Octopus EV to launch personal lease service
Octopus EV to launch personal lease service
The latest news from the world of EVs
Hello and welcome back to The Fast Charge, a weekly British EV newsletter.
In today’s edition… I speak to Oliver Boots, Sales and Marketing Director at Octopus Electric Vehicles about their huge growth, a new personal lease offer, and the second life of their cars.
Further down and elsewhere… Apple’s patented a new EV charger, Shell makes a new chargepoint pledge, and price parity moves further away.
As ever, if you have any questions or comments, please do drop me a line (tomrileylondon@gmail.com) or simply reply to this email.
Octopus EV on delivering cars to the masses
There’s no denying it, most new electric cars are still expensive. And thanks to sky-high prices for key materials like lithium and nickel, plus the ongoing semiconductor shortage, it’s likely they will remain pricey for a while. However, for most people, the list price doesn’t matter, as who buys with cash nowadays anyway?
It’s estimated more than 80% of car purchases in the UK are made using a personal contract purchase (PCP). This arrangement means most people pay a small deposit on a vehicle and then pay a monthly lease fee (basically rent) to keep it for a set time period. At the end of this period, they can hand it back and get something new. It’s insanely popular as it means you're not stuck with a depreciating car at the end of three years, that’s someone else’s problem.
Leasing also has another benefit; it means many people can purchase bigger and better cars than they would be able to with cash. And when the best EVs today cost above £35,000+ new, the ability to lease them is the go-to way. One of the companies in the UK that have capitalised on this is Octopus Electric Vehicles (or OEV for short).
If you’re not familiar with OEV, they are a sister company of Octopus Energy – now one of the largest energy providers in the country. It launched in 2017, back when EVs were still niche, but according to Oliver (Ollie) Boots, the company’s Sales and Marketing Director, the business has grown 20 times compared to last year since launching its own service.
“We were set up to help people get into electric cars, a start-up within a start-up,” Ollie tells me explaining their business mission. “The first few years were trying, and we found through white labelling we couldn’t quite get the service we wanted to and deliver the experience we wanted. So in April last year, we launched our salary sacrifice product, which we call Electric Dreams.”
For those of you unfamiliar, salary sacrifice allows people taking a company car to deduct the leasing, insurance and other associated costs out of their basic pay before income tax. For electric cars, this process has been critical to the EV transition – two-thirds of EVs sold in 2021 were bought through a business.
OEV is due to shortly share data for the first time on its role in the EV transition and growth. Ollie suggests that the company is choosing to do this now because of their “phenomenal” growth. “We’re now at a growth level we’re proud of and want to shout about,” he says adding, “we’re on a pretty cool hockey stick classic start-up curve.”
The company’s growth has largely come from OEV targetting smaller businesses, rather than just large companies, which Ollie believes has been its advantage as no one else really “plays there”. But over the last six months, they’ve started branching out, “we started off by signing up SMEs, in probably about Q3/Q4 last year we moved into signing up some larger businesses, and then Q4/Q1 this year moving into big corporate businesses, like Dyson, Nandos and others.”
Nandos? I think to myself, surely Ollie doesn’t mean they’re signing up people serving chicken wings? Ollie explains “generally people who are in the entry-level positions in the shops wouldn’t take a car, but management level and above would take one because they are in the right salary bracket and can afford it, like with any car finance.”
Ollie tells me that the key salary bracket for OEV’s salary sacrifice is people earning £30,000 a year and above. The cheapest EV that OEV offer is a Nissan Leaf which would likely cost £246.55 per month, while the top model is the Mercedes EQS, which will likely set you back £1,100 per month. This deal also includes maintenance, breakdown cover and a home charger - everything you need to get going.
Car of choice
But what actual cars are people getting into in reality? “It’s really shifted. At the beginning, Q2 and Q3 last year, Model 3 was dominating.” Ollie tells me. “With the launch of the Model Y and just the masses of EVs coming to market, that’s really spreading out orders across our book. In Q1 this year, our most popular car was the Model Y, then number two was the MG ZS, and then the Polestar 2. Those would be our top 3 cars.”
What I find interested about these top three is they’re all massive cars. One of the criticisms of the EV revolution is that we shouldn’t just be swapping out big petrol SUVs for big electric ones. Ollie does tell me that normally the VW ID.3 is popular, but the supply is just not there – referencing the ongoing issues VW is having to produce enough EVs. Ollie believes that people are picking bigger EVs because people are “taking it for their first car, so they want a car they can fit their family in, get a dog in, which is why the Model Y is the most popular.”
Though, is the reasoning a bit more logical? Given the supply of cars is so constrained, are people just picking EVs based on what they can get hold of rather than what they really want. “I think people are compromising,” believes Ollie who personally went for a Polestar 2 that “wasn’t quite the right colour but had all the spec.”
The semiconductor crisis – and the more recent war in Ukraine – is an issue that OEV and other car sellers have to contend with. Ollie explains to me that Octopus has created a two-pronged strategy to overcome it for consumers. “One, we forward order, or allocate factory slots and allocate physical supply. We will try and forward order or forecast a quarter ahead so that we are ringfencing cars for people. Second, still in pilot, but we have interim salary sacrifice cars for people who are happy to wait for their actual ordered car, but they still get all the benefits of salary sacrifice.”
