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Prices of used EVs are caught in a vicious cycle.


Prices of used EVs are caught in a vicious cycle. Subscribe to Electric Vehicle News Bitesize Podcast for FREE to hear more!

Experts have warned that falling values ​​of used EVs could take the wind out of the market for new EVs.

Speaking to Car Dealer, pricing experts and retailers say they are concerned about the dramatic drops EVs have suffered in recent months.

Falling values ​​have deterred some auto dealers from restocking EVs and raised the cost of financing based on the cars’ future value.

Trade valuation firm Cap HPI and retail pricing specialist Auto Trader have both reported a worrying drop in the price of used electric vehicles in recent weeks.

Electric car prices fell -2.1% in January compared to December, while used car prices rose 0.2% over the same period, according to Auto Trader.

Ian Plummer from Auto Trader said: “The drop in used Electric Vehicle prices is concerning.

‘It has the very real potential of impacting confidence in the equity of the asset consumers are buying, as well as retailers’ confidence in their ability to sell them successfully.

‘The real concern, however, is the knock-on effect on Electric Vehicle residual values.

‘Since we buy circa 90 per cent of new cars on finance, we depend on strong and stable Residual Values to underpin the monthly payments we use to access new cars, all the more so since the price of a new Electric Vehicle is considerably higher than the average new petrol or diesel car.

‘If used EVs sneeze, new EVs could catch a cold.’

Meanwhile, the Cap HPI told Car Dealer that the 0.1% increase in used car prices in January would have risen 0.5% were it not for the poor performance of electric vehicles.

The trade ratings firm reported that EVs fell -6.6% month-on-month in January, or £2,050 on average. It looks like there will be a similar decline in February.

The price of some electric cars has dropped by more than £5,000 in a month, according to car dealers.

Used Tesla Model Ys fell 11.1 percent, or £5,500, in January, while a year-old Jaguar I-Pace fell 10.5 percent, or £5,020.

Cap HPI director of valuations Derren Martin said: ‘Electric Vehicle values are continuing to drop currently and until retailers sell the stocks they are carrying and choose to purchase more, these car values will remain under pressure.

‘At some point in the not too distant future, many of these will look reasonably priced versus petrol and diesel equivalents – some do already.’

Some car dealers have decided not to stock used EVs until prices have stabilized — helping to accelerate the downward trend.

Umesh Samani, boss of Specialist Cars in Stoke, and the chairman of the Independent Motor Dealers Association, added: ‘Electric Vehicle has been worrying for me for some time and I’d decided not to buy any, so I’m glad about the current drastic price drops that I don’t have a few on the forecourt.

‘I believe the high prices have always been artificially high, maybe generated by the manufacturers to keep the Residual Values and customer confidence up. The current price drops are merely a realignment of their true current values.

‘Maybe once the market has stabilised for EVs, the values may start to go up a little as demand starts for them at realistic and affordable prices.’

Suzuki and MG dealer Robin Luscombe added: ‘Used EVs increased in price significantly during late 2021 and early 2022, due to lack of supply of new cars, and I would suggest they will return to late 2020 values and depreciate in normal terms from there.’

Hurley said: ‘We believe everyone has been caught out by Electric Vehicle prices dropping, and now we are in a vicious circle of dealers having no confidence to bid combined with dwindling residual values.

‘This has resulted in a huge, stagnant, depreciating swathe of stock that both customers and dealers are nervous to get involved with.

‘Everyone associated with the trade knows that they will find a level, however, what is different to historic problematic areas of stock is that it’s not only price we have to battle, but also a culture shift to get customers excited about this product.

‘A further consideration is the reluctance to buy Electric Vehicle for cash in case another wave of heavy price reductions is introduced by manufacturers following Tesla’s behaviour.’

Tesla slashed prices on new cars in the two weeks into January, causing residual values ​​to drop even more than other electric vehicles. Tesla Model 3 lost more than £13,000 in the four months to the end of January.

Jim Holder, editor-in-chief of What Car?, thinks the falling value of EVs could derail the transition to EVs.

He told Car Dealer: ‘Used Electric Vehicle prices plummeting has to be a concern, like it or not, the transition is happening, but it needs to be underpinned by a vibrant used market that is led by customer demand.

‘Negative headlines permeate well beyond the trade – with the loss of incentives, serious concerns about the charging infrastructure, a focus on rising prices and concerns about residual values only serve to undermine that transition.’

Alex Wright, principal of Shoreham Vehicle Auctions, also thinks the negative press won’t help.

He added: ‘A lot of recent bad press hasn’t helped the image of EVs. High profile headlines have been created by the anti Electric Vehicle lobby which have damaged consumer confidence in moving to an electric car.

He added: ‘A lot of recent bad press hasn’t helped the image of EVs. High profile headlines have been created by the anti Electric Vehicle lobby which have damaged consumer confidence in moving to an electric car.

‘However, as more drivers get behind the wheel of a car, charging infrastructure improves and range anxiety becomes a thing of the past, we believe the perception of EVs in the new and used markets will quickly change.’

While the headlines certainly don’t help, it’s hard to deny the fact that electric vehicle prices are falling far faster than gasoline and diesel vehicles.

Auto Trader’s Plummer believes the government needs to do more to boost demand.

‘To help correct this trend, and to avoid more than just a small pothole on the road to 2030, more action will be required from both the government and industry,’ he said.

‘Encouraging car buyers into used EVs through incentives, marketing and education to demystify them will be critical.’ founder and chief executive Tom Leathes said the recent rapid change in electric car prices was largely driven by Tesla.

He added: ‘While rapid shifts like this can sometimes cause uncertainty, we expect them to normalise in the coming months, which will bring much more confidence to the used Electric Vehicle space, both for dealers and consumers.’

However, Cargurus expert Kevin Roberts said he believed Electric Vehicle prices would be “volatile” for some time to come, especially compared to petrol and diesel vehicles.

He said: ‘The uncertainty around how to gauge the quality of the battery pack and the likelihood of needed battery replacement at some point in the vehicle’s life creates pricing uncertainty.

‘Recent OEM price cuts have created another level of pricing uncertainty in the Electric Vehicle space.’

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