Thursday, February 22, 2024
News The Unexpected Hurdle: Waning Appeal of Used Electric Vehicles

The Unexpected Hurdle: Waning Appeal of Used Electric Vehicles

Challenges Mount for Automakers as Second-hand EV Market Falters


Few would have guessed that this was going to happen only a year ago: the declining popularity of used electric vehicles (EVs), which is also negatively impacting new EV sales. This development poses a significant challenge for automakers and leasing companies, risking their profits and shaking the foundation of the EV market.

 

Diminishing Resale Value in the Second-hand Market

 

The $1.2 trillion second-hand car market is undergoing a significant shift: used EVs are depreciating faster than traditional combustion-engine vehicles. A lack of subsidies, waiting for improved technology, and insufficient charging infrastructure are deterring buyers. Compounding this is a price war led by Tesla Inc. and competitive Chinese models, which is impacting the valuation of both new and used EVs, challenging the financial stability of major manufacturers like Volkswagen AG and Stellantis NV.

 

Leasing Woes and Market Impacts

 

In Europe, leasing is the primary method of acquiring new vehicles. Declining EV values are causing automakers and financiers to increase borrowing costs, dampening demand, especially in early adopter markets moving away from fossil fuels. Major purchasers, including rental companies, are reducing EV orders due to resale losses, according to Bloomberg.

 

The Emerging Second-hand EV Challenge

 

The situation is set to escalate in 2024, when many of the 1.2 million EVs sold in Europe in 2021 will end their leasing terms. The response of automakers to this issue will significantly impact their financial health, consumer trust, and the broader objective of decarbonization, aligning with the European Union’s goal to eliminate new fossil fuel-powered car sales by 2035.

Tire Rack EV tire testing | Photo: Tire Rack

Limited Options for Unsold EVs

 

With a restricted market for used EVs, companies are considering alternatives like incorporating these vehicles into mobility services and ride-sharing. However, the demand in these sectors is limited. EVs don’t have the same secondary market prospects as combustion vehicles due to the lack of suitable charging infrastructure in many regions.

 

China’s experience, where rapid EV expansion led to numerous unused vehicles, serves as a cautionary tale. This situation raises sustainability concerns, especially with critical upcoming elections in the US and Europe in 2024.

 

Market Responses and Future Directions

 

The industry is learning to manage second-hand EVs, particularly around valuing EV batteries. While some models, like certain Teslas and BMW’s i3, maintain consumer interest, the overall hesitance towards used EVs remains. Automakers are now focusing on new battery technologies and more affordable models to adapt to market changes, signifying a shift from ownership to a ‘usership’ model in response to these challenges.

 

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Matt St-Pierre
Trained as an Automotive Technician, Matt has two decades of automotive journalism under his belt. He’s done TV, radio, print and this thing called the internet. He’s an avid collector of many 4-wheeled things, all of them under 1,500 kg, holds a recently expired racing license and is a father of two. Life is beautiful. Send Matt an emai

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