Reaching new customers
The work Ollie and Octopus are doing sounds great, but all of this is still only available to employees of businesses. And as Ollie suggested, those people are often in management positions. For the EV transition to be truly successful, though, it needs to be accessible to everyone. This is where Octopus sees new future growth.
At the start of this month, OEV soft-launched a new ‘personal lease’ offer. There has been no major announcement about it from the company thus far, but by the sounds of it, OEV sees this new service as a challenger to start-ups like Onto and Electric Zoo, which lets people subscribe like Netflix to an EV.
OEV has created a landing page for the new service. The page states that Octopus is “looking for a few early bird customers to trial a new personal car lease, with everything you need to switch to electric included.” The agreements are to be from 1 to 4 years and include a free home charger, breakdown cover, serving and 5,000 miles of free charging. Ollie tells me OEV has set aside 10 cars for the initial launch.
This new product could open a whole new segment for OEV as it goes after the mass public, especially if it’s able to connect seamlessly to Octopus Energy’s some three million customer base. Though, the company still has a few things to work out, like coming up with a name – currently inside OEV the new service is being referred to as a ‘consumer proposition’.
Ollie is mindful not to overplay this new personal service saying, “salary sacrifice is still growing rapidly” and they have “only been doing it for a year.” Though, when I spoke to people at the company at Fully Charged Live a couple of weeks ago, it’s evidently a product they are very excited about.
Second life for EVs
With OEV getting more and more people into EVs, I’m keen to understand what role the company sees itself playing in the second life of cars. As we’ve only seen recently, prices for used vehicles have remained steady and increased in many cases. Is becoming a second-hand seller on the cards for OEV? Ollie tells me at the moment their “default option” is that the company “will sell those cars through the trade or retail channels.” Though he explains, as few OEV cars are coming back from their leases yet, “there is some time for some other options for those cars. They could go into various different channels and we are exploring those options for those cars when they come back, but nothing is fixed.”
One option for OEV might be to partner with a company like Cazoo, which sells used cars online and directly to consumers. Cazoo has the same investors as Octopus Energy – the aptly named Octopus Investments. While Ollie is keen to point out they are separate and they wouldn’t get a favourable arrangement, OEV is open to using retailers like Cazoo to resell its returned vehicles.
However, perhaps it should be businesses like Cazoo that are worried, as alongside using a combination of external trade and retail channels, OEV is said to be exploring the creation of their own second-hand service, though nothing is confirmed for now.
Whatever the case, it strikes me that OEV and its swelling employees (now standing at around 170) are going to play an increasingly active role in our transition to EVs.
My interview was with Oliver Boots, Sales and Marketing Director at Octopus Electric Vehicles. You can follow OEV on Twitter.
Elsewhere in EV land…
NEW TARGET: Last week, Shell announced that it is planning to build 100,000 chargepoints by 2030 in the UK. That’s on top of the 50,000 that they plan to have built by the end of 2026. It’s a bold commitment and about 11,000 of the devices will be rapid. No doubt the vast majority though will be on-street lamppost devices via its subsidiary ubitricty. If you missed it last week, check out my interview with ubitricty’s UK managing director who suggested 700,000 EV chargers were likely needed by 2030 across the country.
CONSUMER SURVEY: Speaking of Shell, they recently conducted some research into people’s experience of charging. What they found is almost half of drivers want to see improved chargepoint availability. As well as the availability of chargepoints, interoperability was flagged as a key concern by EV owners. Over half now carry four or more cards to access public charging infrastructure, up from 21% in 2021. It’s obviously causing pain for people, as more than half of respondents said they’d be willing to pay an additional amount to access charging infrastructure with just one card. Read more.
CROSS STREET: It seems Lancashire County Council have started trailing a charging cable gully for residents without off-street parking. This is approach was only recently backed publicly by the government in its EV strategy and could play an important role in the UK. Very cool, Kanye.
CHARGING DESIGN: Spotted this via the ever brilliant EV Universe newsletter, Apple has been granted a patent for an automated EV charging station which requires no intervention by the driver. I wonder if they will create their own port.
MINIERAL COSTS: According to the Cobalt Institute, EVs have now overtaken smartphones and computers as the main source of demand for cobalt. The automotive industry used 59,000 tonnes of the stuff in 2021 (or 34% of demand) versus 26,000 tonnes for mobile phones and 16,000 for laptops and tablets. In total, there was a cobalt deficit of 15,000 tonnes last year (total demand was 175,000 tonnes versus mined supply of 160,000). This will not help mounting concerns about the supply of rare earth materials for the switch to EVs. Elsewhere, Wells Fargo now believes that EV and ICE price parity now won’t occur until beyond 2030 given supply concerns - we’d previously expected this to happen in about five years. Read more.
ELECTRIC ROVER: Despite revealing huge losses in the region of £455m in 2021 thanks to the semiconductor shortage, last week Jaguar Land Rover announced it will launch a new all-electric Range Rover Sport in 2024. Read more.
ELON SPOKE: Last week it was the FT’s Future of the Car summit. As expected, the keynote interview with Elon Musk sparked huge stories about his purchase and plans for Twitter – the big story being he’d reverse the ban on Donald Trump. In terms of EV nuggets, there wasn’t anything particularly new sadly. But you can watch it online here in any case.
By Tom Riley