The failure of consumers to buy enough electric vehicles (EVs) to hit central planners’ targets is one reason that increasing efforts are being made to “encourage” them to switch over from traditional cars.
There are many reasons that EVs are, once relatively wealthy early adopters have bought theirs (typically making sure that they hang on to a spare traditional car — or two), struggling to find the hoped-for demand, but one of them is that they do not appear to hold their value.
In the $1.2 trillion secondhand market, prices for battery-powered cars are falling faster than for their combustion-engine cousins. Buyers are shunning them due to a lack of subsidies, a desire to wait for better technology and continued shortfalls in charging infrastructures.
Such are the difficulties that come with forcing a technology onto the mass market (the rise of Tesla is a different story) before either the technology or the supporting infrastructure is ready.
Fortune:
Because most new vehicles in Europe are sold via leases, automakers and dealers who finance these transactions are trying to recover losses from plummeting valuations by raising borrowing costs. That’s hitting demand in some European markets that were in the vanguard of the shift away from fossil fuel-powered propulsion. Some of the biggest buyers of new cars, including rental firms, are cutting back on EV adoption because they’re losing money on resales, with Sixt SE dropping Tesla models from its fleet.
“When a car loses 1% of its worth, I make 1% less profit,” said Christian Dahlheim, who heads VW’s financial services arm. The issues with secondhand EVs, he said, have the potential to destroy billions of euros in earnings for the broader industry.
Those are billions of dollars that will not be available to be invested in the EV production insisted on by a growing number of governments. The chances of auto bailouts in a few years are not, I suspect, remote.
Fortune:
The problems are expected to intensify next year, when many of the 1.2 million EVs sold in Europe in 2021 will come off their three-year leasing contracts and enter the secondhand market. How companies tackle this problem will be key for their bottom lines, consumer confidence and ultimately decarbonization — including the European Union’s plan to phase out sales of new fuel-burning cars by 2035. . . .
China offers a cautionary tale. Lucrative subsidies turned the country into an EV giant, but also produced weed-infested graveyards of abandoned battery-powered vehicles. Any similar eyesores in Europe or the US may strengthen calls from conservative politicians to roll back aid for the industry, with key elections coming up in the US and Europe in 2024.
EVs (which won’t do much for the climate anyway, at least any time soon) are “clean” cars, remember.