'We've seen this before': Used electric vehicle prices and sales hit rock bottom

12/13/2024 12:00 AM

As Australia's new car market braces for an electric vehicle onslaught coming from both new brands and established ones, battery-powered cars in the second-hand market have fallen to record-low numbers.

According to the latest monthly Automotive Insight Report (AIR) – which gathers used car sales data from private sellers and dealerships across Australia – second-hand electric vehicles (EVs) are taking longer to sell, while losing a large chunk of their original value in comparison to traditional petrol- and diesel-powered cars.

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For context, the November 2024 report – collated by the Australian Automotive Dealer Association (AADA) and Autograb – revealed that EVs took an average of 61.6 days to sell for the month, a decrease from the peak of 67.3 days recorded the month prior.

Of most concern for sellers is the decreased retention value of battery-powered vehicles – which means how much of the car's original retail price you’d be able to get back if it was sold today – with one- to three-year-old EVs retaining 75.5, 67.2 and 62.6 per cent of their value respectively.

When going by the retention metric, a Tesla Model 3 – the best-selling EV in the used car market – sold in January 2023 would sell for approximately $48,244 – or 75.5 per cent – of its original $63,900 retail price (before on-road costs) if it was sold in November 2024.

However, depreciation is further compounded among four- to five-year-old battery-powered cars, with EVs in that age bracket losing approximately half of their original retail sticker price, recording retention values of 50.9 and 48.5 per cent respectively.

Despite an overall drop in value and sales across the board, petrol and diesel cars are still the overwhelming favourite among used car buyers in Australia, accounting for 94 per cent of used car sales in November 2024.

For comparison, a two- to four-year-old Toyota Corolla – the top-selling second-hand passenger car in November – retains 96.4 per cent of its original value while taking 39.4 days on average to sell.

November 2024 used car sales broken down by fuel type. Source: AADA/Autograb

"Rapid depreciation is naturally a concern for people buying EVs, but many EV owners will comfort themselves by thinking of the fuel [and] taxation savings, and potential incentives," James Voortman, the AADA CEO, told Drive.

"The reality is that we have seen this before, when hybrid vehicles were first rolled out decades ago.

"They [hybrid vehicles] also struggled to retain their value, and now that the technology is trusted and accepted values are holding up," Voortman added.

To make matters worse, used electric vehicle sales in November experienced the largest drop at 8.3 per cent, followed by plug-in hybrids at 7.4 per cent, then LPG at 4.3 per cent.

Despite the downward sales trend, it’s worth noting that the AADA only started reporting on EV retention value in the past couple of months.

Additionally, the dealer industry body previously said the pricing volatility of used electric cars is indicative of a smaller sample size in the domestic second-hand car market in comparison to other fuel types such as petrol, diesel and hybrid.

Why are used electric vehicles going down in value?

Experts have pointed to the influx of brand-new affordable EVs coupled with aggressive discounting in the new car market as a major catalyst for the large depreciation of second-hand battery-powered cars locally.  

"The low retained value for five-year-old EVs is due to a combination of factors, primarily the growth in affordable new EV options and significant discounting," Voortman explained.

"There is also a healthy supply of used electric vehicles, where listings have almost doubled in number compared to the same time last year.

"[EV] demand declined in almost every state and used EVs are also taking longer to sell on average compared to their ICE (internal combustion engine) counterparts, which may influence a seller's willingness to drop the price of a vehicle for a sale," he added.

Additionally, the competitive retail pricing of new electric cars, coupled with the rush of several Chinese brands looking to establish a foothold in the domestic market, has made upgrading to a new EV more appealing to Australian drivers.  

Speaking at a recent inquiry into Australia’s transition to electric vehicles, John Khoury, Industry Policy Advisor at the Victorian Automotive Chamber of Commerce (VACC), said:

"We're seeing some companies decrease prices, really sweeping discounts – some might call it price war. It's the likes of Tesla, BYD and others, [have] significant price reductions. If I'm a consumer, I might be waiting for another one."

For context, the cheapest electric car four years ago was the MG ZS EV SUV, which was priced at $43,990 drive-away. Flash-forward to November 2024 and the title belongs to the GWM Ora in its standard range variant, which starts from $35,990 before on-road costs.

According to Voortman, the competitive pricing of new cars has led to an increased supply but decreased demand in the second-hand car market, regardless of fuel type.

"This trend is likely to persist as more affordable new vehicles enter the market, prompting buyers to upgrade sooner and increasing the supply of used cars, which will affect price sensitivity," Voortman said in a written statement.

The average retention value of electric vehicles between November and October across five years. Source: AADA/Autograb

Outside of industry trends, the decreasing consumer demand for battery-powered cars in the new and used domestic car market has played a significant part in their depreciating value.

For reference, new electric vehicle sales dropped by 24 per cent in November 2024, spearheaded by Tesla’s 36 per cent plunge in deliveries, with the US electric pioneer experiencing a sales slump in nine months of this year.

In terms of the used car market, AADA’s 2023 report identified that EVs accounted for 0.7 per cent of the total market share last year, with 13,748 second-hand electric cars reported as sold.

Meanwhile, used hybrid vehicles had a 3.1 per cent market share in the domestic used car market, with 61,443 second-hand hybrids reported as sold in the entirety of 2023.

As a comparison, petrol and diesel cars accounted for approximately 96 per cent of the entire second-hand car market with 1.3 million and 625,357 sales respectively.

How are car brands protecting consumers from EV depreciation?

In response to the dwindling customer demand amid declining value and pricing, some car makers such as Volvo, Polestar, Kia, and Hyundai offer a Guaranteed Future Value Program (GFV) on their electric vehicle offerings.

While manufacturers have their own specific terms and conditions, generally speaking, the financing program works by the customer and brand agreeing on the minimum future market value of the car.

Once the leasing term for an EV ends, under the GFV, a customer either has the choice to own the car outright by paying the minimum agreed value, or alternatively that deferred balloon payment can be applied towards a new car’s leasing contract.

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