Cap HPI urges industry to navigate ZEV Mandate with caution

Data experts at Cap HPI are warning the industry to approach the upcoming months with care as the pressure to meet Zero Emission Vehicle (ZEV) mandate requirements intensifies.

Derren Martin, director of valuations at Cap HPI, said managing supply channels wisely, avoiding market oversaturation, and recognising the limitations of discounting as a strategy to maintain market balance would be crucial.

“Careful consideration and strategic planning from all sectors, particularly OEMs, are crucial for navigating this rapidly evolving market.

“Oversupply in certain channels and aggressive discounting strategies can negatively impact residual values, especially for specific models within those segments. OEMs must target discounts strategically to minimise distress and maintain overall market stability.”

The ZEV mandate, also known as the Vehicle Emissions Trading Scheme (VETS), introduces new challenges for the automotive sector.

While some experts predict a turbulent final quarter of the year, Cap HPI believes there will be no significant adverse effect on used EV values overall.

 In fact, it said the market might even see a positive impact on petrol and diesel vehicles as manufacturers limit sales of traditional fuel types to boost their zero-emission vehicle sales percentage.

The impact on market values will largely depend on how each OEM manages their ZEV mandate strategies. Pushing high volumes into short-cycle channels or heavy discounting on retail sales is likely to affect used values more than a balanced approach with varied sales channels and incentives.

According to Cap HPI, a high-quality used EV at three years old already offers excellent value and has absorbed much of the potential pressure from new EV discounting.

Most BEV models are already priced lower than their petrol or diesel counterparts where available, sometimes by several thousand pounds. However, there could be increased pressure on late-plate EVs if new models are heavily discounted.

Martin concluded: “OEMs have multiple routes and levers to manage their ZEV mandate requirements. The 22% target for zero-emission vehicles will vary among manufacturers as they utilise different flexibilities allowed by the legislation. Effective use of sales channels and carbon credits will help mitigate the regulations' impact, especially in the initial year.

“It’s important to note that EVs currently represent only 4% of Cap HPI’s total sold data. While this figure has doubled since last year, it does not represent the entire market.”