Used EV prices plummet below gas cars amid changing consumer preferences

The used electric vehicle (EV) market is undergoing a significant transformation as prices dip below those of their gasoline-powered counterparts. This shift, first observed in February, continues to deepen, reflecting changing consumer attitudes towards EVs.

In June 2023, used EV prices were 25% higher than those of used gasoline cars. By May this year, they were 8% lower, according to an analysis by iSeeCars. This analysis of 2.2 million one- to five-year-old used cars revealed that while gasoline vehicle prices dropped by 3-7% over the past year, EV prices plummeted by 30-39%.

"It's clear that used car shoppers will no longer pay a premium for electric vehicles," said Karl Brauer, executive analyst at iSeeCars. He noted that electric power has become a detractor in the consumer's mind, making EVs less desirable and therefore less valuable than traditional cars.

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Consumer perception shifts

The significant price drop highlights a shift in consumer perception. More people are selling their used EVs, partially because the market is larger than ever before. In 2022, 176,918 used EVs were sold in the U.S., with over 45,000 sold in May alone. The increased availability of used EVs at lower prices is making them accessible to a broader market of potential first-time EV owners.

Battery technology and depreciation concerns

Battery technology improvements have increased the range of new EV models, but concerns about battery degradation over time persist. Since 30-50% of an EV's value lies in its battery, this is a significant factor in the depreciation of used EVs. Despite this, EVs have lower overall ownership costs due to reduced fuel and maintenance expenses. Additionally, owners of used EVs can qualify for federal tax credits.

Tesla's price war impact

Tesla CEO Elon Musk's decision to cut prices has significantly impacted the market. In 2023, as demand slumped, Tesla slashed prices of its Model X, Y, and S vehicles. This move initiated an industry-wide price war, causing a ripple effect that led to declining prices for used EVs across the board. Scott Case, CEO of Recurrent, noted that the falling prices of used Teslas corresponded with new Tesla price drops, subsequently affecting prices of competing used EVs.

Hertz's EV strategy shift

In January, Hertz adjusted its aggressive EV strategy, selling off 20,000 EVs at its Hertz Car Sales locations. This amounted to one-third of its EV fleet, with used Teslas sold at a "no haggle" average price of $25,000 nationwide. This flood of used EVs into the market further contributed to declining prices.

Auto companies' strategic shifts

Declining demand and insufficient infrastructure have led many automakers to scale back aggressive EV rollouts. General Motors (GM) recently reduced its EV sales and production targets from 200,000-300,000 to 200,000-250,000. EVs accounted for less than 3% of GM's Q1 sales. Ford has also faced losses from its Model E electric vehicle rollout, despite a rise in combined hybrid and EV sales. Ford has rescinded a program requiring dealers to invest heavily in EV infrastructure to sell electric vehicles.

Infrastructure challenges and growth

Charging infrastructure remains in its early stages, posing an accessibility challenge for many Americans. According to the Department of Energy, there are over 64,000 publicly accessible EV charging stations in the U.S., with a total of 176,000 charging ports. While charging infrastructure has grown by 29% since the Inflation Reduction Act of 2022, which included tax incentives to adopt EVs, the U.S. still has roughly 145,000 gas stations.

A Pew Research analysis found that about six in 10 Americans live within two miles of a public charger, yet only 7% of these individuals would consider buying an EV. Most EV charging still occurs at home, and there are rural EV "deserts."

Consumer interest trends

A Gallup poll in April found a 3% annual increase in EV ownership but an equal percentage decline in serious interest in buying an EV, dropping from 12% to 9%. Overall, 35% of Americans said they might consider buying an EV in the future, down from 43% last year.

The decline in used EV prices reflects a complex interplay of consumer perception, technological advancements, and strategic shifts by automakers. As the market continues to evolve, it remains to be seen how these factors will shape the future of EV adoption.