Electric-powered vehicles experience a substantial depreciation, shedding approximately half their initial worth within two years. This decline is allegedly attributed to automakers, according to industry analysts.
Electric Cars Lose Half Their Value in Two Years, According to a New Report
A report by Cox Automotive reveals a dramatic increase in depreciation for electric vehicles (EVs), with two-year-old battery cars retaining only 47% of their original cost. In contrast, EVs of the same age profile held onto 83% of their new price two years earlier.
This steep decline in residual value is linked to the Zero Emission Vehicle (ZEV) mandate, which requires manufacturers to sell an increasing number of EVs each year to meet government targets. To boost sales, companies are offering substantial discounts on new models, making them more appealing to consumers. This trend, however, is negatively impacting the used EV market, causing second-hand prices to plummet.
The ZEV mandate, introduced in January 2021, requires mainstream car manufacturers to sell an increasing share of EVs every year until 2035. Failure to meet these quotas can result in hefty fines of £12,000 per car sold below the required threshold for a given year.
Last year, all mainstream brands managed to achieve the 22% EV sales mix mandated for 2024, but at a significant cost to car companies. The Society of Motor Manufacturers and Traders reported collectively, manufacturers lost £4 billion in discounted prices while trying to make electric cars more attractive to petrol and diesel customers.
Furthermore, recent news indicates that Labour's decision to impose car tax on EV owners from April 2022 has dampened demand for new models, triggering additional manufacturer discounts. Both Vauxhall and Abarth have reduced the prices of their electric cars to fall below the £40,000 expensive car tax supplement for new EVs starting from April 2023.
While EVs between three to five years old have seen only a modest price drop of 15% on average, newer models face steeper depreciation due to the influx of new models in the market and rapid advancements in battery technology rendering older EVs quickly outdated. The emergence of new, cheaper brands primarily from China, also contributes to lowering second-hand values.
In contrast, the average diesel car retaining the same age profile is retaining 30% of its new value. Cox Automotive Europe attributes this steep drop in used EV values to the heavy discounts on new vehicles, which make it more affordable for consumers to buy brand-new models rather than nearly-new used EVs. This trend is a considerable blow to a market that requires all the incentives it can get to encourage EV adoption.
The discounts offered on new electric vehicles (EVs) by manufacturers, aimed at boosting sales and meeting government targets, are inadvertently affecting the used EV market by causing second-hand prices to plummet. In the tech-driven world of sports cars, the impact of such a trend could potentially dissuade consumers from purchasing used EVs over their brand-new counterparts, influenced by attractive insurance policies and technological advancements.
