All is not as it first seems, and this really isn’t a problem. Motability Operations remains a highly lucrative monopoly business, as evidenced by the CEO and CFO receiving bonuses of £198k and £114k respectively (on top of their £460k and £374k salaries). Bonuses would have gone much further down the organisation as well
Most of this ‘loss’ is due to exceptional paper adjustments (rather than operational losses), driven primarily by the inevitable revaluation of their vehicle fleet residual values. As we know, second hand car values had been ludicrously high over Covid and thereafter, due to supply challenges in the new car market. As these issues resolved (which the overwhelming majority have been) it was inevitable that second hand values would fall, and they have.
Whilst EV take up is a relatively low proportion of customers (currently 17% of new orders, but less as an overall percentage), this is still more than double the take up from private customers away from the scheme. The second hand market in EVs is virtually non-existent and residual values are terrible, so Motability have taken a particular hit on that. Last year, at a meeting with major dealerships, Motability told the dealer principals present that plunging EV residual values were a major factor in driving the overall hike in APs.
In spite of this, Motability continue to push EVs and have earmarked £265m to ‘subsidise’ them for customers. What they don’t say, is that this £265m means that customers who cannot have an EV (or don’t want one) are subsidising those that do get one to the tune of around £450 each (the average EV is subsidised to the tune of £2,700 and that has to be paid for by everyone else). Again, this helps explain the relentless hikes in APs.
With customer numbers increasing significantly, residual values having settled (and in fact now increasing in many cases, well, certainly in the case of petrol cars), the new vehicle payment scheme ending and several other factors, not least ever increasing APs, we can be sure that the scheme will return to delivering healthy profits at a headline, as well as operational level. They will be making a significant profit per lease and their annual staff bonuses will remain secure!
