Brake or Accelerate

The sit­u­a­tion is chal­leng­ing, but Ömer Kök­sal remains con­fi­dent. “We’re con­tin­u­ing to suc­ces­sive­ly con­vert our fleets to elec­tric vehi­cles,” he says. His com­pa­ny is the Allane Mobil­i­ty Group, which spe­cial­izes in car-leas­ing and full-ser­vice solu­tions. It launched and is pur­su­ing a trans­for­ma­tion to elec­tro­mo­bil­i­ty. As the man­ag­ing direc­tor of Allane Mobil­i­ty Con­sult­ing GmbH, Kök­sal is in charge of B2B for Germany’s largest brand-inde­pen­dent provider of new and used vehicles.

Head­quar­tered in the south­ern Ger­man metrop­o­lis of Munich, Allane Mobil­i­ty Con­sult­ing has 33,700 con­tracts in the fleet leas­ing sec­tor and 48,500 in fleet man­age­ment. It advis­es major com­pa­nies on how to man­age their fleets effi­cient­ly, and pro­vides all rel­e­vant ser­vices for the oper­a­tion of pas­sen­ger cars and vans. Its cus­tomers include cor­po­ra­tions such as SAP — which alone has a good 18,000 vehi­cles — as well as Siemens and Lufthansa. “The sit­u­a­tion isn’t easy at the moment,” says Kök­sal. “With e‑car sub­si­dies no longer avail­able since the start of the year and in light of the inad­e­quate charg­ing infra­struc­ture in Ger­many, there’s a lot of uncer­tain­ty. There’s been a con­sid­er­able decline in the demand for elec­tric vehi­cles. Deal­ers’ garages and ware­hous­es are full, but they don’t have the cus­tomers right now to lease or buy the cars.” The vehi­cles are in “park,” not “drive.” Not a good option for an inno­v­a­tive prod­uct. Near­ly all leas­ing com­pa­nies, fleet oper­a­tors, car rental com­pa­nies, and car-shar­ing providers have been observ­ing the sit­u­a­tion Kök­sal describes for some time now. The ener­gy tran­si­tion alone can’t make the sec­tor run on auto­mat­ic. Despite their wide­ly rec­og­nized ben­e­fits, elec­tric vehi­cles have lost some of their appeal to dri­vers. For the first two months of 2024, sales in Ger­many were at their low­est level in three years.

The decline in appeal has trig­gered a drop in demand for elec­tric cars. One mar­ket-based con­se­quence is that the prices for rel­a­tive­ly new or late-model used cars have also dropped. Their lev­els are close­ly linked with the prices for new cars, points out Mar­tin Weiss, a spe­cial­ist in auto­mo­tive data and the direc­tor of vehi­cle val­u­a­tion for Deutsche Auto­mo­bil Treu­hand (DAT). As he explains, “We’re com­ing down from an abnor­mal­ly high mark on the mar­ket, which had spiked because of the short­age caused by COVID, the chip cri­sis, and the result­ing deliv­ery prob­lems. Now there’s an excess in sup­ply, plus a con­sid­er­able slump in the new car mar­ket. That puts new-car prices very close to those for used cars, which in turn makes it hard for used-car sell­ers to get what they orig­i­nal­ly anticipated.”

Also of note is the skep­ti­cism many cus­tomers have about mat­ters such as bat­tery capac­i­ty and lifes­pan. One con­cern is that today’s new cars could soon become “obso­lete” due to rapid advances in tech­nol­o­gy. Accord­ing to Germany’s Fed­er­al Motor Trans­port Author­i­ty (KBA), only 97,000 used EVs were sold in the coun­try in 2023, which amounts to just 1.6 per­cent of the country’s used car mar­ket. As a con­se­quence, late-model used e‑cars are often only mar­ketable at great­ly reduced rates.

The car rental com­pa­ny Sixt, whose rev­enue derives in part from sell­ing its used vehi­cles, has cited price reduc­tions of “more than 20 per­cent.” Accord­ing to a study by AutoScout24, an online mar­ket­place for used cars, sec­ond-hand elec­tric vehi­cles were near­ly 30 per­cent cheap­er in early 2024 than in the same peri­od of 2023. Mar­ket observers expect this down­ward trend to con­tin­ue in 2024 and 2025. Accord­ing to a DAT analy­sis, only 13 per­cent of used car buy­ers are con­sid­er­ing switch­ing to an elec­tric vehicle.

