Residual values for electric vehicles are falling behind those of internal-combustion engine cars, experts say, a trend that could threaten faster EV adoption as well as automakers’ profit margins.
Purchase incentives for new electric cars, changing technology and the cost of batteries mean that EVs are less attractive on the used car market, experts say.
"This is probably the single biggest economic effect that is going to hit the industry," said Fintan Knight, co-founder and CEO of Automotive Equity Management, a startup that benchmarks mobility assets and indexes.
Knight, a former Audi, Rolls-Royce and BMW executive, pointed to studies showing that residual values, expressed as depreciation, are more than 50 percent of the cost of mobility (with the rest being running costs, insurance and energy).
"It’s central to the business model of mobility," he said.
Automakers can offer attractive lease terms if residual values are strong, an especially important point for EVs, which are more expensive to build and sell. Buyers who balk at high list prices -- and the fear of spending tens of thousands of euros to replace a battery -- can be persuaded to switch to EVs by low-cost monthly leases and low running costs, they say.
"The higher the residual value, the more attractive leasing rates can be offered, and the more vehicles can be sold," said Martin Weiss, the head of valuations at DAT, an automotive data provider based in Germany.