I’ve been thinking about the depreciation of ICE (and Hybrid) cars over the next 5 years.
As more manufacturers and customers move towards electric I think that ICE cars will become less desirable. Charging infrastructure still has a ways to go, but we are certainly moving in that direction.
That said, my prediction is that the depreciation rates of ICE/hybrid cars is going to increase over the next few years. Meaning they will depreciate faster (be worth less) than they have historically.
On the flip side, it’s unclear to me how depreciation on used EVs will turn out. Once they hit certain mileage the battery needs to be swapped and that is very expensive.
What does everyone else think?
The next inflation reduction act will include free replacement batteries for everyone! That should help their depreciation.
In all seriousness no one can say what will happen in the future. It all depends on monetary policy moving forward. Rates and initial purchase prices are very high, keeping evs out of range for the majority of America.
Cars depreciate historically pretty fast already.
There’s going to be a strong contingent of hold outs who won’t buy an EV and practically speaking shouldn’t without the infrastructure in place even if it’s built ahead of current rosy projections. And if car makers don’t build ICE some used cars may hold value longer.
What will gas prices look like with less demand?
Short answer is we don’t know. I have an EV and love it and anticipate having at least one gas tank in the garage for at least a decade.
I do think that the lower cost of mile with EVs will be a threat as more used EVs hit this market. For people on a budget that may make the EV a more economically sound choice vs a used ICE car for their day to day with per mile costs when you lump in charging vs gas and maintenance .
Until then I’ll buy what I want to drive and I expect the carmakers will do their best to build what they think people will buy.
Gas prices will increase independent of any actual supply and Demand variables. Oil companies have already shown to increase prices on speculation on a whim if it suits them.
Nobody got to vote on the IC car bans. It was done by executive orders. Demand will remain strong, supply will decrease, and as anyone with even a rudimentary understating on Econ 101 stuff, when that happens prices will increase.
It’s always upper middle class people who live in mild climates in cities with 7 mile commutes that push for EVs. Oh I can so totally charge my Tesla in my 4 car garage overnight and it’s ready to go to my suburban office park the next day. Yeah great. Now what about people in apartment buildings? What about people with with houses and no garages (ghasp!!). What about people who have 60 mile commutes? What about people who live in places that get to temps in the negatives on a regular basis and cut EV ranges in 1/2? What about people who need to drive F350s for their business? And most of all what about people who simply can’t afford $50K for a new EV? I know it may come as a shock to peeps here who debate the merits of $1000 leases all day, but some (maybe most) people in the world cannot afford these toys. They can barely afford a $5K, 10 year old used Corolla.
But these people don’t exist in the minds of people like Gavin Newsom, I suppose.
Think the opposite. Momentum is on mass EV adoption which is going to run into more and more issues with charging, energy costs, lack of available minerals, etc. gas isn’t going anywhere in next 5-10 years.
But let’s say in 10 years there are 10k used EVs and 10k used Corollas. Realizing this is highly geographically dependent. But if there is a charging infrastructure (plugs where there are currently parking meters, along highways, at gas stations) and the cost per mile of an EV vs. ICE is 20-40% then the smarter choice for that average American may be an EV.
Like you said this is an interesting Econ 101 debate that will be influenced by markets, consumer demand and government subsides.
It’s not going to be 20-40%. That is a flawed assumption IMO. It’s going to be far closer.
That $10K Tesla will need a $10K battery replacement when it’s 10 years old though.
And again you have the big city mentality. Parking meters? How many of those do you think exist in rural America? I mean I know those are just dumb rubes (who grow your food by the way) so who cares about them right?
EVs are essentially luxury cars. There will be a market for them like there is a market for a traditional luxury cars. But it will never me the car of choice for the masses.
That’s your and my guess. Today it’s 3-5 cents a mile for an EV vs. 17-20 cents for a gas powered car. Now that’s heavily dependent on your kWH costs, gas prices and climate where you drive. The mineral concern is real and could drive costs higher. But there’s also technology. Do we think that via technology we can drive lower costs per mile?
Sure a $10k Tesla might need a battery replacement eventually. Will it cost that much? Is its a higher risk than your $10k Dodge Dart’s transmission going?
Not trying to be the EV fanboy here and this is not a question about present state but an interesting 5-10 year look forward. I think it’s a ridiculous assumption that car makers will stop making ICE cars even in 20 years. But also the notion that in a country that figured out how to bring cell service and electrification to the far reaches of our country can’t figure this out over time. Last I checked rural America has electricity.
Ideally let the market and consumers decide. But I actually think the market forces over time might nudge EVs to be a more compelling choice than we expect for the average Joe and not just in densely populated blue states.
Market forces so far have been pretty bad at encouraging EV. Without federal and state subsidies , there would be few EV on road.
the average person will gladly take an old toyota or honda over an old ev. electricity/ battery prices haven’t been going down either.
EVs have been around for what 15 years? It’s not like it’s some deeply kept secret that doesn’t escape Miami or San Francisco. Consumers have had a choice of IC vs EV for a long time. And outside those small pockets like SF, LA, Miami, etc the American public has said thanks but I’m good with what I have.
EVs are so good that the only way to get people to buy them is by banning the competition, LOL. Weird how Apple doesn’t need the govt to ban Samsung. People, just you know, buy Apple products because they want to.
a dart transmission is no where near $10k and if you want to avoid that expense a manual is cheaper to maintain.
At the high end it’s a non issue. Tesla sales haven’t skipped a beat.
We haven’t seen what will happen after 30k EVs flood the market.
Tesla solely exists because of the initial subsidies. 100% would not be in business without.
I would say supply and demand economy rules will kick in and prevent any catastrophic event . Like somebody pointed out , ice depreciation is already quite bad but won’t probably be twice as much not any time soon but never . Could X5 residual from from %52 to %49 in 10 years ? Maybe. But guess what , it dropped from %57 to %52 just recently and the reason was not ev adoption ( maybe a little). So if you are holding buying your dream Raptor because you think it will be worth $5K when he turns five, please don’t, you will be missing out on jealous looks on the stop sign from the Leaf driver next to you.
Manufacturers are all but eliminating ICE engines over the next 15 years or so. The mass market isn’t going to have a choice if they want something new. And those old cars ain’t gonna last forever.
That being said, I don’t think ICE engines are going to be gone tomorrow, and think they’ll hold their value ok during this transition. There are still tons of people who have no interest in EVs, and would much prefer the ICE engine they are used to. They don’t trust the tech, think the battery is going to need replaced in 5 years, think it’s too expensive, etc… I also don’t think EVs will hold their resale value very well in the short-term (notwithstanding the current vehicle shortage debacle). Tech is going to continue to change and mature. Just like a computer, what you buy today will be obsolete tomorrow.
Eventually though, these people that refuse to drive anything but ICE are going to die off, and the younger generation will not be interested in them, as they aren’t the latest and greatest tech.
So the last 5 years they were just being generous I guess?
I don’t think he’s saying the tranny is 10k…the CAR can be bought for 10k.
Although most would probably argue that’s still too much for a Dart.