The transition to electric mobility in Europedriven by environmental regulations and the desire to reduce carbon emissions, faces an unexpected obstacle: leasing and renting companies.
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These companies, which have been key in the adoption of electric cars, are beginning to feel the pressure of a resale market that does not favor these vehicles.
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Over the past three years, the quotas for leasing and renting for electric cars have increased significantly, creating uncertainty about the future of this market.
The value of electric cars on the second-hand market has dropped dramatically compared to their gasoline equivalents.
This fact, combined with concern about battery degradation and fluctuations in the price of new vehicles, has generated a weak resale market that directly affects leasing companies.
As a result, many of these companies are forced to raise monthly fees to make up for the losses, potentially jeopardizing the viability of electric cars as an affordable option for consumers.
The role of companies in the electrical transition
In Europe, leasing and renting represent a crucial component in the automotive market. According to data from the lobby group Transport & Environmenthe 60% of new car registrations in Europe are made through leasing or renting operations.
This percentage rises to 80% when it comes to electric vehicles. In countries such as Great Britain and Belgiumwhere subsidies for electric cars are limited, the dependence on leasing companies is even greater.
In these markets, only 23% and 8% of electric car registrations in 2023 corresponded to private buyers, respectively.
The dominance of leasing and rental companies in the electric car market has led the European Commission to consider new measures to accelerate the adoption of zero-emission vehicles in corporate fleets. However, these measures could face strong opposition from companies in the sector.
Tim Albertsen, CEO of Ayvensone of Europe’s largest leasing companies, has warned that excessive pressure to electrify its fleets could lead some companies to exit the market.
The challenges of the electric car resale market
The second-hand market for electric cars is one of the main factors contributing to the increase in leasing and renting rates. Since October 2022prices for used electric cars have been in free fall in Europe.
In Germany, for example, the resale value of an electric car in July 2024 was a 24% lower than pre-pandemic levels. In Britain, this figure stood at 1.7%, 30%.
In contrast, second-hand gasoline cars remained a 15% more expensive in both markets.
This decline in resale value has forced leasing and rental companies to reconsider their strategies. With the residual value of electric vehicles being much lower than expected, these companies are faced with three options: sell cars at a loss, keep them in their fleet for longer, or increase monthly payments for new contracts.
In most cases, the latter option is preferred, which has led to a considerable increase in costs for consumers.
The increase in leasing and renting rates comes at a critical time for the market. electric cars in Europe.
As governments reduce subsidies for the purchase of electric vehicles, as has recently happened in Germany, sales of these vehicles are beginning to stagnate.
During the first semester of 2024electric car registrations in Europe grew only 1.3%, well below expectations.
This stagnation, combined with rising leasing rates, is creating a “perfect storm” which could further complicate the transition to electric mobility in Europe.
While consumers are increasingly interested in electric cars, rising costs and uncertainty over resale value are making many think twice before making the switch.
The possible intervention of the European Union
In the face of these challenges, the European Union is considering intervening to ensure leasing and rental companies remain committed to electrifying their fleets. However, companies in the sector have expressed concern that overly strict regulation could be counterproductive.
Forcing them to include a high percentage of electric cars in their fleets could result in higher costs, which in turn would be passed on to consumers.
This intervention could further distort the market.making electric cars less accessible to the general public and slowing the transition towards more sustainable mobility.
It is a delicate balance that the European Union will have to manage carefully so as not to undermine its own emissions reduction targets.
The role of leasing and rental companies in the transition to electric cars in Europe is fundamental, but it is not without its challenges. The fall in the resale value of electric cars and the consequent increase in monthly payments are creating tensions in the market that could slow the mass adoption of these vehicles.
As the European Union continues to push for the electrification of transport, finding solutions that balance the interests of businesses and consumers will be crucial to ensure a successful and sustainable transition.