The used EV price crash deepens as the history of 'premium' brand ideas increases

A used 2020 Tesla Model 3 is for sale on a CarMax lot on March 10, 2022 in Burbank, California.

Mario Tama | Getty Images News | Getty Images

In February, used electric vehicle prices fell below used gasoline vehicle prices for the first time ever, and the price cliff continues to steepen as car buyers reject any “premium” label previously associated with electric vehicles.

The The decline has been dramatic last year. In June 2023, average prices of used electric cars were more than 25% higher than prices of used gasoline cars, but in May, used electric cars were on average 8% lower than the average price for a used gasoline car in the US. rose from $265 in February to $2,657 in May, according to an analysis of 2.2 million used cars from one to five years old conducted by iSeeCars. Over the past year, used gasoline vehicle prices have fallen 3 to 7%, while electric vehicle prices have fallen 30 to 39%.

“It is clear that used car buyers will no longer pay a premium for electric vehicles,” said iSeeCars analyst Karl Brauer in an iSeeCars report published last week. Electric energy is now a negative factor in consumers' minds, with electric vehicles being “less desirable” and therefore less valuable than traditional cars, he said.

The gap between used luxury brands and electric cars has also widened. According to iSeeCars, prices of used BMWs significantly exceed prices for comparable all-electric Tesla vehicles. A Tesla Model 3 cost $2,635 more than a BMW 3 Series in May 2023, but was priced more than $4,800 less than the 3 Series in May of this year.

Today, more people are selling their used electric cars than ever before, at least in part because the market is bigger than ever before. In 2022, 176,918 used electric vehicles were purchased in the US. In May alone, that number rose to more than 45,000. There are many more vehicles on the used car market than there are new cars, and the value of used cars generally declines rapidly. A one-year-old used car costs on average 80% of the price of the same car sold new. As more EVs enter the used market at lower prices, the EV market becomes available to a broader market of potential entry-level EV owners.

The South Point used car lot on June 7, 2023 in Austin, Texas.

Why experts say falling EV prices could actually hinder widespread adoption

There are reasons why EV premiums in the used market are likely to decline regardless of the recent shift in consumer perception: battery technology is constantly improving, range on new models is increasing, and consumers are also concerned about quality of batteries over time. Newer models have longer range and improved battery life with temperature control for charging. Between 30-50% of the value contained in an EV is the battery. But this is offset by the fact that electric vehicles have a lower total cost of ownership, from fuel to maintenance, and that owners of used electric vehicles can qualify for federal tax credits.

A key factor in the recent decline in used EV prices has been Tesla CEO Elon Musk, who started an industry price war as demand fell in 2023 by slashing prices, while the price cuts for Model S vehicles continued into 2024. Scott Case, the CEO of Recurrent, a startup that measures the performance of EV batteries for automotive consumers, recently told CNBC that falling prices for used Tesla will correspond with price drops for new Tesla, followed by falling prices among used EV competitors.

In January, Hertz also changed its aggressive EV strategy to sell 20,000 EVs at Hertz Car Sales locations, about a third of its EV fleet, and used to sell Teslas at a “no haggle” average price of $25,000 across the country. country.

Declining market demand for electric vehicles and a lack of infrastructure have prompted many auto companies to move away from aggressive EV rollouts and increase promotion of hybrid models, which are experiencing tremendous growth. General Motors recently cut its expected sales and production of electric vehicles from 200,000 to 300,000 units to 200,000 to 250,000. EVs represented less than 3% of GM's first-quarter sales. Ford has suffered losses from the rollout of the Model E electric car, even as combined sales of hybrid and electric vehicles rose in May. Ford has now made the decision to withdraw a program announced during the initial EV boom that required Ford dealers to make significant investments in EV infrastructure in order to sell electric vehicles.

Charging infrastructure is still in its early stages, and without extensive infrastructure, the transition to electric vehicles is an accessibility issue for many Americans. But access to EV chargers is growing. There are more than 64,000 publicly accessible electric vehicle charging stations in the United States, of which more than 3 are A total of 176,000 EV charging ports, the Ministry of Energy said. Electric vehicle charging infrastructure has grown 29% since the Inflation Reduction Act of 2022, which included tax incentives for electric vehicle adoption. There are approximately 145,000 gas stations in the US

A Pew Research analysis based on Department of Energy data found that about six in 10 Americans currently do this lives within two miles of a public chargerThough only 7% of people living within two miles of a charger will consider buying an electric car, Pew found. Most electric vehicle charging still takes place at home, while there are also electric vehicle 'deserts' in rural areas.

This was evident from a Gallup poll among Americans in April ownership of electric vehicles increases by 3% annually, but an equal percentage decrease in the number of consumers who indicated that they were seriously interested in purchasing an electric car, from 12% to 9%. Overall, 35% of Americans said they might consider buying an electric car in the future, up from 43% last year.

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