17 March 2020
As Spain looks to improve its impact on the environment, especially in the transport sector, Ana Azofra, Autovista Group’s valuations and insights manager for the country, studies the impact on residual values (RVs) of electric and traditional vehicles.
In the next 10 years, the world needs to cut the CO2 it releases into the atmosphere by half to avoid the worst-case scenario climate crisis.
To achieve this, there are various strategies, plans and actions by governments and public bodies in the short, medium and long-term across Europe. Meanwhile, private bodies are redirecting, adapting and readjusting their production and commercial offensive to the new demands and the recently constituted government of Spain decreed a climate emergency in January.
In this declaration, the government defined 30 priority actions. Five of these should happen in the first 100 days after the declaration, with the objective of the country achieving climate neutrality by 2050. This would be based on a fleet of zero-emission vehicles, a 100% renewable electricity system, a neutral agricultural system and all the fiscal reforms that promote and favour decarbonisation.
In the absence of specific measures for these first 100 days, we do know that mobility is on the front line, so direct consequences are expected for the new-car market and, of course, for the used-car market and RVs.
Before exploring the possible implications, it is worth recalling some key figures:
- 0: Emission target by 2050
- 29 million: The number of cars and light commercial vehicles on the road in Spain
- 12.4 years: The average age of the car in Spain is one of the highest in Europe. 62% of the fleet is more than 10 years old. To meet the target of zero emissions in 2050, Spain needs to scrap one million vehicles a year
- 2020: European regulations come into force requiring manufacturers to reduce average CO2 emissions to 95g/km
- 2.5%: Moody's estimates that the coronavirus (COVID-19) crisis will hurt demand and production chains globally, resulting in a 2.5% drop in sales in 2020
- 1.26 million: New cars and SUVs registered in Spain in 2019
- 118g/km: Average CO2 emissions in Spain from the new car market; the highest in Europe
- 1%: Battery-electric vehicles (BEVs) failed to reach the 1% market share threshold by 2020, although their share is growing exponentially every month
- 5,000: The number of charging points for electric vehicles in Spain
- 70%: The percentage of Spain’s vehicle parc that has no access to residential parking
- 148: There are 148 municipalities in Spain with more than 50,000 inhabitants. Only two - Madrid and Barcelona - have low emissions zones
- 15%: Manufacturers and associations propose to promote diesel as a short-term improvement measure, as diesel emits 15% less CO2.
Looking at these figures as a whole, it seems risky to formulate a scenario for the sector in 2020.
The only certainty will be the increase in sales of EVs, with almost 150 new cities expected to see the implementation of a low-emissions zone. The increased presence of EVs will be remarkable, even though national growth is far from the 60% surge in sales in Madrid and Barcelona alone last year.
In the used-car sector, a notable increase in the demand for electric and hybrid vehicles can be expected, with the latter being the most viable given the limited charging infrastructure. This will favour the positive evolution of their RVs, which will continue to register slight growth.
There are more variable scenarios regarding the RVs of battery-electric vehicles (BEVs). At present, their RVs in Spain are higher (in percentage terms) compared to the other large European markets - apart from Italy, which is in a similar situation. This is due to the great imbalance between supply, which is slow, and demand, which is increasing. In other words, the shortage of BEVs improves their chances of being sold on the second-hand market.
However, the RVs of BEVs will likely suffer slight negative readjustments in the future if a balance is reached. This adjustment could be more drastic if the scenario in Spain becomes more similar to that of France in recent years. In this market, BEVs were boosted by significant purchase incentives. Meanwhile, infrastructure grew, although not at the same rate as sales. When BEVs arrived on the second-hand market, they were pressurised by incentivised new-car prices (much lower than the list price) and a charging infrastructure that, having been sufficient to boost new-car sales, had difficulties in meeting the demand for both new and used vehicles.
It would, therefore, be good for the prices of used BEVs in the market to start on the path towards parity with internal combustion engine (ICE) models, while controlling the effect of incentives on their future values. Of course, infrastructure improvement is necessary and urgently required if Spain wants to maintain the health and positive evolution of the RVs of BEVs.
The Spanish Government is proposing a ‘green’ tax. This leaves several options, one of which is subsidised taxation for EVs but no support or potential penalties for ICE vehicles. This approach does not favour the positive development of the used values of these two technologies.
However, the proposal also opens the door to the ‘recovery’ of diesel because of the benefit it can bring to CO2 emissions in the short and medium-term. Diesel vehicles had already begun their recovery, partly due to better fuel consumption, which does not escape the perception of demand, and partly due to lower supply on the second-hand market, reflecting the fall in new sales in recent years.
In this scenario, it is foreseeable that the RVs of petrol vehicles will experience a slight negative adjustment throughout the year.
Finally, this decarbonisation process requires a plan to ‘clean up’ Spain's highly polluting fleet of older vehicles.