Driving Into the Future: The Surge of the Used EV Market
Electric vehicles (EVs), including commercial vehicles, scooters, and cars, are surprisingly unpopular in the used vehicle market. In a few cases, they are often sold for less compared to fossil fuel-powered models. The reason for anticipating this theory revolves around the challenge of precisely determining an EV’s remaining battery life. The remaining battery life is considered a crucial factor determining the EV’s cost, which significantly impacts how much a used EV is worth. With the growing trend of electric vehicles, the market for used EVs is also expected to increase.
In September 2024, the largest electric car market, Tata Motors, joined hands with used car marketplaces to facilitate the resale and exchange of electric vehicle owners who are looking to upgrade their EVs. Tata Motors is said to have the largest car park in the electric vehicles segment in India, with an estimate of around 170,000 units. As a pilot, Tata Motors started working with Spinny, one of the used online car marketplaces.
Used Electric Vehicles (EVs) Market Drivers
The increasing demand for used EVs can be attributed to several factors. The primary reasons are increasing sales of new EV models worldwide, the faster development of the charging infrastructure, and government policies supporting this market. The charging infrastructure is being incorporated into residential buildings, and the number of publicly accessible chargers is increasing to enhance convenience and accessibility.
According to IEA (International Energy Agency), at the end of 2022, there were 2.7 million public charging points worldwide, more than 900,000 of which were installed in 2022. In this regard, globally, more than 600,000 public slow charging points were installed in 2022, out of which 360,000 slow chargers were installed in China, which brought its stock of slow chargers to more than 1 million. By the end of 2022, China was home to more than half of the global slow electric vehicle chargers. On the other hand, Europe ranked second in the case of slow electric vehicle chargers, with 460,000 chargers in 2022, which was a 50% increase as of 2021. In Europe, the Netherlands is leading with 117,000, followed by 74,000 chargers in France and 64,000 in Germany. Furthermore, the slow-charging stock doubled year-on-year in Korea, reaching 184,000 charging points.
Figure 1: Slow Electric Vehicle Chargers in Top Countries, 2022
Source: IEA
The market opportunity revolves around purchasing used electric vehicles at more affordable prices than new models from various online platforms. Buying used EVs would help customers adopt sustainable technologies at much more affordable prices and contribute to reducing carbon emissions. Increased consumer environmental awareness and government incentives for adopting zero-emission vehicles are major factors for the used EV market’s growth.
- The falling prices of used EVs are one of the major drivers of market growth. According to Recurrent Motors, Inc., the prices of Tesla cars have fallen 67.89% in the last two years since 2022. In 2024, the price of the 2021 Tesla Model 3 sedan dropped by an average of about 29%, going from $40,522 in January 2023 to just $28,700 in January 2024. Furthermore, 2021 model-year used vehicles of all types further lost about 19.5% in value over the same period.
- According to Recurrent Motors, Inc., the sale of all used BEVs and PHEVs has been higher than that of most EV models.
- Tax benefits related to buying an EV are a major benefit to the buyers. Finance Minister of India, on 1st July 2024, announced during the presentation of the Union Budget 2023 that electric vehicles will become affordable in India through the support of extending battery subsidies for another year. This was mainly done because Green Growth came under the top seven priorities of the Union Budget 2023. In this regard, the government of India announced tax benefits under the new Section 80EEB, by which individual taxpayers can have tax deductions of up to 1.5 lakhs on the interest component of a car loan taken to buy an EV.
- According to the report published by the IRS on the “Used Clean Vehicle Credit”, the United States, beginning 1st January 203, buying a qualified used EV or fuel cell vehicle (FCV) from a licensed dealer for $25,000 or less may be eligible for a used clean vehicle tax credit. The credit further equals about 30% of the sale price with a maximum credit of up to $4,000.
Increasing Sales of Electric Vehicles
According to the IEA (International Energy Agency), the sale of battery electric vehicles (BEVs) increased from 4.7 million in 2021 to 7.4 million in 2022 and 9.5 million in 2023. On the other hand, battery hybrid electric vehicles (BHEVs) sales were 1.9 million in 2021, 2.9 million in 2022, and 4.3 million in 2023. The demand for BEVs and BHEVs has increased by 102.13% and 126.32%, respectively, from 2021 to 2023. This increase in the sale of new EVs would boost the use and adoption of a sustainable vehicle ecosystem, leading to increased demand for used EVs.
Electric vehicle sales are driven in major regions of the United States, China, Europe, and India. The buying of electric vehicles is driving the demand for EV batteries. According to the International Council on Clean Transportation (ICCT), in the United States, sales of new electric light-duty vehicles reached about 1.4 million in 2023, up from nearly 1 million in 2022.
This is a sales share of about 9%. China remained the world’s largest EV market, with approximately 3 million EVs sold in 2023. This is a 5%-point increase from the previous year. India doubled its sales to 100,000 EVs, reaching 2% of its new LDV sales in 2023. With government backing, growing trends toward electric vehicles, and the application of innovative technologies, the use of EV batteries will increase, as will the expected growth of the recycling of EV batteries.
Electric Vehicle Battery Recycling Market
The EV battery recycling market is a significant factor responsible for driving the used EV market growth. The battery recycling segment in the used EV market is essential as it creates a sustainable environment, thus enhancing the lifecycle of EV batteries and reducing the costs associated with raw materials. Not only this, but the recycling of EV batteries also promotes a circular economy that allows valuable materials such as lithium, cobalt, nickel, and graphite to be recovered and re-used.
