Brake or Accelerate

Have fleet operators miscalculated their electric vehicle numbers? A drop in demand and a slump in used-car prices are putting pressure on the car-leasing, rental, and sharing sector. Added value, experts say, could enable the sector to recharge its business and encourage customers to join the energy transition.


What to do with late-model used electric cars? In the fleet sector for company stock, rental vehicles, and car sharing, sales are down. Lower prices mean lower profits.Porsche Consulting/Thomas Kuhlenbeck

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.

Full warehouses, few customers

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.

Chain reaction hits late-model used cars

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.”

Deutsche Automobil Treuhand (DAT) is an automotive data provider that regularly reports on used car prices. For three-year-old cars with annual mileage of 9,000 (small-size) or 13,000 (mid-size and high-end), combustion models were sold at higher prices than electric models in Germany in early 2024. The diagram shows the list-price percentages that car dealers could charge from January 2021 to January 2024. Combustion models led the way — with their most recent figures 11.3 percentage points above those for e-cars.Porsche Consulting/Clara Nabi; Source: DAT Barometer 2024, Deutsche Automobil Treuhand

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.

Customers seem skeptical about used electric cars. In a survey by Deutsche Automobil Treuhand, 45 percent of typical used-car buyers responded with “Definitely no e-car.” Only 13 percent of respondents from this group did not express reservations about the innovative future drive system.Porsche Consulting/Clara Nabi; Source: DAT Barometer 2024, Deutsche Automobil Treuhand

The numbers aren’t adding up

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.”

Fleets and ESG

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.

Helen Mayer, Senior Consultant at the Porsche Consulting management consultancy: “The fleet sector should change its approach and align its strategy to EV life cycles.”Porsche Consulting

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.”


Lowering thresholds

By Dr. Stephen Hellhammer, Partner, Porsche Consulting
Dr. Stephen Hellhammer, Partner at the Porsche Consulting management consultancyPorsche Consulting
Electromobility is here to stay. Both policy makers and the public want to end the era of combustion engines. Ambitious guidelines have been developed for carmakers, and the automotive industry has adapted its product ranges and production plans accordingly. The paradigm shift is underway. Now, however, it also has to be funded. Carmakers and fleet operators are ready. They have assumed the commercial risk of introducing electric vehicles. Yet suddenly they’re facing a hitch. There isn’t enough revenue from the sale of used e-cars. There are many reasons for this, including rapid technological advances, uncertainty on the part of consumers, and the lack of viable infrastructure in cities and municipalities. So what now? Fleet operators need to overcome the current downward trend. This applies especially to the sharp decline in residual value for late-model used electric cars. Fleet operators should offer leases that cover multiple vehicle cycles. That means providing attractive terms not only for new cars but also used ones, and thereby acquiring new customer groups. This will enable the sector to keep e-cars in their fleets longer and to compensate for initial drops in residual value, like those in the first 24 months, further down the road in 48, 60, or 72 months. That will give them leeway and opportunities, but it also assumes they can expand their sales activities. These should ideally be maintained over the entire life cycle of battery-powered vehicles. Of special note is the ever greater role of comprehensive offers. These can be convenient service packages that include maintenance, insurance, charging outlets, solar power systems, energy management, and electric power rates — all from a single source. In other words, all-round programs with obvious added value — programs that have real value for customers because they simplify vehicle usage and integrate useful services. Giving customers greater flexibility can also increase the attractiveness of electric vehicles. One example would be new types of subscription services that let customers switch freely between multiple vehicle models, based on their needs and desires. That would lower the threshold for winning hesitant customers over to electromobility. Large carmakers have the requisite capacities for this type of overall flexible offer. The job now is to integrate these capacities and seamlessly market them. This, however, requires leasing companies and fleet managers to fundamentally reorganize their processes. Only then can there be a seamless “customer journey” to viable costs.
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