Daily Management Review

EV Adoption Is Threatened By Its' Low Resale Prices, Several Experts Say


EV Adoption Is Threatened By Its' Low Resale Prices, Several Experts Say
The saying "a car is worthless the moment you drive it off the lot" is being elevated to a new degree by electric automobiles. Certain investment and industry experts believe that this is increasingly becoming a significant obstacle to broader adoption.
According to a recent iSeeCars.com analysis, the average cost of a used EV in the United States for a vehicle between one and five years old dropped by 31.8% in the previous year, resulting in a $14,418 value loss. By contrast, the average price decrease for a car with an internal combustion engine that is similarly old was only 3.6%.
Karl Brauer, an executive analyst at iSeeCars, says that while cheaper used EV costs may make them more appealing to certain consumers, they may also cause demand for new electric vehicles to decline.
“The value a new car loses in the first few years is the single most expensive aspect of owning a new vehicle,” he said, explaining that “as more new car shoppers become aware of the massive drop in EV values they will be less interested in buying one.”
David Kuo, a stock analyst and co-founder of the Smart Investor, stated in an interview with CNBC that he had refrained from investing in the electric vehicle (EV) market due to its low value retention.
Kuo asserts that EVs lose their value and significance fast after being sold, much like other consumer goods like laptops and cell phones.
“The same [depreciation] is going to happen to electric vehicles; it’ll probably cost you $20,000, $30,000 to buy one, but in a year’s time it will depreciate much faster than an internal combustion engine car,” he said. 
Industry insiders have also reported issues with EV resale. Depreciation, according to VW and Toyota representatives speaking to Bloomberg late last year, is affecting the value proposition of their battery-powered vehicles.
Kuo went on to say that used EVs may have out-of-date software and computational capabilities that are incompatible with updates by the time they are sold, or even before. When consumers realise they paid too much in the first place, it will be a "lightbulb moment," he continued.
Despite the apparent depreciation problem with EVs, market factors may be more of a factor than the technology itself. 
According to iSeeCars, substantial price reduction by Tesla in the midst of a larger price war in the EV market have been a major factor in the sharp declines in used electric car prices in the United States.
Due to Tesla's cheaper prices for new EVs, buyers are less inclined to consider used alternatives at the same price points. Tesla is the leading EV seller in the United States.
“If [Elon Musk] continues to reduce Tesla prices in an effort to stimulate sales, he’ll continue to pull the entire market down, as he did over the past 15 months,” iSeeCars’ Brauer said.
Musk justified the price reductions during an October earnings call, highlighting how important pricing is to customers.
For the majority of individuals, it is a need rather than an option. In order for consumers to purchase our cars, we must lower their price," he remarked.
Chief financial officer Vaibhav Taneja stated during the company's earnings call for the subsequent quarter in January that the company will keep concentrating on cost reduction initiatives in 2024.
Since then, there have been no indications that the EV pricing battle between Chinese rivals and Tesla will end soon.
According to Brauer, there is also an excess of supply due to the overproduction of EVs compared to demand, which makes it unlikely that prices for both new and used EVs will rise anytime soon.
On the other hand, electric and combustion powered hybrids, which are becoming more and more popular in the new and used car markets, might benefit from what is still a problem for the EV industry.
A little portion of the typical EV's price fall was experienced by used hybrid cars, with an average price drop of just 6.5%, or $2,135, last year.
“Hybrids are an excellent stepping stone between gasoline and electric cars, and I expect to see them increasing in popularity over the next 10 years,” Brauer said.