How The Tesla Model 3, Chevy Bolt Will Drop Used EV Prices And Be Great News For Everyone (Except Current Owners).

With the Tesla Model 3 formally announced and Tesla Motors [NASDAQ:TSLA]  taking scads of deposits, some have heralded this as the moment that the electric car becomes available to everyone. With several automakers indicating that their next generation EV will be similarly capable and others suggesting that they’ll target the lower end of the market, it’s certainly true that the Model 3 and its kin open up the market substantially.

The fact that the next generation of EVs have markedly improved range —  and that EV technology, as it has matured — has overcome some of the earlier concerns regarding reliability, opens EV ownership to a much larger proportion of the population. But perhaps it’s not the top end of the market that will be most interesting to watch. The majority of shiny new electric cars, be they Tesla Model 3s, Chevrolet Bolts, or Nissan’s next iteration of the LEAF will stick to that same market segment where the current LEAF, Focus EV and e-Golf have gone – the upper middle class.

We're thinking Ford is missing a trick by not giving its electric Focus a stronger update.

Ford’s Focus EV fills a different niche than it’s gasoline counterpart.

What will be fascinating is the transition that will occur at the lower end of the market. Until now, a mixture of limited availability and high initial expense has led to remarkable residual values for used EVs. But amongst owners of vehicles like the Tesla engineered Toyota Rav4, and indeed, the original Tesla Roadster, there has been some discussion of the impact of the Model 3 on the second-hand value of their cars.

The Toyota RAV4 EV was on the road the same time as the much-missed EV1.

The Toyota RAV4 EV was on the road the same time as the much-missed EV1.

The second generation Toyota Rav4 EV has held its value remarkably well – retaining a used market value of around $30,000 until very recently. Checking the used adverts still finds many vehicles listed in that area, but recently a few have started to appear in the lower $20,000s – with some owners commenting that this summer – as the final year’s production come off lease, there is likely to be a glut of used Rav4 EVs hitting the market. And hinting to potential purchasers that this year may be the one to buy that longed for EV SUV.

And whilst owners of the very early survivors from California’s Zero Emissions Mandate – like the Ford Ranger EV, the Chevrolet S-10 EV and the first generation Toyota Rav4 have found their vehicles held their value remarkably well (how many other decade old pick-up trucks still sell for $5k when dead?), there are some ownership issues. Thanks to lackadaisical support from their original manufacturer and an increasingly precarious used parts situation, the owners of these rare beasts are keen to see them shift to the position of ‘classic’ rather than simply being decade old cars. Perhaps because they love these strange survivors of EV’s pre-mainstreaming, and perhaps also because they paid a substantial premium to keep these vehicles out of the crusher.

The result? These first-generation cars are listed for sale with some pretty substantial asking prices. There’s a disconnect between what most buyers will pay and what the sellers want for their first-generation vehicles — and the cars gradually expire through lack of use and no one to buy them.

Whilst practices like this might succeed in keeping such finicky vehicles out of the mainstream used market, more common fare –like the early Nissan LEAF and even the venerable Th!nk City — may find their market value tailing off. Indeed, in 2015, year on year, the 2011-2013 LEAF lost 26% in used-car average price. Even the relatively new e-Golf dropped 8%.

The Nissan LEAF's used price continues to fall. (CarGurus.com).

The Nissan LEAF’s used price continues to fall. (CarGurus.com).

Part of the drop can perhaps be attributed to age. In 2012 the LEAF got a bit better, and sold a lot better. Edmunds’ used car sales report suggests that the large number of cars coming off lease at 3 years old in 2015 caused transient price drops for that year’s model. A problem they say is likely to be repeated every year as leasing has continued to grow in popularity. The summer markets are being rapidly saturated as leaseholders return their vehicles and replace with new.  Perhaps this is even more true for EV owners where, for example, in the 3 years since the 2013 vehicles were new, there has been a large increase in the range of vehicles available. And each yearly update brings with it ever more capable, and reliable, vehicles.

Then again, perhaps that may mean that this may not be the year for the seismic shift in used EV prices, the shift that may finally mean that EVs really become fully mainstream. With neither the Bolt, nor the Model 3, nor indeed any of the next generation of 200+ mile EVs due out until at least the end of 2016, it’s just possible that leaseholders who’ve got a good deal on their current EVs may hang on one more year. Eeking one more year of use out of their current ride, before ditching it in favour of the next generation of EVs.

Don't think a Model 3 will meet your needs? That's okay.

The Model 3 may drive EVs into the mainstream in more than one way.

But when it does arrive? The Model 3 may herald more EV adoption than the number of deposits suggest, because as the price drops on older EVs, and they drift into being student cars and cars for lower income families, can you see those people switching back to gasoline? The savings on servicing and fuel will drive a generation of environment-ambivalent drivers to cleaner, greener tech. And that’s got to be a good thing.

Are you planning to trade in your current EV for a new one this year? Or will you hold out for next year’s planned releases? Let us know in the Comments below.

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