LAS VEGAS —Electric vehicles are beginning to make headway into the used-vehicle market. But they’re having a rough time holding their value.
Manheim auction statistics shared at the Auto Finance Summit on Oct. 31 by panelist Jonathan Gregory, economic and industry insights senior manager for Cox Automotive, show EVs have more than doubled their presence on the wholesale market in the past two years. They’ve grown to 14,538 sales, or 1.7 percent of the market, last quarter from 6,529 wholesale sales, or 0.7 percent of the market, during the third quarter of 2021.
But the proceeds from those EV lots might be disappointing.
“Depending on which side of the sale you are, it’s either a horrible year for EVs or a great year for EVs,” said fellow panelist Alex Yurchenko, Black Book chief data scientist. “We saw a very heavy depreciation of EVs this year.”
When Tesla cut new-vehicle prices in January, the impact could be felt “almost overnight” in the wholesale market, Yurchenko said.
“A lot of fleet companies, a lot of rental companies were not happy about that,” Yurchenko said.
But if a consumer wants a used EV, “it’s getting more and more affordable,” he said.
Kristen Lanzavecchia, J.D. Power director of industry solutions, another panelist, agreed. EV tax credits and price cuts immediately impact the used EV market, she said.
“As soon as the new-vehicle transaction prices come down, we’re seeing the used prices come down,” she said.
Black Book predicts used-EV prices will continue to fall as new-EV prices drop, Yurchenko said. The weakness in value retention among EVs compared with other vehicles has grown in the past several months, and this is likely to continue with the “price wars” on new EV models, he said.
Black Book predicts the average 3-year-old vehicle in October 2023 held 66 percent of its original value, down from 73 percent last year but up from 51 percent in October 2019. The company predicts this stat will decline to 56 percent by October 2026.
The average 3-year-old EV, however, only held 49 percent of its original value in October 2023, down from 70 percent last year but up from 33 percent in October 2019. Black Book expected EVs of that age would keep 45 percent of value in October 2026. It also said comparing the future EV market to previous years was difficult “and probably useless” because of the more diverse mix of EV body types in the pipeline.
Gregory said the price volatility in EVs might drive consumers to EV leasing. Faced with the prospect of buying a Ford F-150 Lightning only to see the automaker then cut the price by thousands of dollars, leasing looks attractive — particularly when the lease is subvented by the electric vehicle tax credit.
The Inflation Reduction Act contains an up to $7,500 tax credit for new-EV retail buyers, but it also offers a credit of up to $7,500 for commercial buyers such as lessors, who can choose whether to pass on the savings to customers.
Some automakers have embraced EV leasing because the commercial credit has fewer restrictions on which EVs qualify than the new-vehicle retail credit.
Edmunds insights director Ivan Drury said during a Nov. 11 interview the used EV market had been “hammered” by the new EV market. But he said automakers promoting EV leasing will be left with fleets of used EVs to deal with in a few years.
“You’re kicking that can down the road,” he said. But on the other hand, he said: “What else can they do?”