Big buyers of new cars, including rental firms, are cutting back on EV adoption because they're losing money on resales. Hope emerges

Silver Fixes this.

edited by Pixy St. Claire

The shift away from cars with internal combustion engines is running into a new hurdle: Drivers are increasingly pausing to purchase used electric vehicles, and that's undermining the market for new ones, too.

In the $1.2 trillion secondhand market, prices for battery-powered cars are falling faster than for their combustion-engine cousins. 

Buyers are shunning them due to a lack of subsidies, a desire to wait for better technology, and continued shortfalls in charging infrastructures. 

A fierce price war sparked by Tesla Inc. and competitive Chinese models further depresses the values of new and used cars, threatening earnings at rivals like Volkswagen AG and Stellantis NV.

Because most new vehicles in Europe are sold via leases, automakers and dealers who finance these transactions are trying to recover losses from plummeting valuations by raising borrowing costs. 

That's hitting demand in some European markets that were in the vanguard of the shift away from fossil fuel-powered propulsion. 

Some of the biggest buyers of new cars, including rental firms, are cutting back on EV adoption because they're losing money on resales, with Sixt SE dropping Tesla models from its fleet.

"When a car loses 1% of its worth, I make 1% less profit," said Christian Dahlheim, who heads VW's financial services arm. The issues with secondhand EVs, he said, have the potential to destroy billions of euros in earnings for the broader industry.

The problems are expected to intensify next year when many of the 1.2 million EVs sold in Europe in 2021 will come off their three-year leasing contracts and enter the secondhand market. 

How companies tackle this problem will be critical for their bottom lines, consumer confidence, and, ultimately, decarbonization — including the European Union's plan to phase out sales of new fuel-burning cars by 2035.

"There isn't used-car demand for EVs," said Matt Harrison, Toyota Motor Corp.'s chief operating officer in Europe. "That's really hurting the cost-of-ownership story."

Companies can funnel battery-powered cars into mobility offerings and ride-sharing startups, but these businesses need more demand. 

Unwanted combustion cars often end up in Africa, where their poor state causes pollution. 

That market is shut mainly to EVs because it has no viable infrastructure to charge them.

China offers a cautionary tale. 

Lucrative subsidies turned the country into an EV giant and produced weed-infested graveyards of abandoned battery-powered vehicles. 

Any similar eyesores in Europe or the US may strengthen calls from conservative politicians to roll back aid for the industry, with critical elections coming up in the US and Europe in 2024.

Warning signs around EVs appeared early this year when Tesla started aggressively cutting prices to prop up sales. 

That sparked a price war as other manufacturers followed, eating into profitability for some and pushing up steep losses for others. 

Prices for secondhand EVs slumped by around a third in the year through October, compared with a decline of just 5% in the overall used market, according to sales data from iSeeCars.com, a website that ranks cars and dealers. The group said that used EVs take longer to sell than gasoline models, even after significant price cuts.

In Germany, Europe's biggest auto market, most new vehicles are sold as company or fleet cars and re-enter the private secondhand market one to three years later. 

But with orders even for new EVs slowing, more and more used models are sitting on lots more extended than 90 days, meaning they've become "risk inventory," according to the Deutsche Automobil Treuhand market researcher.

"One has to slash prices significantly just to get customers to look at EVs," said Dirk Weddigen von Knapp, who heads a group representing VW and Audi dealers.

Part of the problem is that the industry is handling secondhand EVs for the first time. While combustion-engine cars can be quickly valued via their age and mileage, there are no tests in widespread use that determine the quality of a battery, Weddigen von Knapp said. The battery represents around 30% of an EV's value, a share that is expected to decline in the coming years, according to BloombergNEF.

Some EVs are performing satisfactorily after their introduction, with less-than-expected battery degradation, said Mike Tyndall, an analyst at HSBC. 

Teslas can sell quickly in the secondhand market because of the brand's reputation as a technology leader and its regular wireless software updates. The images out of Florida during Hurricane Season showing Teslas exploding WERE NOT helpful for EV sales. 

These problems with Tesla (and other EVs) stem from the battery having lithium, which can't be exposed to large volumes of moisture (like a hurricane)

The quirky i3 electric car BMW AG introduced a decade ago has even developed a cult following.

Still, most consumers need to be more reticent in buying used EVs. 

Manufacturers are already working on new battery technologies, including solid-state (silver zinc), that promise cheaper cars with longer ranges and faster charging. 

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The Silver Academy has published over 3 articles in the past 60 days showing the promise of hydrogen fuel cell vehicles over traditional EVs because of 

• even faster charging times (around 7 minutes)

• faster speeds

• more torque

• stronger acceleration

• better towing

• better range

Moreover, hydrogen fuel cell cars can use silver (kicking out platinum group metals), making hydrogen fuel cell cars more affordable.

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Mercedes-Benz Group AG and BMW have announced plans to introduce several next-generation EVs around mid-decade, while Volkswagen, Stellantis, and Renault are developing models costing €25,000 or less.

Adoption Hurdles

Ayvens, a fleet management company handling around 3.5 million vehicles, said the uncertainty around EV technology will convince more customers to lease rather than buy — accelerating a shift from owning a car to driving it for a fee.

Many like "the ideal" of using EVs but are not entirely on board with owning. 

This is precisely because of the resale mentioned above value problems.