LONDON, Aug 13 (Reuters) - Low resale values for

electric cars have pushed the leasing firms that drive Europe's

auto market to double prices over the last three years and some

are threatening to quit the business altogether if regulators

force them to go electric too fast, industry executives say.

The jump in prices for electric car leases comes as cuts in

subsidies for new EVs in key markets such as Germany are hitting

sales and risks stalling Europe's electric transition, just when

Brussels wants to step on the accelerator, the executives say.

"If we were pushed very, very hard, that everything has to

be electric too soon ... my shareholders will say 'we don't want

to take the risk' and we'd be out of the market," said Tim

Albertsen, CEO of Ayvens, one of Europe's largest auto

leasing firms. "Let's be honest, without us, who will take the

risk?"

Ayvens, which is majority owned by French bank Societe

Generale, has a fleet of 3.4 million cars, of which

about 10% are EVs.

Leasing companies play a pivotal role in Europe as 60% of

new cars of all fuel types are leased, according to calculations

by environmental group Transport & Environment based on data

from market research firm Dataforce.

When it comes to EVs, the proportion is estimated to be as

high as 80%.

According to data provided to Reuters by Dataforce, in the

16 European markets where it can identify fleet registrations -

including Germany, Britain, France and Spain - 60% of new EVs go

to corporate fleets and commercial buyers. Experts say those

buyers almost exclusively use leases and about half of the

remaining sales to private buyers are also leases.

In markets with no EV subsidies for private buyers, the

dominance of corporates is even more pronounced. In Britain and

Belgium, for example, individuals accounted for just 23% and 8%

of new EV purchases respectively in 2023, Dataforce said.

The price of a lease is designed to account for the

depreciation of a vehicle over the typical three-year lease

period, based on estimated resale prices, or residual values.

But if second-hand prices end up being lower than

anticipated when the lease ends, leasing firms take a financial

hit when they get the vehicle back.

For various reasons - from Tesla's price cuts to

concerns about charging infrastructure and battery life to the

influx of more affordable Chinese EVs - second-hand electric car

prices have been sliding in Europe since hitting a peak in

October 2022.

According to figures provided to Reuters by data firm

Autovista, resale values for EVs in Germany in early July were

24% below pre-pandemic levels and 30% lower in Britain.

That's in stark contrast to second-hand petrol models, which

remained about 15% more expensive in both markets.

"People have become more accepting of used EVs, but they've

got to be cheap," said Gary Cambridge, a partner at used car

dealer Cambridge Motors in London. "If they're expensive, people

don't want them."

PRICES MORE THAN DOUBLE

Leasing companies approached by Reuters declined to give

specific details about any losses on EV contracts from the slump

in residual values. Signs of the electric pain have shown up in

disclosures by some rental companies.

Hertz has reported writedowns of about $150 million

for the roughly 20,000 EVs it has been selling off at greatly

reduced prices while Sixt said lower residual values

for EVs cut its 2023 earnings by 40 million euros ($44 million).

Bart Beckers, deputy CEO at Arval, the leasing company owned

by French bank BNP Paribas, said losses from low EV

resale values were currently limited in number, given EVs are

only a small portion of their overall portfolio.

"But the amounts are not insignificant," he told Reuters.

"Like other leaders in the market ... (Arval) has been forced

already to increase prices because of lower residual values."

Like Ayvens, EVs only make up about 10% of Arval's fleet of

1.7 million vehicles.

Some automakers have provided cash compensation to leasing

companies for slumping EV values, industry executives say.

Reuters reported in May that Tesla has offered discounts and

other ways to mitigate losses to leasing companies, including

Ayvens, though CEO Albertsen declined to say what they were.

But the executives say leasing companies still bear the risk

for EV resale values, which is why prices have climbed.

Leasing firms approached by Reuters declined to give

specifics about price rises for EVs as the subject is sensitive.

In Germany, Europe's biggest auto market, data provided to

Reuters by German think-tank CAR Center Automotive Research show

that EV leases have jumped in the last three years.

In August 2021, a lease for a 45,000 euro EV cost 284 euros

per month, well below the 473 euros for an equivalent

fossil-fuel model. Now, the cost for the EV has more than

doubled to 621 euros while the fossil-fuel car has fallen to 468

euros.

German EV sales fell 16.4% in the first half of 2024 after

the government abruptly axed subsidies for consumers in December

and that decline has hit the overall EU trend.

Sales of fully electric vehicles in the EU rose to 14.6% of

new car sales in 2023 from 6.1% in 2020 but that slipped to

14.4% in the first half as EV sales rose a tepid 1.3%.

MANDATORY SALES TARGETS?

Albertsen at Ayvens said the company was now leasing EVs for

longer than combustion-engine cars to reduce resale risks.

It has also started to lease EVs out once or twice more "at

a more affordable rate" and keep them in its portfolio longer,

possibly up to eight years, he said.

Such is the concern about potential losses, RVI Group, a

company based in Stamford, Connecticut that offers insurance

guaranteeing a specific residual value for an asset, opened an

office in Europe last year to field coverage queries.

Wei Fan, RVI's executive vice president for passenger

vehicles, said he'd seen more requests from Europe in the past

three years - all from leasing companies and banks - than in the

previous 14 years worldwide.

He said he expected EV price volatility to continue for the

next five to 10 years as the electrification process plays out.

Leasing firms say they are concerned, however, that an

European Commission consultation on how to speed up EV adoption

by corporate fleets could result in mandatory EV sales targets,

as this would increase the resale risks they already face.

"The larger the share of EVs in their portfolios becomes,

the bigger this problem is going to be," said Richard Knubben,

director general of Leaseurope, an umbrella body in Brussels

that lobbies on behalf of car leasing and rental groups.

The European Commission's "Greening corporate fleets" open

public consultation, which included looking at possible measures

to accelerate EV adoption, ended on July 8.

Brussels-based Transport & Environment (T&E) wants the

Commission to mandate that Europe's large corporate fleets and

leasing companies go 100% electric by 2030.

Stef Cornelis, T&E's electric fleets programme director,

said forcing fleets to electrify would result in more used cars

for consumers and speed up the EV transition.

A Commission spokesperson said the consultation was meant to

identify substantive market shortcomings that warrant action but

was not geared at gauging support for any kind of initiative.

The poor performance of Green and centrist parties in

European elections in June has raised questions about the fate

of the EU's 2035 ban on fossil-fuel cars, so it is uncertain

whether the Commission would push for a 100% mandate.

But leasing companies are taking the threat seriously.

Leaseurope said an EV mandate would significantly damage

leasing companies and Arval's Beckers says that, at a minimum,

it would have to raise future lease rates further.

"Simply put, prices would go up," he said. "That would

discourage corporate fleets from continuing to lease."

($1 = 0.9154 euros)