Leasing Companies Are Demanding Payoffs from EV Makers Like Tesla as Resale Values Plummet

Car leasing companies are feeling the pinch as electric vehicle resale values tumble, prompting demands for compensation from automakers trying to meet strict emissions targets.

Fortune reports that the market for used electric cars has taken a massive hit since Tesla slashed prices last year, forcing other manufacturers to follow suit. This has impacted companies like Europe’s largest multi-brand leasing firms Ayvens and Arval, which serve as middlemen in the critical corporate car market that makes up around 60 percent of European sales.

According to Ayvens CEO Tim Albertsen, the company has already received compensation checks in recent weeks from carmakers to cover the cratering prices of leased EVs returned at the end of their contracts. Leasing agreements typically factor in an estimated residual value, with payments designed to cover expected depreciation. But with values dropping more than predicted, the leasing firms take a loss when selling those vehicles.

Now companies like Ayvens are pushing manufacturers for protections, including buyback guarantees to safeguard against further erosion in the $1.2 trillion used EV market. “Manufacturers today need to keep selling EVs,” said Albertsen. “We then need some kind of protection from the manufacturers in terms of their future pricing.”

This mounting pressure comes as carmakers face tightening emission regulations and potential fines if they do not meet fleet targets for zero-emissions vehicles. Europe aims to phase out sales of new combustion cars by 2035, but unstable used EV pricing threatens this transition, according to analyst Philippe Houchois.

Major corporate customers have already begun rethinking EV offerings amid the uncertain values. SAP will stop providing employees with Tesla vehicles due to concerns over fluctuating prices complicating planning. Car rental firms Hertz and Sixt have similarly moved to offload Teslas from their fleets.

As Breitbart News previously reported on Hertz:

In a blow to President Joe Biden’s green energy agenda, rental car company Hertz is selling off tens of thousands of electric vehicles (EVs), due to a lack of demand, to buy gas-powered cars.

Hertz executives announced on Thursday that they will be selling 20,000 EVs from their fleet, which accounts for about 33 percent of the company’s total number of EVs.

In return, Hertz will use the money from the EV sales to guy gas-powered cars, which executives said are in much higher demand than EVs

Manufacturers are responding by guaranteeing buybacks, shifting risk into the future. But carmakers remain responsible for eventually finding used EV buyers at decent prices, or taking writedowns. With demand “artificially stoked” by incentives and ending after the second-hand market, this distorted dynamic poses serious challenges, said auto expert Ursula Weigl.

Read more at Fortune here.

Lucas Nolan is a reporter for Breitbart News covering issues of free speech and online censorship.