After a year of Paragon Bank's Motor Finance division lending on electric vehicles (EV), Head of Business Development David Wilson comments on the factors that are set to influence the EV market and the latest SMMT figures.

As the transition gathers space it is no surprise the used car market for electric vehicles (EVs) is growing all the time as manufacturers ramp up supply and new models enter the market.

Figures from the UK motor industry body SMMT show that used battery electric vehicle sales were up 37.5% in 2022.

Overall, 71,071 used battery electric vehicles (BEVs) were purchased last year, with hybrids increasing by 8.6% and plug-in hybrids by 3.6%. Whilst small still compared to the total 6.9 million used vehicles acquired in 2022, it shows the direction of travel for EVs.

At Paragon, we have offered finance on EVs for just over a year and have been pleased with the level of demand shown. Like the broader market, it still only represents a small part of our business, but we are forecasting strong growth as the sector matures.

What will propel the used EV market going forward is greater numbers of new EV sales today and, here, the figures look even more positive. This benefits the used market as the new car of today is the second-hand car of tomorrow.

The SMMT’s February new car registrations showed that vehicles with some form of electric propulsion accounted for over half of sales during the month. BEV registrations were 18.2% higher during the month to 12,310, accounting for 16.5% of sales.

So where next? Four factors will likely influence the market in the coming months and years. The first is something that has dogged the electric vehicle market since its infancy and will only become more prevalent as greater numbers of EVs hit the road – infrastructure.

The SMMT’s figures show that there is just one public charge point installed for every 53 electric cars in 2022, a figure that will only worsen without serious investment. The charging network is confusing for motorists, with a myriad of providers offering different payment methods.

Second, the tax treatment of EV drivers. To date, the Government has offered beneficial tax terms to encourage more people to abandon the petrol pump, but the Chancellor will need to replace those missing billions from fuel duty as petrol usage declines.  The Government has already said EV drivers will need to start paying car tax from April 2025 and we wait to see what comes next.

Third is the price of EVs. Elon Musk has gone on the offensive with some aggressive pricing of Tesla models and has promised an entry-level EV with a price of around £25,000. EVs have so far come with a price premium to reflect the high development costs and production output that is typically lower than petrol or diesel cars. As manufacturers transition their fleets towards EVs, we would expect price to become a key marketing component.

And fourth is technology. EVs are still very much in their infancy and most models still offer less than 300 miles on a full charge. However, we are already seeing some breakthroughs in extended range and better performance – the Mercedes EQS Hatchback, for example, boasts a range of 450+ miles.

So, the EV sector faces question marks and teething pain as it matures and eventually replaces fossil fuel vehicles. However, the direction of travel appears clear, and the used EV car market is set for growth in the coming months and years.

David Wilson
Head of Business Development
Paragon Bank Motor Finance