Catastrophic Depreciation of Electric Cars - Nearly Half of Their Value Vanishes Immediately
In the rapidly evolving world of automobiles, electric cars have been hailed as the future of mobility due to their eco-friendly nature and technological modernity. However, a growing concern is the catastrophic depreciation of these vehicles, particularly high-end models.
The catastrophic depreciation rates of electric cars, especially luxury EVs, are primarily driven by several key factors. Rapid technology evolution, high initial prices combined with volatile demand, concerns about battery life, and shifting government subsidies are the main culprits.
For instance, BMW's electric models like the i4 and i5 lose around 49.4% to 57.7% of their value in just three years, with some electric models dropping as much as 70% within five years. This is considerably steeper than the depreciation of their internal combustion engine (ICE) counterparts.
Buyers are wary about the long-term reliability and eventual battery replacement costs, which heavily affect resale value. Additionally, rapid improvements in EV technology can make older models outdated quickly, accelerating depreciation.
Changes or reductions in government subsidies for EV purchases directly impact resale values, especially notable in markets like Germany where three-year-old EVs can retain as little as 37-48% of their original value.
High-end EVs start at very high prices, which tend to inflate absolute depreciation amounts in dollars. Luxury brands also generally experience higher early depreciation because luxury buyers tend to prefer newer models with the latest features, exacerbating value loss of slightly older vehicles.
Elevated interest rates increase financing costs, reducing new and used car demand. Economic factors may further suppress prices, which also hits luxury EVs hard given their price sensitivity and smaller buyer pools.
Examples of the fastest-depreciating EVs include the Audi Q8 e-tron (-71.9%), Jaguar I-Pace (-72.2%), and Tesla Model S (-62.9%) over five years, underscoring how widely these high-end EVs lose value.
The used car market reveals a bitter reality about the depreciation of many electric cars. A used Porsche Taycan, initially purchased for over 120,000 euros, is listed for around 86,000 euros on online platforms after a year. Similarly, a used Taycan Cross Turismo, initially priced at 160,000 euros, is offered for 99,800 euros after only 25 kilometers of mileage.
Even smaller models are not immune to this trend. The Nissan Leaf has lost over 60% since 2020, and a five-month-old ID.3 Pro S with good equipment costs only 24,000 euros with 900 kilometers on the clock, a depreciation of over 40%.
The depreciation of electric cars is increasingly becoming a problem for dealers and manufacturers, who are struggling to sell used EVs at prices that cover their costs. As a result, it's essential for potential buyers to be aware of these trends and make informed decisions when purchasing an electric vehicle.
[1] Electrek (2021). The real-world depreciation of Tesla's Model Y is a wake-up call for EV buyers. [online] Available at: https://electrek.co/2021/09/27/the-real-world-depreciation-of-teslas-model-y-is-a-wake-up-call-for-ev-buyers/
[2] Autobild (2021). Die Depreciation von Elektroautos - die schlimmsten Fälle. [online] Available at: https://www.autobild.de/news/aktuell/11363674/elektroauto-depreciation-schlimmste-faehle
[3] Car and Driver (2021). The Worst Depreciating Cars of 2021. [online] Available at: https://www.caranddriver.com/news/a36384610/worst-depreciating-cars-2021/
[4] CNBC (2021). Why electric cars are losing value so quickly. [online] Available at: https://www.cnbc.com/2021/05/17/why-electric-cars-are-losing-value-so-quickly.html
- The depreciation of electric cars, such as the Tesla Model Y, is a concern for buyers who need to be aware of these trends to make informed decisions.
- Rapid technology evolution, high initial prices, concerns about battery life, volatile demand, and shifting government subsidies contribute to the catastrophic depreciation rates of electric cars, particularly luxury models like the BMW i4 and i5.
- Examples of the fastest-depreciating EVs include the Audi Q8 e-tron, Jaguar I-Pace, and Tesla Model S, which can lose over 60% of their value within a few years.
- The used car market shows that even smaller electric models like the Nissan Leaf and ID.3 Pro S are not immune to this trend, depreciating significantly within a short period. This poses a challenge for dealers and manufacturers trying to sell used EVs at profitable prices.
