Rise of brand new used electric vehicles

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David Cottrell received its $39,999 Tesla Model Y last February. The compact electric hatchback was a fantastic vehicle, he said. But just a few months later, he decided to enter the make and model on the website of an online used car shop. Surprise! The Tesla was already worth $10,000 more than he and his wife paid for it. They were considering buying a home in their hometown of Seattle, and the extra cash seemed like a no-brainer. By June, they had sold for $51,000—not a bad profit.

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Now Cottrell looks back on the deal with regret. He loves his new home and is delighted with his booking for a larger home. Rivian electric truck due to be delivered this summer. But when he plugged the same Model Y back into an online used car shop this month, he found that the car would only cost about $2,000 less than what he sold, even with the 20,000 miles he’s driven since. . “If we could keep it, I could ride here for a year and could come out on equal footing,” he says.

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This is not how a car’s lifespan should work. They should lose their value over time. This is why used cars tend to be cheaper than new ones. But now everything is upside down. A toxic mix of supply shortages in an era of pandemic and inflation has sent used car and truck prices skyrocketing, up 35 percent in March from the same period last year. US Bureau of Labor Statistics. According to Luke Walch, owner of Green Eyed Motors, a dealership near Boulder, Colorado that specializes in electric and hybrid vehicles, it’s not uncommon for some used luxury cars like Porsches and Corvettes to sell for more than their original price. Now, “it’s seeping into the commoner’s car,” he says.

In the world of electric vehicles, things are especially strange, as used cars seem to be getting newer. Numbers tracked Recurrent, which monitors electric vehicle batteries, and research firm Marketcheck suggest that most used electric vehicles for sale last year were four or five years old. Today, just under a third of used electric vehicles are three years old. Electric vehicles sold in 2020 or 2021 account for 17.5% of inventory. “This is is an weird,” says Brian Moody, executive editor of Autotrader, an online car marketplace. In fact, the whole situation is almost unprecedented, he says.

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Photograph: Mario Tama/Getty Images

If you are someone who is hoping to switch to electricity right now, that is also unfortunate. Despite high prices, electric and hybrid vehicles are disappearing from lots faster than they can get them, Walch said. Carvana, a company that buys and sells used cars online, says 90 percent of its electric vehicles are in the process of being bought, up from 45 percent just over a month ago.

The rise of new used cars began with chip shortagewhich began to seriously affect the production of cars in 2021. Modern cars use at least 100 chips each to drive their complex electronic systems, and especially sophisticated electric vehicles can use up to 1,000. But when the Covid-19 pandemic first hit in 2020, automakers cut their sales and chip purchase forecasts. Chipmakers sold their wares elsewhere. Federal stimulus checks followed, sending thousands of dollars into US bank accounts. Some Americans were looking for large purchases with chips, such as computers, game consoles, and cars. But automakers no longer had the silicon to build cars and were forced to slow down or even stop production. The confusion pushed up the prices of new cars and led to more price-sensitive buyers in the used car market, where prices also rose.

The Russian invasion of Ukraine and subsequent sanctions on Russian exports have created new bottlenecks in the supply chain. The price of nickel, a component of some chemical elements for electric vehicle batteries, swung a lot last month. Gasoline prices skyrocket in the US encouraged car buyers to look for electric vehicles. “Prices [electric vehicles] crawled up for a while, and then there was a big bounce because of the war and high gas prices,” says Al Bastanmer, owner of Green Light Auto, a wholesale company that sells used electric vehicles and hybrids in Daly City, California. “It’s just crazy. This is a record high.”

The crisis of new and used electric vehicles, and the temptation of electric vehicle owners to abandon their new Tesla, Ford Mustang Mach-S, and even lower end cars like Nissan Leafs could stay for a while. New cars are getting slightly cheaper, with new car transaction prices falling 0.3 percent between February and March, according to Kelly Blue Book, an automotive research company. But new car transaction prices remain stable and even rising for electric vehicles (up 1.8% over the same period) and hybrids (8.6%). In other words: new green cars are not getting cheaper now.

But with the electrics, the big problem is that some new cars that were supposed to enter the market in 2020 and 2021 were never produced. This means that there will be fewer used cars on the market this year, next year and next. “At some point, new car prices will recover, but it will take a long time,” says Scott Case, co-founder and CEO of Recurrent, a battery health company. “This whole system – it will take a long time to work it out and move to the new normal.”

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