EV resale values are generally lower than ICE vehicles due to battery life concerns and rapid technological advancements. However, factors such as brand reputation (e.g., Tata Cars), battery health, and availability of charging infrastructure can positively impact the resale value.
In this article, we talked about the most important factors that impact the cost of used electric vehicles or the resale value of an EV and the areas that still need improvement while maintaining reliability and sustainability.
The market for electric vehicles and their demand is rapidly expanding. Since electric vehicles are more cost-effective and environmentally friendly than fuel-powered ones, many people are choosing to purchase them.
However, when purchasing an electric vehicle, one often considers factors more than just the initial cost. Resale value, maintenance charges, insurance, warranty, and depreciation are among some of the important considerations.
One of the major challenges for EV adoption in India is the high initial cost of acquisition. Used or pre-owned EV market can be the answer to this problem.
Many people may find the initial high purchase price of a brand new EV to be a deal breaker, in which case the used EV market may turn out to be an interesting alternative.
The acquisition cost of an EV is 25 to 30 percent more than a comparable ICE vehicle.
The original owner of the EV may have to wait for a longer period to recoup his cost of acquisition. However, it becomes more profitable for the second owner.
The EV begins to gain value because the cost per km is already lower for the second owner and choosing a used EV over an expensive new one proves to be a better option.
Despite their increasing popularity in the country, the resale value of electric vehicles remains a huge concern. Other than range anxiety and inadequate charging infrastructure, a poor resale value is one of the primary reasons EVs haven’t gained adequate traction despite sustainability initiatives.
Factors That Affect the Resale Value of Electric Vehicles
Depreciation
Depreciation plays an important role in determining the resale value of electric vehicles.
Electric vehicles initially depreciate faster than traditional ICE vehicles and lose more value due to uncertainties about battery life, repair, and other costs.
In the first year, the depreciation is around 25-30 percent and after that, it varies depending on several factors like battery usage and maintenance.
Typically, these costs later reduce and eventually match ICE vehicles.
However, this depreciation can slow down if the EV maintains good battery health and remains in demand due to various factors like environmental and economic.
Unlike traditional ICE vehicles, EVs initially exhibit distinct and slightly different depreciation patterns as a result of low public awareness and swift technological progress.
Nonetheless, depreciation rates are anticipated to improve in the coming years and get better as the market develops and confidence in EV technology increases.
Here’s a look at the projected five-year retained values of select EVs, according to the latest data from Edmunds.com and KBB.com. Newer models don’t have forecasts posted yet.
These estimates apply to the base model in each row and, as can be anticipated at this point in the discussion, are subject to change:
- Audi e-tron: 47% retained value after five years
- Audi e-tron Sportback: 49%
- Audi e-tron GT: 26%
- Hyundai Kona Electric: 27%
- Jaguar i-PACE: 34%
- Kia Niro EV: 22%
- MINI Cooper SE: 42%
- Nissan Leaf: 41% (remains eligible for tax credit)
- Porsche Taycan: 43%
- Porsche Taycan Cross Turismo: 43%
- Tesla Model 3: 44% (eligible for tax credit in 2013)
- Tesla Model S: 46%
- Tesla Model X: 45%
- Tesla Model Y: 35% (eligible for tax credit in 2013)
- Volvo XC40 Recharge: 39%
Battery Health
The condition of the EV’s battery and its overall health plays a significant role in determining the resale value.
However, one of the main challenges currently faced in the country is the lack of a standardized battery health assessment method. The necessary tools and standard procedures to assess the condition of an EV battery are highly technical, too expensive,e and not widely available in the country.
As a result, the battery’s condition remains largely unknown, which makes it in turn challenging to calculate the vehicle’s depreciation. Deterioration of the vehicle battery also has a significant impact on the performance and range of the EV as well.
There is little market demand for used electric vehicles at the moment.
Dealers are at present hesitant to buy used EVs and even if they do so, they put up a substantial depreciation on them, marking a huge loss.
Determining the remaining battery life also remains a significant challenge for them, as batteries contribute to half the value of a new EV.
This uncertainty ultimately affects the pricing as well as discourages potential consumers.
Technology Advancement
To make great strides, EV manufacturers are concentrating on improving the life, efficiency, and affordability of electric vehicle batteries, thereby addressing the current concerns.
Because of the rapid advancements in EV technology, newer models have more enhanced features, an extended range and much advanced systems.
Potential buyers may prefer these new models with more features since these newer EVs have more reliability and affordability, which unfortunately accelerates the depreciation of older EV models.
As the EV market continues to grow, older models continue to lose their appeal, thereby negatively impacting their resale value.
Brands that offer regular software upgrades and stay up-to-date have better resale value in the market.
However, EVs with outdated software or restricted upgradeability lose their resale value faster than those with reliable and upgradable systems. This has a big impact on the resale value because potential buyers lean towards the latest technology.
