Drivers charge their Teslas in Fountain Valley, California, on March 20, 2024.
Jeff Gritchen Media News Group | Getty Images
Cars lose value as soon as they leave a parking lot, but electric cars are taking this adage to a new level. Some industry and investment experts say this is a major barrier to widespread adoption.
According to a recent study by iSeeCars.com, the average price of a 1-5 year old used EV in the U.S. has fallen 31.8% over the past 12 months, equating to a value loss of $14,418. In comparison, the average price of older internal combustion engine cars fell by just 3.6%.
Karl Brauer, executive analyst at iSeeCars, said lower used EV prices may increase demand for electric vehicles for some buyers, but may also reduce demand for new electric vehicles. It is said that there is.
“The loss in value of a new car over the first few years is the most expensive aspect of owning a new car,” he said, adding, “More new car buyers are willing to take advantage of the significant decline in value of EVs. As they become more aware, their interest will wane.” When buying. ”
David Kuo, an equity analyst and co-founder of Smart Investor, appeared on CNBC’s “Street Signs Asia” on Monday and said that the inability of EVs to maintain value is hindering investment in the industry. He said he was there.
According to Kuo, EVs are similar to other consumer electronics products such as laptops and mobile phones in that they tend to lose value and relevance soon after being sold.
“same [depreciation] That will happen to electric cars too. “It will probably cost $20,000 or $30,000 to buy, but after a year it will depreciate much faster than an internal combustion engine car,” he said.
Industry insiders have also pointed out the issue of EV resale. As he told Bloomberg late last year, Volkswagen and Toyota said depreciation is hurting the value proposition of battery-powered vehicles.
Kuo further argued that used EVs’ software and computing power can become outdated and incompatible with updates at or before the time of sale. That could be a “light bulb moment” where buyers realize they paid too much in the first place, he added.
unfavorable market conditions
Despite the obvious depreciation issue of EVs, the cause may have less to do with the technology itself and more to do with market conditions.
According to iSeeCars, the dramatic decline in the value of used electric vehicles in the U.S. is primarily driven by aggressive price reductions by automakers. tesla There is extensive price competition in the EV market.
Tesla is the dominant EV seller in the U.S., and lower prices for its new cars mean buyers are less likely to prefer the same price level for a used alternative.
“if [Elon Musk] If Tesla continues to lower prices to stimulate sales, it will continue to drag down the overall market as it has for the past 15 months,” iSeeCars’ Brauer said.
During an October earnings call, Musk emphasized the importance of cost to consumers and defended price cuts.
“For most people, it’s not an option, it’s a necessity. We have to make cars more affordable so people can buy them,” he said.
Chief Financial Officer Vaibhav Taneja said during the company’s next quarter earnings call in January that the company will continue to focus on cost-cutting efforts in 2024.
Since then, the EV price war between Tesla and its Chinese competitors has shown little sign of letting up.
Additionally, Brauer said, the overproduction of EVs relative to demand has created an oversupply, and prices for new and used EVs are unlikely to recover in the short term.
However, a continuing problem for the EV market may be a boon for electric and combustion engine hybrid vehicles, which are increasingly gaining traction in new and used car markets.
Last year, the average price of a used hybrid vehicle fell by just 6.5%, or $2,135. This is just a fraction of the average EV drop.
“Hybrid vehicles are an excellent stepping stone between gasoline and electric vehicles, and we expect hybrid vehicles to grow in popularity over the next decade,” said Brauer.