Mon, Jan 08, 2018 - Page 8 News List

Rent and wait

Why most electric cars so far are leased and not owned

Bloomberg

An electric Volkswagen car is plugged into a recharging point in central London.

Photo: Reuters

Jeffrey Jablansky is the very model of a savvy electric-vehicle early adopter. He opted for a Chevrolet Bolt early last year, choosing a vehicle far ahead of all others by his preferred metric: electric range per dollar. But he never considered buying the car; instead, he pays US$220 per month to lease the vehicle.

“I just think in three years I’m going to be delighted at what else is available,” said Jablansky, who writes about cars as a freelance journalist. “And we’re going to laugh one day that we used to plug cars in for eight hours at a time.”

It’s not just that almost nobody is driving electric vehicles right now. Only 1 percent of the global market has gone electric, and the number is even smaller in the US. At this point, years after the first Chevrolet Volt and Nissan Leaf zipped off assembly lines, the market for plug-in vehicles in America is dominated by leases.

DOMINATED BY LEASES

US drivers now lease almost 80 percent of battery electric vehicles and 55 percent of plug-in hybrids, according to Bloomberg New Energy Finance (BNEF). The lease rate for the country’s entire fleet hovers around 30 percent. (There’s one blank spot in the data: Tesla does not divulge how many of its vehicles are leased, and since it sells its cars directly rather than through dealerships, the company doesn’t have to.)

The lopsided consumer preference for leases is fueled by the meager demand for battery-powered vehicles on the used market. Partly this is a consequence of public policy meant to spur electric vehicle adoptions: buyers of pre-owned cars can’t grab thousands of dollars in federal and state incentives.

The high lease rate is also fueled by the bet Jablansky and others like him are making that upcoming models will far exceed today’s in value and capabilities.

“When there’s new technology coming out, and it’s coming out so rapidly, and you’re improving on it so constantly, typically people only want to lease it,” said Steve Center, a vice president of American Honda Motor Co. The hydrogen fuel cell version of the Honda Clarity isn’t available for purchase; it can only be leased.

“Think of your cell phone,” Center explained.

Perhaps electric vehicles will truly arrive when they are no longer compared to smartphones, which become obsolete after three years.

The bet on fast-paced improvements makes sense. In the past five years, battery prices have fallen by an annual average of 20 percent, according to BNEF, as factories scale up and engineers perfect the packaging of cells. “If you look at what can happen across the lifetime of a lease, you’re really talking about doubling the range of these vehicles,” said Edmunds analyst Jeremy Acevedo.

Not surprisingly, a dated plug-in car is a pariah. Electric compact cars that were sold in 2014 are now worth only 23 percent of their original sticker price, compared with 41 percent for comparable combustion vehicles, according to Black Book, an auto analytics firm. A stale Nissan Leaf holds its value about as well as a Florida timeshare.

AGE QUESTION

Part of the problem is that nobody — including auto engineers — really knows how well the first wave of these plug-in cars will age.

“The buyer of a used EV today is as much an early adopter as the buyer of a new EV was in 2011,” said Nicholas Albanese, an analyst with BNEF.

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