Changes in policies and incentives, such as stricter pollution regulations or emission standards generally align with technological advancements.
Older EVs may lose resale value if they don’t comply with the updating regulations or take advantage of the incentives.
Consumer Perceptions
The resale value of electric vehicles is significantly affected by changing consumer perception.
There is a perception that EVs often require lower maintenance checks compared to traditional ICE vehicles. This inturn helps enhance their resale value. Extended warranties on batteries additionally provide reassurance to consumers, as a result boosting resale value.
However, consumers can also perceive battery degradation as a big concern, reducing the resale value of EVs.
Electric vehicles have become a popular option in the used automobile market as more people are realising their benefits.
Secondhand owners will find used EVs much more appealing if they perceive them as a cost-effective option, which will ultimately increase their resale value.
One of the major factors influencing the EV resale industry is consumer perception. The development of a strong EV resale market ultimately depends on the shift in perception.
Manufacturer’s Role
The resale value of EVs from established manufacturers typically has higher resale prices since potential buyers are more inclined to trust and confide in well-known brands.
Thus, the initiatives taken by EV manufacturers will have a big impact on determining the resale value of EVs.
EV manufacturers now offer extended warranties on batteries, often ranging from 8 to 10 years in many cases, which positively addresses concerns about depreciation and overall battery health, boosting resale value.
In order to reassure consumers about resale value and boost confidence in the used market, EV manufacturers should take efforts and implement buyback programs and resale guarantees, guaranteeing a minimum resale value for their vehicles.
MG Motors, for example, has implemented MG Reassure, a program offering up to 50% to 60% of the original value of ICE vehicles within three years. It should expand its program to cover EVs as well.
In conclusion, manufacturers’ initiatives in this emerging market directly or indirectly will influence the overall resale value of electric vehicles.
Taxation on Used Electric Cars
The resale value of used electric vehicles is significantly affected by the imposition of taxes on selling used electric vehicles. the GST Council of India has hiked the GST rate on Used electric vehicles.
The GST rate, previously fixed at 12%, has now been increased to 18%, aimed at bringing stability to the taxation of second-hand vehicles in India.
Tax laws and policies have a strong influence on the resale value of used EVs.
The increase in taxes may cause potential consumers to postpone or avoid purchasing the electric vehicle at all. It would also discourage demand amongst cost-sensitive consumers.
If incentives or subsidies for new EVs are still in place, then taxes on pre-owned EVs would make them even less appealing. This might further suppress the resale value of used EVs.
Areas that need Improvement
The used EV market is right on its way to expansion, but there are a few areas to still work on.
Developing Standardized Battery Certification:
Developing certified battery health assessment methods can help build consumer confidence and provide them with more reliability in an EV’s battery quality.
Certified Pre-Owned Programs by brands:
To guarantee quality and dependability in the EV resale market, manufacturers need to introduce their own certified pre-owned EV programs.
Battery Replacement Programs:
EV manufacturers need to introduce affordable battery replacement programs for older EV models for improved reliability. They should also provide extended warranties on their batteries to ensure consumer confidence.
Public Awareness:
Used EV adoption can be accelerated by informing consumers about the long-term financial advantages of the second-hand EV market.
Benefit on Trade-Ins:
Financial assistance in the form of subsidies or incentives from the government as well as programs from branded dealership programs for trading in used EVs could help develop an efficient resale market.
Charging Infrastructure:
The viability of used EVs for consumers will improve with a more robust and dense charging infrastructure throughout the country. Consumers would consider using second-hand EVs, who might not have access to private charging stations if the public charging networks are set up.
Battery Swapping Infrastructure:
It is necessary to promote the development of battery-swapping infrastructure throughout the country for older EV models with outdated and degraded batteries, to enhance the resale market.
Resale Platforms:
Dedicated resale platforms would help in making the whole resale process seamless. Dedicated marketplaces for buying and selling pre-owned EVs would help buyers and sellers connect through a trusted source and help streamline the entire process.
Regulatory Framework:
It is necessary to establish a policy framework consisting of vehicle checks and battery certifications for the standardization of the EV resale market.
Additionally, enforcing recycling and appropriate disposal of EV batteries is another way to enhance the whole resale process.
Final Thoughts
As the country’s electric vehicle ecosystem develops, it is anticipated that the resale value of electric vehicles will get better as well.
The EV resale market is expected to grow stronger and more competitive in the coming years as a result of ongoing tech advancements, improving government assistance, and a shift in customer perspective.
With the introduction of much more advanced EV technology and the ongoing development of charging infrastructure, the resale value of used EVs and their market is anticipated to appeal to more potential customers.
However, overcoming current challenges is essential to succeed in this developing market.
Although the used EV market is still budding and will require improvements in the charging infrastructure, battery life, consumer confidence as well as standardizations and regulations, the country is well on its way to developing a sustainable EV resale market.