The auto industry’s headlong rush into EVs is hitting an unexpected speed bump in the used car market. Sales of second-hand electric models are plummeting far faster than combustion vehicles amid buyer anxieties.
This emerging bottleneck now impedes the entire transition, threatening profits and emissions targets.
A vicious price war sparked by Tesla has exacerbated sliding used EV values. Automakers and dealers who financed leases must absorb losses when those vehicles resell at fractions of their new cost.
To recoup, they’re hiking borrowing rates which depresses new EV demand – a disastrous feedback loop.
Fleet buyers including Sixt and Ayvens are pulling back on EV acquisitions, spooked by the profit disappearance in resales. Most chillingly, consumers waiting on better and cheaper battery tech see little upside in used EV purchases today.
These interlocking dynamics are projected to intensify when millions of EVs exit initial leases en masse next year.
Bloated inventories of instantly dated models have already turned China’s ambitious EV launch into a graveyard of abandoned cars.
While automakers scramble to tackle collapsing residual values, quick fixes remain elusive.
Battery quality assessments trail combustion engine metrics. Software updates prop up some models, but most feel instantly obsolete in the face of ongoing tech leaps.
Letting unwanted EVs pile up in developing markets only exacerbates pollution without infrastructure to support them. And wasting state EV subsidies on vehicles with sharply curtailed lifespans will inevitably provoke political backlash.
In racing to electrify without safeguarding the secondhand market, automakers may have shot themselves in the foot. Their singular focus on pumping out new EVs blinded them to the need for battery standardization and durability.
