Swift Disappointment: Pre-owned Electric Vehicles Experiences Quick Depreciation in Value - Steep depreciation of used electric vehicles
In the rapidly evolving automotive market, luxury electric vehicles (EVs) are experiencing significant depreciation compared to their internal combustion engine (ICE) counterparts. This trend is primarily driven by rapid technological advancements, frequent new model updates, high initial prices with steep value drops, fluctuating pricing strategies, and policy factors such as tax credits.
- Rapid Technological Advancement and Model Refreshes: Luxury EV manufacturers, notably Tesla, regularly introduce updates with new features and refreshed models that quickly make older vehicles seem outdated or less desirable. This dynamic diminishes the perceived value of used EVs faster than for ICE vehicles, which tend to have slower incremental upgrades.
- Higher Initial Depreciation Percentage: Data from BMW shows EV models like the i4 and i5 lose approximately 49.4% to 57.7% of their value within three years, with total depreciation reaching up to 73.6% after five years. In contrast, comparable gasoline models depreciate less over the same period.
- Market Pricing and Resale Value Dynamics: Tesla’s frequent price cuts on new vehicles undercut used car values, driving down prices further for owners wanting to sell older models. Such aggressive pricing strategies create uncertainty and downward pressure on used EV prices, unlike more stable pricing in luxury ICE vehicles.
- Battery Life and Concerns About Degradation: Although not explicitly detailed in the search results, a known factor in EV depreciation is buyers' concern over battery life and potential replacement costs, which can lower resale values relative to ICE vehicles where engine longevity is better understood and perceived as less risky.
- Impact of Tax Credits and Incentives: The availability or ending of used EV tax credits (up to $4,000) influences buyer demand. When credits expire, used EV demand can drop, accelerating depreciation. Conversely, credits can temporarily elevate used EV prices, but their uncertainty introduces volatility in resale values.
- Luxury EVs Particularly Affected: Among luxury EVs, models like the Mercedes EQS and Audi Q8 e-tron have seen depreciation up to ~71-72% over five years, which is substantially higher than the typical depreciation of luxury gasoline vehicles. This suggests luxury EV buyers face an even steeper hit in value retention.
In the current market, used luxury EVs are less competitive in resale value compared to luxury ICE vehicles. For instance, a solidly equipped base version of the Tesla Model Y with 17,000 kilometers on the clock can be purchased for 33,750 euros from spring 2024, while a Mercedes EQS 450+, barely 15 months old with 10,000 kilometers, is listed for less than 76,000 euros, originally costing 135,380 euros.
The depreciation of smaller electric vehicles is currently significantly higher than that of vehicles with diesel or gasoline engines. Models with no mileage and day registration of a Fiat 500e can be obtained for under 19,000 euros. However, it's worth noting that the value loss of a Tesla Model Y is noticeably lower than that of its competitors, due to the significantly lower new car price and Tesla's clear and transparent pricing structure.
As fewer cars are being bought on European roads, especially expensive vehicles, dealers are under pressure to sell vehicles but are tight-lipped about the reasons. Leasing rates for expensive vehicles are high, while outright purchases are rare. This situation, coupled with the steep depreciation of luxury EVs, presents a challenge for both dealers and buyers in the market for these vehicles.
[1] BMW i4 and i5 depreciation data [2] Mercedes EQS and Audi Q8 e-tron depreciation data [3] Tesla's impact on used EV prices [4] Luxury EV depreciation analysis
- Examining Depreciation Rates: An analysis of depreciation rates shows that luxury electric vehicles like the BMW i4 and i5, as well as the Mercedes EQS and Audi Q8 e-tron, depreciate significantly faster than their luxury internal combustion engine counterparts.
- Financing Vocational Training Programs: To offset the financial impact of depreciation, various initiatives could be explored, such as partnering with vocational training programs to upskill employees in areas like technology and vehicle maintenance, potentially positioning dealerships as more valuable assets in the evolving automotive market.
