It seems obvious that, if you want to get lots of people to trade-in their petrol, diesel or hybrid cars and buy electric models, some form of incentive is needed.
The move to electric motoring is of paramount importance if we’re to seriously decarbonise society but, unlike previous mass adoptions of new technology – such as the car itself in the early years of the 20th century, mobile phones and smartphones more recently – electric cars can’t be given the chance to naturally find their customers. The climate clock is ticking and in the next five to 10 years people are going to have to make the switch.
Both stick and carrot are clearly necessary. The stick comes in the form of increasing taxes on fossil fuels (the carbon levy added its mandated couple of cent to the cost of each litre of petrol and diesel in Budget 2025, but falling wholesale oil prices largely absorbed that) and the raising of other motoring-related taxes on conventionally powered cars.
The carrot has, until now, been the electric car purchase grant. Designed to offset the higher purchase cost of an EV, the grants – both in the form of an actual grant from the Sustainable Energy Authority of Ireland (SEAI), and a rebate on vehicle registration tax of up to €5,000 – have made new electric cars much more affordable than they otherwise would have been.
However, the market is massively sensitive to those grants. Last year, the German government, more or less without warning, removed all electric car purchase grants. The result? A significant drop in new EV sales, which thanks to Germany’s sheer economic size, meant that overall European electric car sales fell, even though in individual markets they actually rose somewhat.
Something similar happened in Ireland too. Last summer, the SEAI grant was reduced from €5,000 to €3,500. Now, €1,500 either way really ought not to make a huge difference when it comes to the decision to buy or not buy a car likely costing upwards of €40,000, but it’s incontrovertible that electric car sales in Ireland have tanked – down by 25 per cent – since then. Cause or correlation? It’s ultimately impossible to say, but it doesn’t matter when the effect is the same.
The problem for European car makers is that, under European Union regulations, they will need to sell ever higher numbers of EVs in 2025 to stick to their corporate average emissions levels. If those EV sales targets are missed then billions of euro in fines will be applied across a car industry already reeling from volatile sales, volatile costs and the encroaching competition from China.
Are we approaching electric car incentives from the wrong angle, though? It seems simple enough that reducing the price of new EVs through government largesse should stimulate sales, but perhaps there’s another way. In fact, perhaps we should just do it in reverse.
“I think that the government should support the buyer who buys the second-hand electric car,” says Marc Hedrich, head of Kia’s operations in Europe. We’re speaking on the fringes of the launch of Kia’s new EV3, a more affordable, compact electric car which is expected, along with affordable EVs from other car makers, to reignite at least a little interest from consumers in 2025.
“I think that what the government in France did is a perfect example of what you should not do,” said Hedrich. “They put as much as €13,000 against the cost of a new EV, giving people a ridiculously low monthly repayment, but it has killed the used values. So I think it’s better to support the second owner. It will cost less money for the government to do this, and I think it will allow the market to, shall we say, digest electric cars.”
The precipitous nature of second-hand EV values has been a significant problem for many owners of late. While most have bought on a personal contract plan (PCP), and therefore had the used value of their car protected up to a point, the problem is that PCP sales are based on the car maker undervaluing the final used price of the car, meaning that there’s still something left over – a little equity – which the owner can use as the deposit for their next car. The fragile nature of electric car used values has seen this system upended in many cases.
According to Hedrich, there’s blame to be apportioned here, and in one particular direction. “What we have seen it that many car makers were too pushy when they set the second-hand values of their EVs. What no one predicted is that Tesla, with its price cuts, would basically break the system. Now you have many people saying that they will not buy a Tesla ever again – not just private buyers, but fleet operators too – and that has put major pressure on the residual values of all, which have decreased.”
Hedrich does at least have some good news for those staring at plunging used EV values – he thinks that the market has started to stabilise, and has hopefully bottomed out. The values also depend in no small measure on the car and its battery as originally sold.
“You might remember that when we first introduced the electric Niro, we had a choice of two batteries,” says Hedrich. “But we always pushed the bigger battery, with the 425km range. Now, four years down the line, you can look at a used Niro and it can still do 400km on one charge, because the battery is so robust, but other cars that had maybe a 300km range when new, they will struggle to do 250km now, and so the market doesn’t want them.”
Should the EU tweak the emissions regulations in order to help shore up the increasingly fragile car industry, though? Hedrich is in a different position to his European peers in this case. Kia is, of course, Korean and backed by the financial might of the broader Hyundai group, so while it has factories, design studios and development centres in Europe, Kia is not so much of Europe and can easily pivot to other global markets if required.
Hedrich’s attitude to the increasing need to sell more EVs, then, is less about changing the legislation and more about going to the market with the right cars.
“We have done our job and we have an avalanche of new EV models coming,” says Hedrich. “When you look at the market, Stellantis has a €25,000 EV coming, Renault has a €25,000 EV coming, our EV3 is at a lower price point and so we have all the things to succeed. We already have 5,000 orders for our EV3, and that’s without the car being in Europe until today. Will it be enough? We will see.”
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