Entry of ‘low cost’ trams will accelerate “depreciation” in the used market

Tesla, the leader in the electric vehicle market, is planning to produce a low-cost model, in a move that will be followed by car manufacturers such as Stellantis and Volkswagen, in an attempt to expand the market. Chinese competition, with lower prices, also requires a response.

The effects of competition, however, will not only be felt in the sale of new cars, but also in the used car market, where the entry of new electric cars with more competitive prices will force a “forced depreciation”, according to the general director from Standvirtual, Nuno Castel-Branco.

In addition to the reduction in the price of new vehicles, technological development in electric vehicles is added, which is also a factor in price pressure in the used market.

“We anticipate, as has been seen in other technologies, that autonomy will increase. There is talk of the option of solid batteries that will probably reduce the size or automatically increase the ranges by double and start to bring them closer to a thousand kilometers”, says Nuno Castel-Branco, in an interview with Jornal Económico (JE). “As soon as there are cars on the market that charge faster and cover a thousand kilometers, a car that is not bad, that covers 400 kilometers, starts to become obsolete”, he adds, pointing out that, from this perspective, there will be a normal reaction from the consumer, which will tend to make an adjustment in supply/demand, which is “not as evident in combustion vehicles, which already have greater stabilization than electric vehicles”.

Currently, electric vehicles depreciate faster than cars with combustion engines, but Castel-Branco says that this is also due to the particular market situation.

“It is important to look at this from the perspective of the moment we are living in: the market leader in this area of ​​electric vehicles is Tesla and Tesla, in recent years, has made some price reductions with very great significance in terms of new cars, which has been highly publicized, due to its magnitude”, he points out. “Cars dropped by almost 10 thousand euros when new. This may give the perception of greater depreciation on used cars, but this is not necessarily the case. If new cars reduce, the price of used cars must also fall. But this is not normal depreciation. It’s forced because there was a price adjustment here,” she explains.

A study by Standvirtual, which is a virtual marketplace for used vehicles, compares the Tesla Model 3 and the diesel BMW 320, noting that the “depreciation of the BMW is much more gradual”. “The same thing does not happen with the Tesla Model 3, because, in fact, there was a brutal fall there. There is a huge price adjustment when new and everyone who has used ones also had to adjust them”, says Nuno Castel-Branco.

“The analysis we do is that, from 12 months onwards, cars are depreciating on average by 15%, which is not far from what is more or less expected in the depreciation of cars, that is, there is no decline here. very pronounced”, he says.

Price war

“Now, when we are in a market segment, such as electric cars, where Chinese brands are entering, where we are seeing Tesla lowering prices, where we will probably see Stellantis and Volkswagen also entering with lower cost products to make this market accelerate, this will push the prices of new trams lower and will accelerate the depreciation of used ones”, he maintains.

The general director of Standvirtual believes that this increase in competition between car manufacturers will continue to destabilize the electric vehicle market.

“Manufacturers are at war, in some way, for this market and for market share and this will certainly impact and force depreciation in some way”, he argues. “And another thing is that older electric cars could probably experience greater depreciation, because they are becoming more technologically outdated,” he adds.

“While in combustion, the car is four or five years old, more extras, less extras, but the engine [aguenta-se]. A four or five-year-old electric car might have had a hundred or so kilometers of autonomy and now it has 300. It’s already a big difference in the battery. This is almost closer to cell phones. A cell phone that is four or five years old is already more obsolete than combustion cars and, therefore, there will be this additional pressure, which is normal, on the depreciation of electric cars”, he explains to JE.