{"id":33155,"date":"2024-08-12T10:15:29","date_gmt":"2024-08-12T14:15:29","guid":{"rendered":"https:\/\/henrypayne.com\/?p=33155"},"modified":"2024-08-12T10:15:29","modified_gmt":"2024-08-12T14:15:29","slug":"how-ev-depreciation-is-clouding-the-electric-future","status":"publish","type":"post","link":"https:\/\/henrypayne.com\/index.php\/2024\/08\/how-ev-depreciation-is-clouding-the-electric-future","title":{"rendered":"How EV depreciation is clouding the electric future"},"content":{"rendered":"

As Ferrari pumps out its first electrified automobiles, it is offering customers a full battery replacement. The battery warranty is intended to maintain not just the car\u2019s performance, but its resale value.<\/p>\n

The Italian automaker\u2019s guarantee is the latest sign that electric vehicles have a growing challenge \u2014 and it\u2019s not just cost and range anxiety relative to their gas-powered peers. EV residual values are cratering compared to their gas-powered peers, harming resale value for owners who have otherwise enjoyed lower ownership costs due to EVs’ low maintenance and refueling expenses.<\/p>\n

Experts say the reasons for EV depreciation vary from the flood of new models in the market to battery degradation after years of charging. A\u00a0recent study<\/a>\u00a0from iSeeCars.com found EV residuals fell 31.8% over a year ago (a value loss of $14,418) compared to 3.6% for gas engine vehicles. Yet, while EV deprecation is sour news for owners, lower EV values \u2014 combined with higher government incentives \u2014 could open the opportunity to a wider demographic of buyers to try EVs as manufacturers try to meet government sales mandates.<\/p>\n

\"Tesla<\/figure>\n
Tesla sells more EVs in the U.S. market than any other automaker, but its models aren’t immune from the steep depreciation affecting used battery-powered vehicles. Mike Stewart, AP<\/em><\/p>\n
<\/div>\n<\/figure>\n

\u201cVehicle deprecation over the initial years of ownership is the most expensive part of owning a new car,\u201d said Karl Brauer, executive analyst at iSeeCars.com. \u201cAs more EV buyers become aware of that fact, the fewer will be interested in ownership.\u201d<\/p>\n

Concerned over owner backlash, some luxury automakers are taking action. To protect residual values critical to its brand\u2019s reputation, Ferrari \u2014 which has been making hybrid-electric supercars like the SF90 Stradale and 296 GTB\/GTS since 2019 with its first, fully-electric vehicle coming at the end of 2025 \u2014\u00a0has launched an extended, $7,530 battery replacement warranty<\/a>\u00a0so owners can replace the batteries on plug-in hybrid models without facing a high repair bill.<\/p>\n

The so-called Warranty Extension Hybrid and Power Hybrid programs cover battery replacements in the eighth and 16th year of a vehicle\u2019s life (a five-year warranty is already offered) and is intended to “preserve the performance and excellence” of hybrid cars, according to Ferrari.<\/p>\n

\"TheThe Ferrari SF90 Stradale, the brand’s first plug-in hybrid, is covered by a battery replacement warranty the automaker introduced to preserve the value of used models. Ferrari<\/em><\/p>\n
<\/div>\n<\/figure>\n

“In case of future developments in battery technology, the replacement (battery) will be a new, state-of-the-art component that will ensure the same performance as the original one,” Ferrari said.<\/p>\n

Brauer says value retention is particularly important to the Ferrari brand, whose owners expect their $350,000-to-$500,000 purchase to appreciate over time. But the iSeeCars analyst says the depreciation factor is a problem at the mainstream end of the market as well.<\/p>\n

\u201cThere are a lot of factors causing the devaluation of EVs,\u201d he continued. \u201cThere are too many new EVs coming into the market and not enough buyers; a lot of EVs are coming off three-year leases into the used market; and Hertz has dumped thousands of EVs into the used market because customers weren\u2019t renting them.\u201d<\/p>\n

According to the iSeeCars study, used EV values in June 2023 were 25% (over $8,000) more than the average used gas car price. Fast forward to June 2024, and they were over 8% ($2,657) lower than the average used gas car.<\/p>\n

\"MainstreamMainstream EVs like these Hyundai Ioniq 5s face steep depreciation. Henry Payne, The Detroit News<\/em><\/figure>\n

EVs are relatively new to the U.S. market (the best-selling Tesla Model Y, for example, has only been on sale for five years) compared to internal combustion engine peers. But, as they age, battery degradation will threaten to cause further depreciation.<\/p>\n

As owners of laptops and smartphones know, battery performance degrades over time. But where laptop users can replace their batteries for $50-$200, car owners are facing a much bigger bill \u2014 estimated at between $15,000 and $22,000, depending on the model.<\/p>\n