Drivers charge their Tesla cars in Fountain Valley, California, on March 20, 2024.
Jeff Gretchen | Media News Group | Getty Images
A car loses its value once it's driven off the lot, but electric cars take that adage to a new level. This has become a major barrier to wider adoption, according to some industry and investment experts
A recent study from iSeeCars.com showed that the average price of a used electric vehicle that is 1 to 5 years old in the United States decreased by 31.8% over the past 12 months, equivalent to a loss in value of $14,418. In comparison, the average price of an internal combustion engine car of a similar age fell by just 3.6%.
While falling prices for used electric vehicles could increase their desirability for some buyers, it could also reduce demand for new electric vehicles, according to Karl Brauer, executive analyst at iSeeCars.
“The value a new car loses in the first few years is the most expensive aspect of owning a new car,” he said, explaining that “as more new car shoppers realize the dramatic decline in EV values, they will be less concerned.” In buy one.”
Speaking on CNBC's “Street Signs Asia” on Monday, David Kuo, equity analyst and co-founder of Smart Investor, said the inability of electric vehicles to retain their value prevented him from investing in the industry.
According to Kuo, EVs are similar to other consumer electronics such as laptops and cell phones in that they tend to lose value and relevance quickly after they are sold.
“The same [depreciation] It will happen to electric cars; “It will probably cost you $20,000 or $30,000 to buy one, but within a year it will depreciate much faster than a car with an internal combustion engine.”
Industry insiders have also pointed to problems with reselling electric vehicles. Speaking to Bloomberg late last year, representatives from Volkswagen And Toyota He said the depreciation hurts the value proposition of their battery-powered vehicles
Kuo also argued that the software and computing capabilities of used EVs may become outdated and incompatible with updates by the time they are sold or even earlier. That will be a “lightbulb moment” when buyers realize they paid too much in the first place, he added.
Unfavorable market conditions
Despite the obvious problem of EV depreciation, its causes may have less to do with the technology itself and more to do with market conditions.
According to iSeeCars, the significant decline in the value of used electric vehicles in the US has been largely driven by significant price cuts Tesla Amid a broader price war in the electric car market
Tesla is the dominant seller of electric vehicles in the United States, and as a result of lower prices for its new electric vehicles, buyers are unlikely to enjoy the same price levels for used alternatives.
“if [Elon Musk] “If he continues to lower Tesla prices in an attempt to stimulate sales, he will continue to push the entire market down, as he has done over the past 15 months,” iSeeCars' Brauer said.
On an October earnings call, Musk defended the price cuts, stressing the importance of cost to consumers.
“It is not optional for most people, but rather it is necessary. We have to make our cars accessible to everyone so that people can buy them,” he said.
On a next-quarter earnings call in January, CFO Vaibhav Taneja said the company would continue to focus on cost-cutting efforts in 2024.
Since then, the electric vehicle price war between Tesla and Chinese rivals has shown little sign of abating
Additionally, overproduction of EVs relative to demand has led to oversupply, making it unlikely that new and used EV prices will rebound in the near term, according to Brower.
However, what has been a persistent problem for the electric vehicle market may be a boon for plug-in hybrids and combustion vehicles, which are showing increasing strength in the new and used car markets.
The average price of used hybrids fell just 6.5%, or $2,135, last year — a small fraction of the average decline for electric cars.
“Hybrid cars are an excellent stepping stone between gasoline and electric cars, and I expect their popularity to increase over the next ten years,” Brauer said.
