Are electric cars losing value
EV Sales Are in a Slump Why Arent More Car Buyers Going Electric?
The EV revolution is losing momentum: After electric car sales soared in 2022, interest among buyers has underwhelmed and plans for a rapid transition away from gas-powered cars could be in jeopardy.
While the EV market has grown in 2023, sales aren't rising as fast as expected, even with new model launches and price cuts and generous tax credits lowering costs for buyers. Automakers are taking notice and acting accordingly.
In just the last few weeks, EV leader Tesla slashed its prices once again; Ford reduced production of its F-150 Lightning electric pickup truck and postponed $12 billion of EV spending; Mercedes-Benz CFO Harald Wilhelm described the EV market as a brutal space as the company continues to discount vehicles; General Motors delayed three model launches and backed off a public goal of producing 400,000 EVs by the middle of next year; and Honda announced it was ending plans with GM to jointly develop affordable EVs.
Over at Toyota, which has prioritized hybrids over EVs, Chairman Akio Toyoda told reporters that people are finally seeing reality. Despite EV tax credits of up to $7,500, fewer Americans are ready to switch to EVs than automakers or government officials thought.
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Automakers losing money on EVs
In the U.S., the days' supply for new EVs has doubled since last year to 88 days, meaning thats how long it would take for the current inventory of vehicles to sell at the current sales rate, Pat Ryan, CEO of AI car shopping app CoPilot, told Money. For reference, the average days' supply for gas-powered cars is 59 days, which is basically normal by historic standards.
Traditional automakers overestimated the current demand levels for EVs and are building more vehicles than they currently need, Ryan said. At the same time, the traditional automakers are losing money as they venture into EVs.
Automakers are being forced to lower their EV prices to attract customers and compete with Tesla. But this approach is especially painful because they're already losing money on their EV investments. Ford, for example, lost about $36,000 for every EV it sold last quarter.
According to Cox Automotive, automakers have plans for 150 new electric models between 2023 and 2026, but those goals are complicated by lower-than-expected demand and the tough price environment.
As EV technology improves, Jessica Stafford, senior vice president consumer solutions at Cox, expects the fuel savings and environmental benefits to motivate Americans to buy them.
"It may appear that the EV revolution is slowing down, but our data doesnt corroborate that," she says, noting that EV sales have increased 12 quarters in a row. "Automakers are not stalling on EVs, but instead, adjusting to a pace that is more sustainable for efficient growth without over-saturating the market."
Why Americans arent buying electric cars
Electric vehicles used to be in hot demand because supply was limited and early adopters were eager to try the new tech or shift to more environmentally-friendly transportation. These enthusiasts were often willing to pay luxury prices for their EVs.
But for automakers to capture the mass market, EVs have to outcompete gas-powered on cost and quality. When gas prices are high, it makes more sense for buyers to consider switching to an electric car. Gas prices have been fairly low in 2023 they're currently down around 30 cents per gallon compared to a year ago, on average nationally so there's less incentive to go electric.
According to experts, here are some of the big reasons the demand for EVs isn't as high as some want it to be:
- EVs are too expensive: Joseph McCabe, president of AutoForecast Solutions, says vehicle cost is the No. 1 barrier to EV adoption. EVs usually cost at least $10,000 more than their comparable gas counterparts, he says.
- Charging is expensive: If you can charge your EV at home, there are considerable fuel savings that come with going electric: Youd spend about 3x more on gas than the cost of home charging. However, the costs are about the same if youre using a public charger, and getting fuel at a gas station is much more reliable and less time-consuming.
- Charging is inconvenient: Fast chargers are still hard to find in many more remote parts of the country. According to AAA, 56% of people say the lack of convenient charging is a top reason for not going electric.
- Depreciation: The average used EV price dropped nearly 20% in the past year, according to iSeeCars.com. Potential EV buyers have good reason to worry their cars wont hold their value well as the technology improves. The used market is not as strong for electric vehicles, and as a result the depreciation is higher, says Greg Brannon, director of automotive engineering research at AAA. That's your single biggest operating expense.
