How EV depreciation will impact the cost of mobility

It was once a hard truth that each minute you drove and each mile that you covered your car got closer to the end of its useful life.

For the cars that gave us highly valued individual and mass mobility over the last century, this could be as much as 20 years. But this era is coming to an end.

More often the car is not yours -- it is leased -- and more often, it is not a combustion-powered car but an electric vehicle.

Depreciation for those EVs -- and therefore the cost of mobility -- is very high compared to the overall market.

This will bring a new era not just in technology but also the business models that can survive with a dramatically higher cost of mobility.

Here are some of the numbers to back this up.

A 24-year-old BMW 3-Series sedan in Germany has a retail market value of 2,437 euros, that is 5.2 percent of the price for which it was originally sold. For a Porsche 911 the retail value after 23 years is 14,102 euros or 7.5 percent of its original price.

The fact that something is less useful, in this case the 911 (forgive us Porsche), does not mean it has less value. The market decides value, and the market changes.

So, how is the market valuing EVs?

At the moment EVs are trendy -- in both the new and used car markets.

New electric models join the market every day at various price points. As with the introduction of all new technologies, the market delivers sometimes resounding judgements on failure and success.

The failures are punished with low interest, low demand and low transaction prices, the winners with the opposite.

Today, in Germany, the average net retail transaction price for a new EV is 62,952 euros. This market is high revenue for the brands that build them and the dealers that sell them, so far.

These high prices not only make buyers nervous. The lease and finance companies that increasingly own the largest proportion of them are also nervous. How far will the prices of these cars fall over the next three years, five years or longer?

The nervousness is justified. After all, battery life and the ever shrinking range, between 2 to 3 percent a year, under optimal charging and use behaviors, could result in a precipitous loss of usefulness after eight years.

This makes the purchase of a 5-year-old car and a 3-year-old car very sensitive to the so-called expiry date. No matter how exciting the rest of the package, a brick is not a car.

Market value for used EVs is strong. In Germany, 36-month-old EVs sell for a net retail average of 40,247 euros. At that price, the retail depreciation spread between new car values and used car values is -36 percent.

The average market price for new cars trading in Germany today is 32,184 euros. For 3-year-old cars it is 26,262 euros. The depreciation spread between new and used car prices of all cars in Germany is -18 percent. Half as much.

The overall market today implies a significant value loss for electric cars, but the asset you choose and when you buy or sell can make a big difference.

Make no mistake depreciation for electric cars, and therefore the cost of mobility, is very high compared to the overall market. This will bring a new era not just in technology but also the business models that can survive with a dramatically higher cost of mobility.