As countries worldwide transition away from fossil fuel-powered vehicles in favour of electric alternatives, the used EV market is expected to rapidly pick up pace. While the uptake of EVs has been relatively niche until recently, the stockpile of used EVs is steadily growing, as early adopters upgrade to EVs offering innovative, new technologies, such as more efficient batteries. Just as in the traditional car market, those who cannot afford a shiny new EV will likely turn to the used EV market to follow the electrification trend without spending a fortune.
At the EV summit 2023 in Oxford this month, the lead of U.K. sales and deliveries at Tesla, Michael Oates, emphasised the important role he expects used EVs to play in the transition away from internal combustion engine (ICE) cars. Oates stated, “Once the early adopters have adopted, we need to start getting in front of new audiences, those who haven’t necessarily considered an electric car as their next purchase.” He pointed to segments of society that cannot afford new EVs explaining, “That’s why I believe that used cars are absolutely pivotal to ensure that as many people as possible can experience the sheer joy of owning and driving an electric car.”
In the second quarter of 2023, used battery electric vehicle sales increased by 81.8 percent to 30,645, contributing 1.7 percent of the used vehicle market, according to the U.K.-based Society of Motor Manufacturers and Traders. A similar trend is being seen in the United States. Cox Automotive data showed that used EV sales in the U.S. through a licensed dealership rose by 32 percent year on year to 42,753, in quarter one of this year. Despite this positive development, Tesla’s Oates was quick to stress that the used EV industry is still in its infancy and it has a long way to go until buying a used EV becomes commonplace.
Those turning to the used EV market to make a purchase are likely to be sceptical about performance and other factors that have deterred many EV buyers in the past. Early adopters will be trading in older models for innovative new options, offering a longer range, higher speeds, and better charging times, while those investing in a used EV will likely have to accept models with a poorer performance than their current ICE vehicles. Therefore, it is going to take a massive marketing campaign in major EV markets and beyond to attract a new segment of society to invest in the used EV market.
In the U.S., following the supply chain disruptions of the post-pandemic period when EVs were in high demand and there was limited availability, the market is finally stabilising. Favourable climate legislation and tax credits from the Biden administration are driving down EV prices and encouraging more widespread uptake. For example, the Inflation Reduction Act provides some buyers with a tax credit of up to $4,000 for buying used electric vehicles that cost no more than $25,000.
Used cars, in general, are about 7 percent less expensive than a year ago, according to the Bureau of Labour Statistics, while EV models are around 28 percent less expensive. This is largely thanks to supply chains getting back on track, which Biden hopes to maintain through increasing the U.S. manufacturing capacity and establishing regional – rather than global – supply chains for key components.
There’s also good news for buyers as, unlike ICE vehicles, electric cars and trucks are retaining their value better today, largely thanks to a huge increase in charging infrastructure availability and greater public awareness about both EVs and the green transition. Some EVs have been found to retain around 50 percent of their value. Liz Najman, a researcher at research firm Recurrent, stated “Most used EVs in the country have at least an eight-year, 100,000-mile warranty on their battery,” with most used EVs falling into this category.
The used EV market is becoming much more diverse year on year. Just a couple of years ago, pretty much the only used EVs available were high-end Tesla models, and other early EVs, that were initially aimed at the high-earning segment of early adopters. Now, there is a far wider range of EVs available, from basic compact cars to high-spec options. This is expected to attract a new segment of buyers to the market.
However, to develop the market further, automakers must improve their battery testing mechanisms to ensure consumers have a decent understanding of the lifespan of their used EV. Until recently, there was no way to measure the health of an EV battery, which deterred buyers. But, now, companies are investing in battery testing technology, with firms such as the U.K.’s Altelium offering an EV battery state-of-health test and certificate. The startup launched the service in over 7,000 U.S. car dealerships and over 5,000 U.K. dealers this year.
As governments worldwide push consumers to switch from ICE vehicles to electric alternatives, and early adopters trade in their older versions for new, innovative models, the used EV market is expected to expand substantially. This will be supported by favourable climate policies and financial incentives in certain countries. Further, battery testing centres will help buyers to better understand the battery life of their used EV to ensure they are not wasting their money.
By Felicity Bradstock for Oilprice.com
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