By Paul Homewood
h/t Andrew Bartlett
From Fleet News:
This problem will only get worse as EV sales increase and manufacturers are forced to cut new car prices to the bone to meet EV targets:
Pre-tax profits for vehicle leasing company Lex Autolease have plummeted by more than £400 million, according to newly-filed accounts.
The Lloyds Banking Group company posted a pre-tax profit of £124.4m for 2023, a dramatic fall on the £544.2m reported for 2022.
The fall in profits came despite Lex Autolease’s revenue increasing over the same 12 months from £2 billion to £2.2bn as new vehicle supply improved.
Blame, in part, has been levelled at lower profits on the disposal of vehicles “due to market conditions” and increased interest expense on its borrowings.
In 2023, almost half (46%) of new vehicle orders were for electric vehicles (EVs) – a similar proportion to the 47% reported in 2022.
The company says that one of the key drivers of performance are the fluctuations in residual values (RVs) of fleet vehicles.
However, it said: “Significant price reductions have been seen through 2023 as significant volumes of battery electric vehicles (BEVs) have come into the market for the first time.”
Since September 2022, BEVs have seen their used values decrease by more than 60%, according to Cap HPI, which has resulted in fleets facing rising rentals as leasing losses mount on used plug-in vehicles.
Lex Autolease says that it expects more customers to enter into informal extensions on leased product due to the increases in rentals being seen in the market.
The 77% year-on-year fall in profits came after an impressive 26% increase (from £433m to £544m) reported for 2022, when the leasing industry enjoyed record returns due to the impact of the global semiconductor shortage restricting supply across the auto industry, increasing the demand for, and value of, used vehicles.
Industry trade body, the British Vehicle Rental and Leasing Association (BVLRA), has said that the UK’s vehicle leasing and rental industry is facing an “existential threat” due to the collapse in used BEV values.
https://www.fleetnews.co.uk/news/lex-autolease-profits-fall-by-400m-used-evs-blamed-for-reduction