- Range anxiety: Some high-end EVs promise 300+ miles of range on a single charge, but even that is not enough to cover a common drive like San Francisco to Los Angeles. Youd have to take a charging break, potentially adding 30 minutes or an hour to an already long drive.
- Hybrids are more popular: According to Adam Ragozzino, principal analyst, batteries and electric powertrains at Wards Intelligence, Tesla isnt the best-selling electrified vehicle brand in the U.S. Its Toyota, which has over 20 hybrid models and is focused on these cars in the near term, given that they offer good fuel efficiency and are capable of making long trips without requiring charging breaks. Hybrids are not only more practical and familiar to drivers than EVs, they also tend to be cheaper.
Whats next for EVs
Auto experts are increasingly skeptical that the U.S. will be able meet a 2032 target essentially requiring 67% of new cars to be EVs. Right now, the current EV market share in the U.S. is just 7.9%, according to Cox. Automakers are already adjusting their own goals, and it's possible that more EV model launches will be delayed in the coming months.
Ragozzino says the government's goals won't be possible unless automakers make major progress on charging infrastructure and bringing down production costs to the point where they can price their EVs on par with gas and hybrid cars.
Ryan agrees that automakers can't justify scaling up their production with the levels of demand among buyers today.
"Moving forward, it will remain very challenging for the traditional automakers to make meaningful inroads on their EV commitments," he says.
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Electric cars losing value twice as fast as petrol vehicles - drivers may lose 25,000
When someone buys a new car, the value will naturally decrease over time given the wear and tear of the vehicle, as well as the mileage and age.But, for some electric car owners, they could be seeing the value of their car depreciate at twice the rate of petrol cars.
According to a new study, EVs on average will lose 51 percent of their purchase value from 2020 to 2023, compared to just 37 percent for petrol vehicles.
This equates to a massive 15,220 loss for electric car owners, with petrol drivers seeing a decrease of 9,901.
The data, from ChooseMyCar.com, used a comparison of new car prices three years ago compared to their value now.
The higher the original purchase price of the car, the bigger the loss, with the Tesla Model S losing 25,000 in value in just three years - a 46 percent drop.
READ MORE:Elderly drivers face 'daunting' licence renewal every three years
However, entry-level EVs like the Nissan Leaf are also losing a massive amount of value in such a short space of time.
The Leafs value dropped by 13,000 - or 58 percent - despite it being one of the most popular small EVs on the market.
Other popular cars like the Hyundai Ioniq and BMW i3 saw large depreciation rates as well with 67 percent and 64 percent respectively.
Nick Zapolski, founder of ChooseMyCar.com, said: Our research shows yet another blow for EV owners, on top of many other issues that have come to light recently.
Not only are the EVs themselves not holding value, the price of electricity itself has zoomed up, meaning running the cars is not as economical as it once was.
The Government previously offered the Electric Vehicle Homecharge Scheme, which enabled drivers to save money on the installation cost of a home EV charger.
It was discontinued over a year ago, with many calling on the Government to reintroduce the scheme to help motorists switch over to electric vehicles.
Mr Zapolski said the hundreds of pounds saved on installing the home charger now looked insignificant compared to the thousands of pounds lost in value.
READ MORE:Petrol and diesel drivers urged to avoid filling station issues
He added: Home charge points are expensive to install (if you even had the necessary driveway to allow that) and there has been uproar about the availability and reliability of public charge points.
On top of that, recent decisions made by the Government mean that some of the initial incentives to encourage EV ownership are being discontinued, such as lower tax and free entry into ULEZ zones.
The Government really needs to take action if it wants to continue to push the idea of EVs onto the consumer, as currently the cons of EV ownership threaten to outweigh the pros.
Data from the Society of Motor Manufacturers and Traders (SMMT) shows there are more than 1.1 million electric cars on the road in the UK.
