Electric Car Sales: The Curse of Used Vehicles

Car sales in the EU fell at the end of last year, in December, for the first time in almost a year and a half, according to data from the European Automobile Manufacturers Association (ACEA). Additionally, during the same period, sales of electric cars plummeted by 16.9 percent, marking the first such decline since 2020. In Croatia, sales of electric cars in December fell by 17.3 percent, but hybrid models recorded significant sales growth of 53.8 percent.

The start of the new year did not bring changes when looking at the largest automotive market in Europe. Of course, this refers to Germany, where compared to December 2023, sales of new electric vehicles in January fell by 54.9 percent, while sales of plug-in hybrids decreased by 19.6 percent. On the other hand, sales of gasoline vehicles recorded a growth of 9.1 percent and diesel vehicles by 9.5 percent.

Decline in Electric Vehicle Sales

The German VDA, the interest group for the country’s automotive industry, states that battery vehicles are likely to see a drop from 524,000 units last year to 451,000 units this year. Considering that Germany aims to have 15 million BEVs on the roads by 2030, this figure is moving in the wrong direction. This is due to a number of factors, primarily because Germany withdrew its subsidy program for electric vehicles in December, a whole year earlier than expected. Add inflation, rising car prices, and weak charging infrastructure, and it is clear why sales are declining.

According to Automotive News Europe, manufacturers are delaying the introduction of electric vehicles, and rental companies are ‘reducing the purchase of such fleets.’ Nevertheless, even after losing subsidies, car manufacturers like Tesla, VW, Audi, Stellantis, and Mercedes-Benz have jumped in to compensate for this, at least temporarily.

Renault announced its plan to postpone the IPO of its electric vehicle startup Ampere, citing slow demand and tough market conditions as justification. Bloomberg also reported that Volkswagen is doing the same with its electric vehicle business, delaying its IPO plans for its battery unit. In any case, European electric vehicle manufacturers are in big trouble and are trying in every way to keep up with China’s BYD and Musk’s Tesla. Adding to the story is the fact that Porsche’s CFO Lutz Meschke believes that Europe might withdraw its ban on gasoline and diesel vehicles by 2035 due to slowing demand for electric vehicles.

New Obstacles

In addition to the decline in sales of new electric cars, a new obstacle related to used electric cars has emerged. Namely, no one wants to buy them, which undermines the market for new ones, analysts say. In the global used car market, estimated at $1.2 trillion, prices for battery cars are falling much faster than those of traditional internal combustion vehicles. Buyers are avoiding them due to a lack of subsidies, a desire to wait for better technology, and ongoing deficiencies in charging infrastructure. The fierce price war initiated by Tesla and competing Chinese models further lowers the values of new and used cars, threatening the profits of rivals such as Volkswagen AG and Stellantis NV.

Since most new vehicles in Europe are sold through leasing, car manufacturers and dealers financing these transactions are trying to offset losses from the sharp decline in value by increasing borrowing costs. This impacts demand in some European markets that were leading the transition away from fossil fuel-powered vehicles. Some of the largest buyers of new cars, including rental companies, are reducing the adoption of electric vehicles as they lose money on resale, and many are increasingly removing them from their fleets, analysts say.

– When a car loses 1 percent of its value, I make 1 percent less profit – said Christian Dahlheim, head of VW’s financial services department. Problems with used electric vehicles, he said, could potentially destroy billions of euros in earnings for the entire industry.

Problems are expected to intensify next year when many of the 1.2 million electric vehicles sold in Europe in 2021 will end their three-year leasing contracts and enter the used car market. How companies will tackle this problem will be crucial for their ultimate results, consumer confidence, and finally decarbonization – including the European Union’s plan to gradually phase out the sale of new fuel-powered cars by 2035.

– There is no demand for used electric cars – says Matt Harrison, Chief Operating Officer of Toyota Motor Corp. in Europe.

What to do with used ones, many are asking, and some suggest directing such cars towards ‘ride-sharing’ companies, but there are not nearly enough of them to absorb all this influx of used electric vehicles. China, with the help of subsidies, has turned the country into an ‘electric giant,’ but also into an ‘electric graveyard,’ as poorer quality leads to faster abandonment of such vehicles.

Longer on the Shelf

Used electric vehicles take longer to sell than gasoline models even after significant price reductions, sales data from iSeeCars.com, a website that ranks cars and dealers, shows.

In Germany, the largest European automotive market, most new vehicles are first sold as official or fleet vehicles and then re-enter the private used car market one to three years later. But with slowing orders even for new electric vehicles, more and more used models are sitting for longer than 90 days, meaning they have become ‘risk inventory,’ according to market researcher Deutsche Automobil Treuhand.

– We have to significantly lower prices just to get buyers to look at electric vehicles – said Dirk Weddigen von Knapp, who leads a group representing VW and Audi dealers.

Part of the problem is that the industry is handling used electric vehicles for the first time. While internal combustion engine cars can be quickly assessed based on their age and mileage, there are no widely used tests that determine battery quality, Weddigen von Knapp said. The battery accounts for about 30 percent of the value of an EV, a share that is expected to decrease in the coming years if minerals and metals become available.

To be fair, some electric vehicles perform well years after their introduction, with less than expected battery degradation, said Mike Tyndall, an analyst at HSBC. Tesla can sell quickly in the used car market due to the brand’s reputation as a technology leader and its regular wireless software updates.

However, most consumers remain hesitant to purchase used electric vehicles. Manufacturers are already working on new battery technologies that promise cheaper cars with greater ranges and faster charging. Companies like Mercedes-Benz Group AG and BMW have announced plans to introduce several next-generation electric vehicles by the middle of the decade, while Volkswagen, Stellantis, and Renault are developing models that cost €25,000 or less.

But there seems to be no end to this problem, so fleet management company Ayvens, as well as many analysts, say that the future of electric models is actually leasing, not buying.

Buying Guide

If you do decide to go for a used electric vehicle, it is important to pay attention to a few details. First of all, the battery!

The battery is the component that most often concerns potential buyers when purchasing used electric vehicles, but if it is well maintained, it is very likely that it has retained a large part of its capacity – states the website of the association Strujni krug and adds that manufacturers provide a warranty on batteries of 5-10 years, depending on the vehicle, and it is expected that during the warranty period, capacity does not drop below 70 percent. As for the electric motor, it requires almost no maintenance as it has no components like ‘fossils,’ but brakes, suspension parts, wipers, tires, and cabin filters wear out significantly.

– When purchasing a used electric vehicle, be sure to first pay attention to the overall condition of the vehicle. Check the body lines to see if the vehicle has been involved in accidents, try driving it to see if parts like brakes and suspension are in order. If the vehicle has been involved in a traffic accident, it is important to check that the battery casing and other parts of the electric drive have not been damaged – they state from Strujni krug.

It is also recommended to take it to an authorized service immediately after purchase so that experienced technicians can thoroughly inspect it and connect via the OBD II port to check if the car is throwing any errors. When connecting, it is possible to check the current battery capacity, so be sure to request this at the service to know if it is worth buying the vehicle.