Ambitious plans for electric vehicles in Europe

The average age of vehicles within leased and rented fleets is around 2 years, whereas roughly 35% of Europe’s car park is at least 10 years old or more. Furthermore, approximately 46% of all vehicles registered in the European Union are purchased by Leaseurope members. As such, leasing and rental companies are the primary acquirers and providers of safe, reliable and innovative mobility solutions across Europe, including essential mobility services throughout the EU during the pandemic. Lessors and automotive rental firms are driving the transition to sustainable mobility and reducing transport emissions by purchasing the cleanest fit-for-purpose new vehicles and replenishing the European second-hand market with less polluting, safer and well-maintained used-vehicles.

A huge variety of business models rely on vehicle rental and leasing, spanning a large range of vehicle classes. Leasing and rental companies therefore play a vital role in helping their clients with their sustainability transition – helping them choose the most appropriate vehicles and managing the finance and operational costs associated with using them. These clients can face a variety of challenges as they try to decarbonise, particularly those who use heavy-duty vehicles, where technology, infrastructure and deployment is lagging. Our sector is the largest acquirer of electric vehicles in Europe, both with regards to full battery electric (BEV) as well as plug-in hybrids (PHEV), helping hundreds of thousands of customers across the continent make the jump to zero-emission mobility.

While growth of electric vehicles has already been significant, there are a number of market conditions required to sustainably increase uptake. In practice these are an interdependent mix of factors which must be addressed comprehensively and in combination.

•           Range anxiety and adequate infrastructure

Adequate public and private charging infrastructure, including fast-chargers and the right geographic spread, will be the number one driver to promote accelerated EV update. This means ensuring reliable service provision at charge-points, more user-friendly payment options and price transparency, inter-operability and seamless movement for EV travel across borders. Many private drivers cannot rely on home-charging for all their needs and need to be able to charge “out in the wild” for longer, diverse, and more remote journeys. Commercial vehicles need a different charging mix to support diverse use cases and logistics networks. It is vital that funding for charge points is increased so that charging infrastructure capacity is supplied ahead of demand instead of continually trying to catch up.

•           Sufficient grid capacity

More attention needs to be paid to the grid capacity implications of an increasing EV fleet and growing infrastructure footprint in Europe to ensure that the necessary grid adaptations are made to support continually increasing user demand across charging location types and all geographies.

•           Adequate vehicle supply

Supply needs to be able to meet demand for EVs across a range of user groups, notably sizeable fleet operators like leasing and rental firms. This is not only about the absolute number of vehicles available currently or in the future, but also about potential market distortions that would impact both vehicle availability and price. Regulatory safeguards are needed to prevent these distortions, for example discrimination between retail and non-retail supply when manufacturers provide competing mobility services.

The European Commission has set out ambitious new targets within the Smart and Sustainable Mobility Strategy (on which we have a separate article), as well as a comprehensive set of proposed regulatory measures to promote decarbonisation of road transport. The proposed revision of the Alternative Fuels Infrastructure Directive and the move to much more ambitious electric charging infrastructure deployment can potentially act as a game-changer in providing the adequate level of charging infrastructure that the EU needs over time. The massive financial support that the EU is injecting into the green recovery can act as an important accelerator of EV uptake and infrastructure deployment.

Incentives for EV ownership are now available in almost all European countries, covering many forms like bonus payments, tax incentives, mobility credits for sustainable commuting, clean vehicle vouchers for tourism, access to dedicated clean and shared vehicle lanes and parking etc. Evidence from front-running countries like Norway show that careful consideration of the options is required and these incentives need to be maintained over many years to drive sustained uptake. Incentives relevant for the second-hand owner will help develop a healthy used market for electric vehicles, which will support affordable pricing for new EVs while promoting wider access to second-hand EVs.

While good results can be achieved with well-designed EU regulations and national incentive plans, a pan-EU electric vehicle mandate, implemented in equal measure across Europe, could raise significant problems. The divergence in market readiness is highly variable across member states in terms of EV penetration/demand, charging infrastructure, average fleet age, disposable income, and aftermarket capacity. A one-size-fits-all approach could end up being harmful as it cannot take account of the significant differences between countries with regards to their ability to take on EV vehicle volumes that are not driven by market conditions, consumer demand and, most critically, adequate infrastructure and supply capacity. Some national mandates are already leading to situations where EVs are lying idle in parking lots because customers are unwilling to pay the price premium, are worried about access to charging infrastructure, or can’t find the type of vehicle that suits their operating requirements.

For this reason, positive incentive measures are usually more effective at accelerating decarbonisation within the market, as opposed to forced adoption which does not fit with the underlying economic reality. Consumer education is also a critical consideration – many customers simply do not yet understand how to operate an EV and where they can reliably access public charging infrastructure, with transparent pricing and payment means. However, with targeted efforts this can change, and consumers are slowly becoming increasingly aware of the benefits of EV ownership. Together with well-considered regulations, this should boost electric vehicle uptake going forward.