The nascent electric vehicle sector is currently dealing with an issue that could threaten the sector’s longevity: EVs are losing their resale value at alarming rates. Data suggests that battery electric vehicles (BEVs) are losing up to hundreds of dollars in value per day as secondhand electric vehicle prices continue to plummet. The loss in value has been so great that trade-in values for electric cars have fallen by one-half in only a year.
This doesn’t bode well for the industry as fewer commercial buyers will be willing to invest in an asset that loses value so quickly, especially since new electric cars are still, on average, more expensive than internal combustion engine (ICE) cars. Car rental companies, for instance, have begun raising their EV leasing prices to make up for the fall in electric vehicle resale values. Some industry experts even say that car rental companies could be forced to pull out of the EV market if they are compelled to adhere to strict electrification timelines while secondhand EV prices are still falling.
Data shows that the fall in used EV prices has been exceptionally steep this year compared to 2023 when experts predicted that it would take three years for EVs to lose their value. EVs are now losing up to 50% of their value only a year after they leave the lot. Given how expensive the average electric vehicle is, especially now that many countries are winding down their EV subsidy programs, such a massive drop in value is simply too large for most companies and even buyers to accept.
The fall in resale values makes it impossible for fleet companies to recoup their EV investment by offloading the cars in the secondhand market. Some EV models are arguably losing value faster than others in the United Kingdom markets. For example, the Tesla Model 3 lost 45% of its value compared to the Polestar 2 and the Ford Mustang Mach-E, which lost 52% of their value in a year.
Although the Mercedes EQE saw the greatest loss in value at nearly 50%, Tesla is more likely than other automakers to lose value this year. As progress and innovation in the EV sector speeds up and electric vehicles gain range, perform better and charge faster, older EV models will lose their resale value even faster. The limited range of older and even current EV models will become a major detriment to resale values as customers become accustomed to and start to expect electric vehicles with higher range.
Now is the time for entities such as Rivian Automotive Inc. (NASDAQ: RIVN) to take the lead and come up with innovations that bring the cost of electric vehicles significantly lower so that issues of dropping resale values in light of the currently high upfront costs don’t hamper the uptake of these vehicles.
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