Some experts warn that the poor resale values of EVs may hinder their adoption.

• In the past year, the cost of electric vehicles (EVs) decreased by 31.8%, significantly more than the 3.6% decrease in the cost of internal combustion engine vehicles.
• The high depreciation rate of EVs may discourage buyers from choosing them over combustion engine vehicles.
• The ongoing price war in the EV market may keep used counterparts' prices suppressed.

Electric vehicles are driving down the value of cars as soon as they leave the dealership, which is a significant obstacle to their broader acceptance, according to some experts in the industry and investments.

A study by iSeeCars.com found that the average price of a 1- to 5-year-old used electric vehicle (EV) in the U.S. decreased by 31.8% in the past 12 months, resulting in a loss of $14,418. In contrast, the average price of a similarly aged internal combustion engine vehicle only decreased by 3.6%.

According to Karl Brauer, executive analyst at iSeeCars, lower used EV prices may increase their appeal to some buyers, but it can also decrease demand for new electric vehicles.

"The cost of losing value in a new car during the first few years is the most expensive aspect of owning a new vehicle, according to him. He added that as more people become aware of the significant drop in EV values, they will be less likely to purchase one."

David Kuo, stock analyst and co-founder at the Smart Investor, stated on CNBC's "Street Signs Asia" on Monday that the inability of EVs to retain value had prevented him from investing in the industry.

Kuo believes that EVs, like laptops and cell phones, rapidly lose value and become outdated after being purchased.

Electric vehicles will experience the same depreciation as internal combustion engine cars, with a cost of $20,000 to $30,000 to purchase, but they will depreciate much faster in a year's time.

Representatives from and spoke to Bloomberg last year about how depreciation was negatively impacting the value proposition of their battery-powered vehicles, according to industry insiders who have also flagged EV resale problems.

Used electric vehicles (EVs) may become outdated and incompatible with updates before they are even sold, according to Kuo. This will be a "lightbulb moment" for buyers when they realize they overpaid.

Unfavorable market conditions

Although EVs may seem to have depreciation problems, the root cause might not be the technology but rather market conditions.

The decline in used electric vehicle values in the U.S. is mainly due to the aggressive price cuts by car manufacturers amid a broader price war in the EV market, according to iSeeCars.

Tesla's dominance as the top EV seller in the U.S. has led to a decrease in buyers' willingness to pay the same prices for used EV alternatives due to the lower prices of Tesla's new EVs.

If Elon Musk continues to lower Tesla prices to boost sales, he will continue to drag the entire market down, as he has over the past 15 months, according to iSeeCars' Brauer.

During an October earnings call, Musk justified the price reductions, stressing the significance of affordability to customers.

"Most people don't have a choice; it's necessary. We need to make cars more affordable so people can afford them," he stated.

In the upcoming earnings call in January, Vaibhav Taneja, the chief financial officer, announced that the company would continue to prioritize its cost reduction initiatives in 2024.

The EV price war between Tesla and Chinese competitors has persisted.

According to Brauer, the excessive supply of EVs due to overproduction has made it unlikely for both new and used EV prices to recover in the near future.

While the EV market faces ongoing challenges, electric and combustion powered hybrids are gaining traction in both new and used vehicle markets.

The decline in the average price of used hybrid vehicles was only 6.5% or $2,135 last year, which is significantly less than the decline in the average price of electric vehicles.

Brauer stated that hybrids are a great transition from gasoline to electric vehicles and predicted their popularity will rise in the next decade.