Dramatic Decrease in Worth for Electric Cars - Nearly Half Instantly Affected
The depreciation of high-end electric cars has been described as catastrophic due to the significant loss in value these vehicles experience within a few years. This depreciation is more pronounced than many comparable gasoline vehicles and even other luxury cars.
Key factors contributing to this severe depreciation include rapid technological advances, dynamic pricing strategies, loss of tax incentives, luxury vehicle depreciation patterns, battery warranty and degradation concerns, and high initial prices.
Rapid technological progress in electric vehicle (EV) technology, particularly battery performance and software features, improves quickly. New models frequently receive updates or redesigns that make older vehicles seem outdated, reducing their desirability and resale value. Some manufacturers like Tesla adjust prices frequently and sharply, sometimes overnight, often lowering prices on new models. This behavior directly reduces the value of used models, as consumers see better deals on the latest vehicles, pushing used prices down.
Federal and local tax credits or incentives for buying electric vehicles—including used EV tax credits—can end or change, negatively impacting demand and resale values for used EVs once these subsidies expire. Luxury vehicles, such as the BMW i7, Mercedes EQS, and Tesla Model S, traditionally depreciate faster than economy models, exacerbating EV depreciation.
Concerns about long-term battery health and replacement costs can deter used buyers, lowering resale prices. Vehicles may also lose value as their battery warranties near expiration. High-priced EVs depreciate a larger absolute dollar amount, making the perceived value loss more severe compared to lower-cost models.
Examples of five-year depreciation include the Audi Q8 e-tron (-72%), Jaguar I-Pace (-72.2%), Tesla Model S (-62.9%), Mercedes EQS (-60.6%), and BMW i7 reaching up to 77% depreciation in five years.
While the depreciation of electric cars is less severe for smaller models, it is still significant. Electric vehicles make up only around 3% of used car offers and this is not expected to change until 2035. New electric models charge faster, drive further, and are more efficient, making used vehicles seem outdated.
For instance, a five-month-old ID.3 Pro S with good equipment costs only 24,000 euros with 900 kilometers on the clock, compared to the 44,000 euro new price, representing a depreciation of over 40%.
In conclusion, the catastrophic depreciation of high-end electric cars results from rapid tech improvements rendering older models outdated, aggressive pricing tactics, sunset of subsidies, luxury car depreciation norms, battery concerns, and high initial prices. This combination makes used EV values drop dramatically compared to traditional gasoline cars.
- The rapid technological advancements in electric vehicle (EV) technology, such as battery performance and software features, contribute to the depreciation of high-end electric cars, as new models frequently surpass their older counterparts, lowering their desirability and resale value.
- Luxury electric vehicles, like the Tesla Model S, BMW i7, Mercedes EQS, and Audi Q8 e-tron, depreciate faster than other luxury cars and gasoline vehicles, largely due to high initial prices, battery concerns, and changes in tax incentives, which lead to reduced demand and lower resale values for these models.
