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What’s Your Take on Used Electric Vehicles?

Zabir Rahman | October 15, 2021

Until a little over a decade ago, electric vehicles were seen as impractical. But there was a distinct change in perception when Tesla Motors announced their vehicle roll out.

What’s Your Take on Used Electric Vehicles?

Electric vehicles were being talked about with great interest in the mid-1990s in the US.
Poor air quality levels, and especially over the state of California, were cause for concern. In fact, California has its own specific air quality monitoring agency called the California Air Resources Board.

A little over two decades ago, the US state must have been the equivalent of India’s heavily polluted national capital region. It received wide press coverage, and climate change activists would highlight how the ozone layer above it was severely damaged.

General Motors launched an electric car called the EV1, in 1996. It was unlike other commonly seen American cars. With its compact dimensions, it was more reminiscent of fuel efficient Japanese or South Korean hatchbacks. Several other manufacturers made a concerted focus, at the time, to launch battery electric vehicles. Even Toyota launched an electric version of its RAV4 model.

But they were all crushed

Despite reasonable sales, General Motors recalled every single EV1 and destroyed them. The primary reason was because electric vehicles meant lower customer lifetime values. Since these vehicles had no lubricants, and had way fewer moving parts, their dealerships would hardly see any business. A documentary called “Who Killed the Electric Car” is based on this event.

To place into perspective, a vehicle with an internal combustion engine has about 2000 moving parts. In comparison, an electric vehicle has just about 20. That’s right, just 20 moving parts. What this means is there are fewer parts that will experience wear and tear. And as a result, maintenance costs would be significantly lower.

The affected businesses would, however, number several thousand — spanning parts manufacturers, fuel companies, automobile dealerships, and of course, General Motors themselves. From a business point of view, killing the EV1 was, therefore, a no-brainer. But from an environmental standpoint, it was a harsh decision.

Around the same time, India saw its first electric car maker begin operations. It was Bangalore-based Reva. The built a tiny grotesque car called the Maini. Barring metropolitan cities, only a handful were ever seen in smaller cities and towns. At some point along the way, Reva was acquired by Mahindra. Besides other innovations, its design received a major update. It was available as the Mahindra e20 until 2017, that marked its final year in production.

Residual values of electric cars

In the majority of cases, when an individual or organisation purchase a vehicle, they shortlist several factors their new car must fulfil. Besides fuel economy, seating capacity and features, the car’s residual or resale value is also given fair importance.

Residual value is the estimated price the vehicle will command in a few years from now. On average, most car buyers will consider what their purchase will be worth in, let’s say, five years from their year of purchase. It is also, you could say, the car’s value that remains after deducting depreciation.

While assets like real estate, watches or even some rare or classic cars, go up in value over time, most regular vehicles will depreciate.

Across the world, the used vehicle market is a massive segment. Going by estimates, for every new car sold, there is a corresponding sale of a used vehicle too. In just the US, there were 43 million used vehicles sold in 2020.

In India, it numbered an estimated 3.8 million units sold during the same period. Of these numbers, used electric vehicles are steadily gaining market share. What is more interesting to note is the fact that the majority of electric vehicles are also holding their values better — meaning their resale prices are much higher than their fossil fuel powered cars. And the key reasons for this trend are identical to the ones that drove GM to cannibalise their own product.

What prompted the change in perception?

Until a little over a decade ago, electric vehicles were seen as impractical. They were viewed as a secondary car, that could only be used within city limits. Battery technology was still quite ancient at the time, and most could only manage about a 100 kms on a single charge. A further downside was the extended charging times needed.

But there was a distinct change in perception when Tesla Motors announced their vehicle roll out. Almost overnight, consumers were taken aback by their space-age offering. Teslas boasted top notch aesthetics, their fit-and-finish rivalled that of Japanese high-end vehicles, and they promised ride and handling like the offerings from Bavaria. Oh, and all while delivering over 200 kms on a single charge. And if speed was your thing, well, Tesla had you covered too.

Zabir Rahman

Zabir drives research writing at Stonebench, Singapore. His core interest was automobiles, although with time, he thinks he is growing more fond of writing and teaching. Zabir is now keenly interested in the technology space and is part of the Elbyte editorial team.

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