Chevrolet Silverado EVs line up for test drives at the Las Vegas Motor Speedway on April 25, 2024 during a GM fleet event. - Photo: Martin Romjue / Bobit

Chevrolet Silverado EVs line up for test drives at the Las Vegas Motor Speedway on April 25, 2024 during a GM fleet event.

Photo: Martin Romjue / Bobit

The economics and market dynamics of electric vehicles are looking negative for now as fleets, consignors, auctions, dealers, and buyers are all trying to make sense of a volatile industry. The ground may be shaking but the sky is not falling.

That was an overarching takeaway when combining recent analyst insights from Black Book, J.D. Power, and the National Auto Auction Association, whose experts each cited detailed stats and trends on the current state of EVs during the Conference of Automotive Remarketing March 26-28 in Phoenix.

Dr. Alex Yurchenko, senior VP and chief data science officer at Black Book and MOTOR, who spoke about EVs during the annual signature “Annual Remarketing Industry Outlook” session, said based on the average retention by power train, the last two years were not good for EVs, when compared to hybrids and plug-in hybrids. Price cuts on new EVs led by Tesla immediately affected wholesale and retail used vehicle prices.

Dr. Alex Yurchenko, senior VP and chief data science officer at Black Book and MOTOR, who spoke about EVs during the annual signature “Annual Remarketing Industry Outlook” session at the...

Dr. Alex Yurchenko, senior VP and chief data science officer at Black Book and MOTOR, who spoke about EVs during the annual signature “Annual Remarketing Industry Outlook” session at the Conference of Automotive Remarketing on March 27, 2024.

Photo: Ross Stewart / Stewart Digital Media

EV Depreciation Hits the Skids

“When the overall market depreciated about 21% last year, EVs as a group depreciated about 30%,” Yurchenko said.  “We see very large depreciation across all EVs, both luxury and more affordable EVs like Chevrolet Bolts. We expect this to continue.”

With rolling EV prices cuts, the volatility for EVs will remain.

Hybrids, however, had a good run since 2020 driven by a lack of supply related to demand. “If you wanted to buy a Toyota RAV4 hybrid last year, you probably had to wait four months to get it. Now the inventory is improving. And we saw some corrections in the hybrid market. We expect the prices for hybrids to get back to normal, compared to the rest of the market.”

OEMs are increasing production of hybrids, and Toyota is going almost all-hybrid with the popular Camry model designated as hybrid-only. The path to vehicle profitability and demand is through hybrids, as the market for them expands, he said.

Yurchenko underscored that used vehicle prices will remain elevated for the next several years. 2025 will bring the lowest number of lease returns back to the market. Between 2021 and 2022, the number of leases were cut in half due to market shifts.

While the number of lease returns are set to decline, Yurchenko predicted the number of lease units returning to auctions will increase during the next one-plus years. During the last two years, more than 90+% of all leases were not returned to dealers or auctions because consumers either bought or kept them.

“They had a lot of equity in the vehicles so they kept them, so captive finance companies just didn't see those vehicles. Now we've seen increases in leased vehicle returns going back to the auctions while the overall volume of lease returns will decline in the next several years.”

Yurchenko further explained that as the number of lease maturities will decline 2025, the number of leased vehicles returning to dealers will increase. In 2020-23, as consumers kept 90%+ of their vehicles, most did not make it to the auctions. The rest was mostly kept by dealers because they needed inventory. Starting this year, consumers are returning more vehicles to the grounding dealers, and that in turn, will increase the volume going through the auctions.

On price retention, Yurchenko pointed out how pandemic-era vehicle prices saw retention peaked by 72% due to constrained supply, but despite recent declines, retention is still 31% above 2019 levels.

“Baseline, we expect the prices to decline, but in the next two years, we expect prices in the used wholesale vehicle market to stay above 2018-19 levels by at least 20%,” Yurchenko said. “But if you take the much longer view, prices will still be much higher than we've seen historically.”

Electric Vehicle Auction Sales Up, Resale Values Down

During a State of the Auction Industry presentation, Larry Dixon, vice president of auction data solutions for the NAAA, reported:

EVs continued to comprise a very small 1.2% of total auction sales net volume. But sales are rising fast. During the first two months of 2024, they were up by 86% year over year, led by a sizable jump in Tesla volume.

While Tesla sales were up 133% in February 2024 compared to a year earlier, EV depreciation has been well above average. Many models have seen depreciation rates of 30%+, which Dixon called quite substantial. The three-year-old vehicle retention rate was 22 points lower than in February 2023.

The drop in retention rates for EVs has been nearly three times that of gas-powered vehicles, Dixon said.

Electric vehicle auction prices remain under pressure and will continue for at least the near future. When new EV prices are cut 10-20%, that will diminish wholesale prices and values for EVs. Expect above average depreciation for EVs moving forward as they continue to build a larger presence in the used and new vehicle markets.

In response to questions, Dixon said he believes vehicle prices will continue to fall from current levels but that an unlikely 35% drop to 2019 levels would be “calamitous.”

“I think it's important to point out that U.S. vehicle demand and prices were rising before the pandemic for both consumers and dealers. They were demanding more used vehicles. So that's another reason why, hopefully, we don't go back to where prices were four years ago.”

During the remarketing conference, JD Power's David Sargent reviewed the firm's EV Index which evaluates buyer interest, availability, adoption, affordability, infrastructure, and...

During the remarketing conference, JD Power's David Sargent reviewed the firm's EV Index which evaluates buyer interest, availability, adoption, affordability, infrastructure, and experience with electric vehicles.

