A used 2020 Tesla Model 3 is available for sale on the CarMax lot on March 10, 2022 in Burbank, California.
Mario Tama Getty Images News | Getty Images
Back in February, the price of used electric vehicles fell below the price of gasoline-powered vehicles for the first time, and the price gap has grown steeper as car buyers reject the “premium” tag previously associated with EVs.
The decline has been dramatic over the past year. In June 2023, the average price of a used EV was more than 25% higher than the price of a used gasoline car, but in May, the average price of a used EV was 8% lower than the average price of a used gasoline-powered car in the US. widened from $265 in February to $2,657 in May, according to an analysis of 2.2 million one to five-year-old used cars conducted by iSeeCars. In the past year, the price of used petrol vehicles has fallen by between 3-7%, while the price of electric vehicles has fallen by 30-39%.
“It is clear that used car buyers will not pay a premium for electric vehicles,” iSeeCars executive analyst Karl Brauer said in an iSeeCars report published last week. Electric power is now a detractor in the minds of consumers, with EVs “less desirable” and therefore less valuable than traditional cars, he said.
The gap between used luxury brands and EVs is also widening. Used BMW prices exceed prices for similar, all-electric Tesla vehicles by a significant amount, according to iSeeCars. The Tesla Model 3 costs $2,635 more than the BMW 3 Series in May 2023, but in May of this year, it costs $4,800 less than the 3 Series.
More people are selling used EVs now than ever before, at least in part because the market is bigger than ever. In 2022, 176,918 used EVs were purchased in the U.S. In May, that number increased by more than 45,000. There are many more vehicles on the used market than the new car market, and the value of used vehicles depreciates quickly as a rule. A one-year-old used car costs on average 80% of what a new car sells for. As more EVs enter the used market at lower prices, the EV market becomes available to a wider market with potential first-time EV owners.
There is a reason why EV premiums are more likely to fall in the used market regardless of new consumer perception changes: battery technology continues to improve, increasing range in new models, and consumers are also concerned about batteries degrading over time. Newer models have longer range and better battery life with temperature control for charging. Between 30-50% of the installed value of an EV is the battery. But offsetting is the fact that EVs have lower overall owner costs, from fuel to maintenance, and used EV owners can get federal tax credits.
A key factor in the current drop in used EV prices is Tesla CEO Elon Musk, who has started an industry price war as demand falls due to price cuts in 2023, with price cuts on Model X, Y and S vehicles continuing through 2024. Scott Case, CEO of Recurrent, startup that measures the performance of EV batteries for car consumers, recently told CNBC that the decline in prices of used Tesla corresponds to the drop in the price of new Tesla, followed by a decrease in prices between competing EV used.
In January, Hertz also shifted its aggressive EV strategy to sell 20,000 EVs at Hertz Car Sales locations, roughly one-third of its EV fleet, selling used Teslas for an average price of $25,000 “no bargain” across the country.
Declining market demand for EVs and a lack of infrastructure have led many car companies to pull back from aggressive EV rollouts, and put more promotion behind hybrid models, which are booming. General Motors recently cut its expected EV sales and production from the 200,000–300,000 range to 200,000–250,000. EVs accounted for less than 3% of GM’s Q1 sales. Ford has suffered losses from the launch of its Model E electric vehicle, although combined sales of hybrids and EVs rose in May. Ford has now made the decision to cancel a program announced during the initial EV boom that required Ford dealers to make significant investments in EV infrastructure in order to sell electric vehicles.
Charging infrastructure is still in its infancy and without increased infrastructure, switching to electric vehicles is an accessibility issue for many Americans. But access to EV chargers is growing. There are more than 64,000 publicly accessible electric vehicle charging stations in the United States, with more than 176,000 total EV charging ports, according to the Department of Energy. EV charging infrastructure has increased by 29% since the Inflation Reduction Act of 2022, which includes tax incentives for EV use. There are approximately 145,000 gas stations in the US
A Pew Research analysis using Department of Energy data found that roughly six in 10 Americans now live within two miles of a public charger, although only 7% of people who live within two miles of a charger would consider buying an EV. Most electric EVs are still ahead, while there are also rural EVs “desert”.
A Gallup poll of Americans in April found EV ownership rising 3% year-over-year, but the corresponding percentage of consumers showing serious interest in buying an EV, falling from 12% to 9%. Overall, 35% of Americans said they might consider buying an EV in the future, down from 43% last year.