The major regions are China, the USA, Europe, and India, where EV sales are significant. The government’s support for the development of recycling plants is a significant reason for the EV battery recycling market’s growth. Technological advances and innovation also play a critical role in the market’s expansion.
- In May 2023, Glencore and Li-Cycle announced a joint study to develop a European recycling hub. This is expected to create the first European fully closed-loop solution from lithium-ion battery material inputs to battery-grade products. This could be Europe’s largest source of recycled battery-grade lithium, nickel, and cobalt. This Hub has a processing capacity of 50,000 to 70,000 tonnes of black mass input annually. This Portovesme Hub would leverage Li-Cycle’s state-of-the-art hydrometallurgical technology. It is anticipated to be Europe’s largest producer of sustainable battery-grade products, located in Sardinia, Italy.
- In June 2024, Altilium and Enva Signed an MOU for an EV battery recycling partnership. This partnership would help Enva and Altilium leverage collection infrastructure, recycle old EV batteries, and recover critical materials. This would help create a circular economy for battery minerals in the UK. Altilium can recover over 95% of the battery metals using advanced hydrometallurgical recycling processes.
Government Policies Supporting Electric Vehicles
Favorable government policies are leading to the adoption of EVs. According to the U.S. Department of Transportation, the U.S. Federal Government set a goal to make half of all new vehicles sold in the U.S. in 2030 zero-emission vehicles and to build a convenient network of more than 500,000 chargers. This will support making EVs accessible to all Americans, aiming towards local and long-distance trips.
According to the Governor of California, an executive order was issued requiring that by 2035, all new car and passenger light truck sales be zero-emission vehicles. This order was issued to move the state further away from its reliance on climate change-causing fossil fuels while retaining and creating jobs and initiating economic growth. As part of this order, the California Air Resources Board developed regulations that mandated that 100% of the in-state sales of new passenger cars and trucks be converted at zero-emission by 2035. This regulation will support achieving at least a 35% reduction in greenhouse gas emissions as well as an 80% improvement in the oxides of nitrogen emissions from cars state-wide.
In India, under the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) scheme, the government formed a national policy relevant to EVs, which was implemented by the Ministry of Heavy Industries for five years with a budget of Rs. 10,000 crores.
Furthermore, the European Union adopted a law in 2023 to make all new cars and vans sold in Europe zero-emission from 2035. In 2023, the most popular alternative to diesel and petrol cars was battery electric vehicles (BEVs), which represented more than 14.6% of all new cars sold in the European Union. Thus, these developments by various governments are the reason for the faster adoption of electric vehicles.
Used EV Market Restraints
The market for used electric vehicles faces challenges that are expected to hinder its growth and adoption. A reasonable amount of the battery resale value concerns arise from the depreciation and residual value of the unit. Unlike traditional internal combustion engine vehicles, which tend to retain their value more effectively, used EVs have seen dramatic drops in resale prices. For instance, the residual value of electric vehicles is declining at a faster rate than that of ICE vehicles. In this regard, a study in the United States found that the average price of a one-to-five-year-old EV decreased to 31.8% year over year, equating to about $14,418. Additionally, in comparison, the average price for similarly aged ICE vehicles fell 3.6%. This depreciation may dissuade potential customers who resent paying for a car which will easily lose value. From the customer’s point of view, the residual will not only be lower than expected but also impact the battery’s longevity and performance. Some consumers are willing to reduce gas consumption and embrace the electric vehicle movement only. Still, they are held back by the uncertainties of owning such automobiles.
Infrastructure and service support scarcity is another major problem confronting the used EV market. Most of the independent garages and workshops are unable or unwilling to service electric vehicles, particularly in rural places. As a result, consumers may become anxious about maintenance and repair options available for purchased used EVs. Charging infrastructure has started developing but is still lacking in some areas, making potential buyers more worried about range anxiety. In the absence of a decent network of charging stations, customers can be wary of buying used EVs since they would expect to face the trouble of locating adequate charging facilities. Tackling these issues requires manufacturers, governments, and service providers to work together to increase consumer confidence through better infrastructure, more detailed information on the total cost of ownership, and innovative approaches to avoid consumer depreciation concerns.
Used Electric Vehicle Market Players
- Com Inc: The company’s website features various models and displays the average fuel savings. Users can also search for vehicle details.
- Cars24: The company presents different models on its website and has retail outlets where customers can view cars for sale. It is a leading player in the sale, purchase, and financing of pre-owned cars in India, Australia, Thailand, and UAE.
- TrueCar, Inc.: TrueCar is an online marketplace for new, used, and certified pre-owned vehicles. On its website, customers can engage in buying and selling automotive transactions. TrueCar partners with a network of certified dealers to offer one of the most expansive inventories. It is bringing more transactions online and offers unique solutions for purchasing a car for any budget and any number of times.
- Find My Electric: This online marketplace allows anyone to list their vehicle for sale and complete the transaction on the website in a few easy steps. First, enter the vehicle information, upload photos of the EV, and give a detailed description. Once the listing is live, interested buyers will contact the seller using the contact information. Both parties can choose the structure of the deal and negotiate the best price.
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