REMARKETING: Eco sub-brands have yet to make a dent, but values remain strong
21 November 2011
Although the recent rise in eco sub-brands like Vauxhall's Ecoflex and Skoda's Greenline is only just starting to seep through to the used market, such models appear valuable, reports Jack Carfrae
They have seen an explosion on the new car market, but eco sub-brand cars such as Volkswagen's Bluemotion and Ford's Econetic models have yet to make a serious impact in the auction halls.
BCA communications director Tony Gannon says: "The key issue for eco-brands is currently supply, because professional buyers just don't see high numbers reaching the used market."
He suggests that, though rare, eco versions of existing models were likely to hold on to their values well: "Whenever there is a rarity value attached to a market sector then this can affect prices, and we would expect to see relatively strong values for any vehicles falling into the broad 'eco' sector."
Gannon adds that the allure of low running costs and the demand for cars with low emissions also has a serious impact on the desirability of such models, but again, it is their current availability - or lack of it - that ultimately governs their performance on the used market: "General demand for low-emission, high-mpg cars is correspondingly high, but because we just don't see high numbers of these vehicles reaching the used market, it is difficult to gauge overall demand in this niche sector."
Cap chief editor Chris Crow agrees, and goes further, saying eco-branded cars are some of the most desirable around. He adds that models fitted with low rolling-resistance tyres, taller gearing, improved aerodynamics, regenerative braking and stop/start systems are now the ones to have.
He continues by suggesting that car manufacturers have implemented eco sub-brands so widely because of the perceived benefits in the marketplace: "They say copying is the best form of flattery, so the adoption by some manufacturers of eco-branded models in badge only is an indication of the acknowledged market gains to be derived by manufacturers from eco alternative brands in the new and used car markets."
New cars badged as eco specials usually command a significant premium over and above the standard models on which they're based. Manufacturers have been criticised for charging extra for their cleanest and most economical vehicles in the past, rather than implementing the technology as standard fit across the range - which some firms do.
The biggest bone of contention is whether such variants actually deliver significantly lower running costs than the standard cars on which they're based, which ultimately has an impact on overall RVs. Crow continues: "Manufacturers who deliver real-world running cost savings have in recent times been achieving premiums over their conventional variants. Where the eco-brand is more cosmetic and based upon 'efficient engines', these manufacturers no longer achieve premiums for their eco variants."
Cap's figures show that certain brands have established sizeable premiums for the RVs of their eco products. Of the manufacturers surveyed, Mercedes showed the most substantial margin between its conventional and eco models, with a Cap premium of 12.5%. Skoda and Volvo also enjoyed large increases of 7.5% and 5.1% respectively. The lowest recorded difference was Ford, which showed only 0.3% between variants, while Fiat actually recorded 2.2% less for its eco variants: "That would be to do with age and condition of a small basket of vehicles, and nothing more," says Crow.
The figures also show that manufacturers such as Kia and Volkswagen that have fitted the technology to smaller cars have seen notable improvements in the marketplace. The appeal of a small car combined with the additional draw of reduced running costs has boosted appeal.
Despite the success of Mercedes' Blue Efficiency models, Crow argues that eco variants still don't hold as much weight with luxury cars as specification: "The position for premium manufacturers in particular is unchanged insofar as specification remains king. Where there is a trade-off between specification and economy, the initial owner, typically a company car driver focusing on his P11D value, will choose the eco variant whereas the used car market focus remains on specification."
He continues: "In contrast, the Volkswagen Group, having recently won the highest mileage achieved on a single tank of fuel with its Passat Bluemotion model, has been able to realise premiums evidenced by such models, along with Skoda alternatives that are regularly seen in auction achieving well over Cap Clean prices."
It's still early days for eco models on the used market, but so far there's no reason to think there's any exception for them when it comes to service history and condition. There are, however, mild concerns about wear and tear on certain components such as starter motors and batteries, which are more heavily exercised with the introduction of stop/start systems.
Crow claims the cars haven't been on the market for long enough to determine whether there are any considerable reliability implications, but admits there are concerns about the advent of such technology and its longevity: "There is a view that the fitment of ever-increasing technology to cars may lead to more frequent breakdowns resulting in expensive repairs. However, the extension of manufacturer warranties covering longer timeframes should largely negate such concerns."
As manufacturers double their efforts to reduce emissions and boost economy, it is sensible to expect to see an increasing number of eco-branded cars coming on to the used market in the future. All signs so far point to a modest to significant hike in value for these models, but they're likely to become commonplace in the long run. Crow says: "Manufacturers will produce more eco models in an attempt to achieve their CO2 emission reduction targets and broaden their appeal to first-time buyers. Such models will then supersede the conventional models, which will no longer be offered."
He adds that eco variants will eventually replace conventional cars as they become more prominent: "As the technology becomes standard, premiums on eco models will be eroded with non-eco models instead heavily discounted by traders."