Higher exposure in the EV market could increase residual value risk in U.S. auto lease asset-backed securities (ABS), said an S&P Global Ratings report. Studies also show that EVs currently have higher depreciation levels than internal combustion engine vehicles, which could result in lower recoveries and thus lower residual values.

Other key takeaways from the report include:

• U.S. electric vehicle sales rose 51% year over year in 2023, with EV market share increasing to 9.1% due to charging station growth, improvements in vehicle range, lower pricing, and government subsidies.
  
  
• Residual performance on auto lease ABS transactions we rate remain positive, reflecting the well-diversified pool mix. S&P Global Ratings’ analytical approach provides for adjustments to our assumptions, if needed, as EV concentrations increase in rated pools.
  
  
• S&P Global Ratings expects U.S. EV sales growth to slow to 25%, EV leasing rates to increase, and auto lease ABS ratings performance to remain stable this year.