Car ownership levels increased for the first time since 2019 to new record levels, with 40.7 million vehicles on the road.
Plug-in vehicles now make up more than three percent of the total UK vehicle fleet, thanks in part to the rise of electric vehicles.
There are still concerns about the rollout of public EV charging stations, with some experts predicting that the UK needs to increase installations massively to meet 2030 targets.
A new group of 18 of the biggest charge point operators have recently created ChargeUK, and pledged 6billion to install more charging stations.
Electric car depreciation the ultimate guide
With the electric switchover on the horizon, you might be considering the future of your vehicle is it worth selling your petrol car in order to go electric? Will an electric car depreciate faster? While there are plenty of positives to being the owner of an electric car, not least lack of road tax, you should remember to consider the long-term logistics, and that means inevitable electric car depreciation. Or, perhaps youre thinking of selling your electric car in that case youll need to know how to get the best price.
What is car depreciation?
Car depreciation refers to your cars loss in value as it ages. In some cases you may find this happens the moment the car becomes yours, as it is now a second-hand vehicle and not brand new. Cars will lose value over time due to age and use, as well as general demand. For example, a three year old car that has done 60,000 miles will be worth less than a one year old car that has barely lapsed 10,000.
For some people, being certain of their cars resale value is key in their buying decision. Its pretty unlikely youll ever make back what you paid for a new vehicle, but some cars will make better returns than others. And thats no different when it comes to electric car depreciation.
What factors contribute to electric car depreciation?
Electric cars are subject to the same factors of car depreciation as a petrol or diesel car, but with some added extras due to their design. However, they can also enjoy the benefit of being one of the most in demand cars of the moment, and with premium brands like Tesla among current EV suppliers, buying an electric car may even be a better investment than a petrol or diesel model.
Electric car depreciation will generally be due to:
- High mileage
- Age
- Interior and exterior cosmetic condition
- Service history
- Battery condition/age
- EV type (hybrid, full etc.)
Electric cars are also subject to different incentives like government grants which in some cases can persuade people to simply buy new, therefore lowering the demand for used EVs. That said, its worth noting that some of these incentives have changed significantly as demand for electric cars has risen, so by 2035 there may be less resistance to buying second-hand.
How fast do electric cars depreciate?
According to the AA, a new car will lose around 60% after its first three years at a mileage of 10,000 miles a year. This shouldnt be news to most car owners, as depreciation is simply a fact of life (and makes it even more important to get the best deal when you sell your electric car). While electric cars arent immune to this basic three-year rule, they have been performing notably well in recent times as ULEZ zones and trending brands help them retain value for longer.
Back when electric cars were first becoming popular, it was harder for them to hold value this was due to lack of demand from such a niche car. The Peugeot iOn and Citroen C-Zero, for example, both fared pretty poorly so far as residual value of electric cars is concerned due to being released at a time when public interest was low and charging stations were next to non-existent. Things have definitely changed since then, with over 20,000 electric car charging points around the UK. General performance has also improved, with better driving ranges per charge and quicker overall charging times. Of course, with the government hoping to have us all driving electric cars in 2035, future demand is guaranteed.
How long do electric car batteries last?
Electric car batteries last between 10-20 years. Thevital difference between a traditional fuel car and an electric car, the battery, is a reason behind their depreciation, too. Electric car batteries are essential to keep the car running, and if the battery is in poor condition, it directly impacts the value of the whole car.
The good news is that car batteries can be easily replaced, however, there are things which can see your battery degrade in condition faster:
- Overcharging
- Extreme temperatures
- Charging immediately after driving without a battery cool-down period
- Using only rapid chargers
Generally speaking, though, this shouldnt put you off buying an electric vehicle petrol and diesel cars are no more immune to the wear and tear that comes with decades of use.
Does brand matter when it comes to depreciation?
