and the year after that. With ICE availability shrinking by 10-16% annually, can you sustain your current stock profile? Are you ready for the influx of EVs? Could hybrid vehicles serve as a stepping stone for your customers? These are questions I asked at the beginning of the year, and I challenge the industry to consider them again. The time to prepare is now.

Looking ahead: the EV tipping point

In my view, we’re on the cusp of mass EV adoption. Dealers who understand EVs and know how to sell them will rise to the top. But the transition won’t be seamless. To make the journey smoother, consider the following steps:

• Rethink stock profiling: Align your inventory with evolving supply and demand by keeping an eye on market trends, and think about freeing up cashflow with stock funding solutions.
• Embrace hybrids: With ICE availability dwindling, hybrids can bridge the gap for your customers.
• Invest in training and technology: Equip your team with the omnichannel retail and marketing tools they need to sell and support EVs effectively.
• Educate your customers: Use marketing and PR to simplify the EV decision-making process for your buyers.
• Support EV campaigns: Get involved in initiatives to boost EV awareness, like #DriveChange from World EV Day™, which celebrates its fifth year in 2024.

The future is electric, and the dealers who prepare now will be the ones leading the charge.