The sit­u­a­tion is espe­cial­ly tight for mobil­i­ty providers whose fleets have high num­bers of elec­tric vehi­cles avail­able for rent­ing or shar­ing. They are strug­gling to remain prof­itable. This is not only a mat­ter of e‑car resid­ual val­ues falling below antic­i­pat­ed lev­els and hold­ing the num­bers down. Bot­tom lines are also under pres­sure from what can be con­sid­er­ably high­er vehi­cle oper­at­ing costs. Fac­tors here include lower capac­i­ty uti­liza­tion due to longer down­times from charg­ing, com­plex car trans­fers to and from charg­ing sta­tions, and longer ser­vice times for high-volt­age com­po­nents that have to be repaired at autho­rized work­shops. Com­pa­nies also incur costs from invest­ing in their own charg­ing infra­struc­tures and from the high prices at pub­lic rapid charg­ing sta­tions. Anoth­er non-opti­mal fac­tor is the fact that vehi­cles are only rarely booked for extend­ed peri­ods. E‑cars tend to be rent­ed for a day, but sel­dom for four, seven, or four­teen days.

Lead­ing car rental com­pa­nies are tak­ing steps to address the sit­u­a­tion. After report­ing a neg­a­tive impact of around 40 mil­lion euros on its 2023 rev­enue due to lower resid­ual val­ues for elec­tric cars, Sixt has increased depre­ci­a­tion and placed a sig­nif­i­cant­ly high­er pri­or­i­ty on “phas­ing out elec­tric risk vehi­cles,” accord­ing to a press release by the inter­na­tion­al rental cor­po­ra­tion. Sixt will doubt­less con­tin­ue to reduce its share of elec­tric vehi­cles. Its US-based com­peti­tor Hertz also wants to cut its EV num­bers — by 20,000, or rough­ly one-third of its total fleet. It will use the pro­ceeds to pur­chase new cars with com­bus­tion engines. For Hele­na Wis­bert from the Cen­ter of Auto­mo­tive Research, these deci­sions by Sixt and Hertz rep­re­sent “anoth­er set­back on the road to electromobility.”

Ömer Kök­sal is of the same opin­ion. He talks about a “dilem­ma” many com­pa­nies are fac­ing. On the one hand they need to respond to mar­ket con­di­tions and are there­fore pulling the brakes on elec­tro­mo­bil­i­ty. “At the same time, many com­pa­nies are try­ing to increase elec­tro­mo­bil­i­ty in their fleets to meet the CO2 tar­gets called for by gov­ern­ments and the pub­lic. Accord­ing to the EU tax­on­o­my, vehi­cles with cli­mate-friend­ly drive sys­tems can be con­sid­ered envi­ron­men­tal­ly sus­tain­able invest­ments. Fleets are there­fore one of the instru­ments at com­pa­nies’ dis­pos­al for imple­ment­ing their ESG strate­gies.” Kök­sal is thus call­ing on pol­i­cy mak­ers to pro­vide more sup­port for tran­si­tions here, such as tax incen­tives or sim­pler report­ing require­ments. “We need clear­er guid­ing prin­ci­ples,” he says.

The Allane Mobil­i­ty Group wants to fur­ther expand the range of com­po­nents in its mobil­i­ty bud­gets in the future. It expects to pro­vide not only cars to its cor­po­rate cus­tomers but also e‑bikes, pub­lic trans­porta­tion pack­ages, and the pop­u­lar “Deutsch­land-Tick­ets” or coun­try-wide rail tick­ets. In devel­op­ing these sus­tain­able mobil­i­ty solu­tions, the Munich-based com­pa­ny is work­ing close­ly togeth­er with the Porsche Con­sult­ing man­age­ment con­sul­tan­cy. As Kök­sal explains, “If we don’t want to jeop­ar­dize the rise of e‑mobility, we need to cre­ate added value.” This view is shared by Helen Mayer, Senior Con­sul­tant in Mobil­i­ty Ser­vices at Porsche Con­sult­ing. “We need to act now,” she says, “and we need new solu­tions that can make elec­tro­mo­bil­i­ty more attrac­tive to cus­tomers. It’s also cru­cial for fleet oper­a­tors to offer more mobil­i­ty options to their cus­tomers’ employ­ees.” She rec­om­mends the fol­low­ing: “Cor­po­rate trans­for­ma­tions toward elec­tro­mo­bil­i­ty should not be allowed to sput­ter out. They should be accel­er­at­ed. Leas­ing and finan­cial ser­vice providers should opti­mize their inter­nal process­es and pro­ce­dures. And new cre­ative approach­es are need­ed to address the uncer­tain­ty about how to han­dle elec­tric vehi­cles.” Assets should be man­aged sub­stan­tial­ly more dynam­i­cal­ly and applied sys­tem­at­i­cal­ly through­out vehi­cle life cycles. As she con­tin­ues, “The time for empir­i­cal data alone is past. We need to look ahead. When it comes to elec­tro­mo­bil­i­ty, reverse gear is not an option.”