Yes. The more in-demand a brand is, the more likely it is to still be desirable even as a second-hand vehicle. This is why electric cars from Tesla and Mercedes can buck the trend when it comes to the 60% lost value rule. There are also other considerations like congestion zone rules and low emission zones that will ensure demand for EVs remains high in certain areas Oxfords new low emission zone, for example.
Other factors can also come into play, including a brands general customer appeal and its overall offering. Vauxhall, for example, while not a high-end brand, is doing well at staving off EV depreciation because it is a much-needed affordable, family-friendly entry in the UKs current range of electric cars for sale.
Which electric cars hold their value?
As with any other sort of car, electric car brands that are particularly sought-after will enjoy better value in the long run. According to cap hpi, some of the best electric cars for retaining value include:
Smart EQ ForFour
Arguably, Smart will always have an edge due to being a leading choice of compact car for city dwellers. And, considering the majority of electric car chargers are located in densely populated areas, this means Smart has a good chance of becoming the EV of choice for many urbanites. Reported to lose 57% of its value within three years, the Smart EQ ForFour comes up equal with standard fuel cars when it comes to depreciation.
Tesla Model X
It goes without saying that one of the worlds most in-demand brands has strong performance when it comes to electric car resale value. The Tesla Model X is one of the priciest entries in the brands catalogue and after three years is thought to lose only 43% of its value. Given current trends, theres good reason to think this car will give even stronger returns depending on each would-be buyer.
Hyundai Ioniq
Referring to the full-electric version of this Hyundai model, the Ioniqs place on the market as an affordable family car helps it keep a solid electric car resale value even three years in. Reported to lose 48% of value in that time, this model shouldnt have trouble finding a buyer.
Porsche Taycan
From a premium brand, the Tayan was reported as losing only 37% of its value in three years, which is an impressive feat compared to others on this list. Its worth noting with such high-end brands as Porsche that buyers may be thinner on the ground, but thats just another reason to sell the Motorway way and get your car in front of 5,000+ dealers.
BMW i3
The BMW i3 has been available for almost a decade now, but remains in strong demand, which is a good thing for those looking for a good resell price. The i3 is reported to lose a little over half its value in three years. Considering the i3 is still quite expensive to buy new, second-hand versions may find some keen buyers.
Tesla Model 3
Another entry from all-electric premium brand Tesla, the Model 3 is one of the brands best for withstanding EV depreciation (a little over 40% after three years)due to also being one of the most affordable in its catalogue, ensuring demand.
Polestar 2
Losing just 42% of value after three years, Polestar only offers one EV at the moment, and that is the Polestar 2. This air of exclusivity is also what is helping this model retain its value.
Volkswagen e-Golf
The Volkswagen e-Golf loses around 49% of value over three years thanks to finding plenty of demand from second-hand buyers looking for an affordable family-friendly electric vehicle.
Do electric cars have good resale value?
Yes, as interest in these vehicles has grown and the age of all-electric creeps closer, value is set to stay steady. In 2020 alone more electric cars sold from January to September than in the whole of the previous year, it was also reported that EVs are becoming the most affordable type of car.
Brands including Jaguar, Mercedes-Benz, Fiat, and Volvo all plan to have done away with non-electric cars by 2035. At the moment, electric cars are thought to retain about 48% of their original value after three years, which puts them marginally ahead of the combustion engine counterparts.
There is also the argument that what electric vehicles may lose to depreciation, they make up for in what they save you in running costs like petrol, as well as making owners exempt from other fees and tax.
Sell your car
If youve decided to switch your car to electric, you might have a car you want to sell first. Or, perhaps you want to sell your EV while it still holds good value. Whatever the case, do it the Motorway way. Dealers compete to give you their best price, and its easy, quick, and 100% free with no hassle.
Ready to sell your car?
Ready to learn more about valuing, maintaining, and selling your car?Check out more of our guides here, covering everything from hybrid and electric car depreciation, to converting your car to dual-LPG fuel.