Photo: Ross Stewart / Stewart Digital Media

Electric Vehicles Defying Negative News

In a general session presentation about the automotive industry, Dave Sargent, vice president and the head of the connected vehicle practice at JD Power, said despite all the negative news about EVs, they are selling faster now than last year, and in the years before. Sargent emphasized that when the media refers to slowing EV sales, it’s referring to a slowdown in the rate of increase in EV sales.

New sales of PHEVs and EVs now make up 10%+ of all vehicle sales, with February 2024 at 10.3%. All-electric vehicles stood at 8.4% share of overall sales. Tesla, considered a premium vehicle, makes up most of the 37% share of new premium vehicles sold that are all-electric.

New EV prices have eased slightly due to price reductions and lower-priced entries.

EVs Holding Their Own

In assessing the prospects of future EV purchases, JD Power’s EV Index looks at interest, availability, adoption, affordability, infrastructure, and experience.

Interest in EVs has plateaued with 24% of surveyed consumers in February 2024 indicating they are in the upper funnel of consideration, compared to 26.3% in February 2023, Sargent said, with March likely coming in at 22.5%. The availability of EVs also has plateaued in the premium and mass markets, but EV availability will likely grow in the next two years as cheaper EVs come into the market.

“For five months in a row, the proportion of people who say they're very likely to consider an EV for the next vehicle is down,” Sargent said. “When we look at online shopping behavior, and the percentage of clicks, which are driving someone to look at an EV, it picked up a little bit over the last month, but still for the most part, it's been flat. We’re not seeing this big increase in consumer interest in EVs that we started to see a while back.”

Some of that can be attributed to the total number of EVs in circulation, known as EV Parc, which is growing at 2.2 times the rate of the charging infrastructure. A year ago, 2.6 million EVs were on the street, compared to 3.7 million so far this year, an increase of 42%.

Among the top five reasons that consumers reject EVs:

  1. Lack of charging station availability
  2. Purchase price
  3. Limited driving distance per charge
  4. Time required to charge
  5. Inability to charge at home or work

Among the positives in favor of EVs:

  • Availability will grow, especially among affordable EV models
  • EVs are at parity on cost, or better
  • Owners are mostly satisfied and likely to stay with EVs

Among the negatives:

  • Interest remains limited and regional
  • Infrastructure is lagging
  • Concern about durability and depreciation

Better Ways to Remarket EVs

“It’s critical to know how an EV has been treated during its life,” Sargent said. “Consumers frankly are terrified of used EVs.” Among key points:

  • For recently sold EVs (MY19-23), batteries are generally holding up over the measurable mileage (first 75,000-100,000 miles)
  • Motorq and J.D. Power see an average of 7% capacity degradation for the first 100,000 miles, even better than most OEM expectations.
  • Among outliers, 5-10% of EVs have reduced realized range in that timeframe.
  • This situation will become more complex, given the range of new EVs coming out, with varying battery suppliers, chemistries, architecture, etc.

“For the most part, EVs are holding up really very well in terms of their battery life,” said Sargent, referring to the extensive EV data gathered by JD Power and its data partner, Motorq. “When customers report a lot of problems with the EVs, very few of those problems have anything to do with the battery itself.”

When the data is modeled out, the first 100,000 miles on an EV show that the average battery capacity degradation is 7%. As Sargent explained, if you buy an EV with a 300 mile range, after 100,000 miles, the battery will be left with a max range of 279 miles.

“Frankly, there's probably a greater degradation in mpg on an ICE vehicle than there is in range on an EV,” Sargent said. “There are outliers because not all EVs are the same. It matters where an EV has been, how it’s been treated, how it’s been driven, and particularly how it’s been charged.”

When buying a used EV, purchasers should do their research and find out which make and model EVs are the outliers with shorter ranges than the average degradation. Likewise, some EVs will end up as “superstars” with less percentage degradation of the battery than with the average EV, he said.

“Your ‘problem children’ are the ones at the bottom. You don't want to buy one of these EVs. The question is, you got to find out which it is because you can't tell by just looking at it.” One rule for powering EVs is to not always use full DC Level 3 charging to 100% which over time can hasten battery degradation. “DC fast charging in small amounts is not too much of a problem.”

The use of battery health scores based on consistent evaluation and data methods can build confidence and peace of mind in the used EV market, he said.

“Consumers are really worried about used EVs. Most consumers have no experience buying an EV. Almost no one has bought a used EV. Their understanding is based often on hearsay, or their experience with other rechargeable electric devices in their life, like a phone or laptop. And they know that those degrade rapidly over time.”

An EV battery differs vastly from a personal electronic device, which many prospective buyers don’t fully understand yet, Sargent said. “As an industry, we owe it to consumers to have a healthy used EV market, so we can have a healthy new EV market. The two go together. We must give them peace of mind as to the health of the vehicle that they're planning on buying.”

Consumers are more likely to pay more for a used EV that has been accurately evaluated and verified as having a healthy battery, Sargent said, and more companies are pursuing such measures. 

 

About the author
Martin Romjue

Martin Romjue

Managing Editor of Fleet Group, Charged Fleet Editor, Vehicle Remarketing Editor

Martin Romjue is the managing editor of the Fleet Trucking & Transportation Group, where he is also editor of Charged Fleet and Vehicle Remarketing digital brands. He previously worked as lead editor of Bobit-owned Luxury, Coach & Transportation (LCT) Magazine and LCTmag.com from 2008-2020.

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