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One word describes the task of reliably forecasting how much a used electric vehicle will be worth at the end of its lease (called residual value): impossible. That’s the latest finding from CAP Motor Research, one of the UK’s biggest providers of vehicle valuation data for […]

One word describes the task of reliably forecasting how much a used electric vehicle will be worth at the end of its lease (called residual value): impossible. That’s the latest finding from CAP Motor Research, one of the UK’s biggest providers of vehicle valuation data for leasing companies, insurance firms, vehicle retail groups and financial institutions. The findings signal just how early the market is for electric vehicles (how much unknowns there are) as well as the fact that the introduction of the electric vehicle’s battery changes the entire metrics game for companies like CAP.

CAP’s commercial and financial customers are keenly interested in getting residual value estimates so that they can determine what types of vehicles to buy in the future. But at this point, determining that data when it comes to electric vehicles is just too difficult, because CAP says there’s just too much uncertainty surrounds charging systems, overall running costs and especially the battery, generally the most expensive chunk of upcoming electric vehicles.

CAP Communications Manager Mike Hind notes in the firm’s release that, by some estimates, electric vehicle owners may have to spend up to £10,000 to replace an old battery. That’s significantly more than consumers and fleets are accustomed to paying for most repairs and parts for today’s gas powered vehicles. And at that rate, says Hind, it seems unlikely that an electric vehicle with a lot of miles on it, “will have any residual value at all.” In other words, if you take the value of a used electric vehicle and subtract the cost of getting a new battery for it, you probably won’t have much left over.

But that scenario also implies an assumption that batteries will have little or no value in secondary markets after they degrade beyond their useful life in vehicles, and that may not be the case. For example, Nissan is forming a joint venture with Japan-based trading house Sumitomo to recycle lithium-ion batteries from electric cars to be used in energy storage devices for backup power, in an effort to help make plug-in models like the upcoming Nissan LEAF more affordable for the mass market.

Other vehicle technologies, when first introduced, have presented similar challenges for residual value forecasters. As Ward’s Auto has pointed out, when the Toyota Prius and some of the earliest in-vehicle GPS systems first rolled out, their long-term values were significantly underestimated. But the ratings rose after they had time to be proven on the road.

With electric vehicles, the inherent uncertainty surrounding a new technology’s long term value is exacerbated by the fact that the biggest question mark rests on the costliest piece of the car (electric vehicle infrastructure startup Better Place, whose plan involves buying hundreds of millions of dollars’ worth of batteries to “swap” into subscribers’ vehicles, has estimated that manufacturing costs for plug-in car batteries won’t drop below €8,000, or about $11,440, until after 2012). And it’s not only how the battery performs in the vehicle that matters, but also how it might be recycled or reused for other applications.

This isn’t totally unknown territory, however. Tesla expects that after seven years or approximately 100,000 miles, the battery pack in its Roadster model will drop down to about 60-65 percent of its “ability to hold its initial charge,” thereby reducing the car’s range, according to the company’s S-1 filing. Better Place has told us that for lithium-ion batteries produced in the next several years, it expects them to degrade down to about 80 percent of their original capacity (marking the end of their useful life in vehicles) after eight years on the road.

Another big unknown is that manufacturers are considering a variety of approaches and business models to sell electric vehicles, says Hind. For Nissan, which plans to roll out the electric LEAF sedan (pictured) later this year as part of its aggressive efforts to lead the EV market (along with partner Renault), an initial solution to these challenges is to take financing into its own hands. If Nissan is the one issuing the lease contract, the logic goes, then it gets to set the residual value. Factoring in more optimistic estimates of long-term vehicle value and secondary markets for lithium-ion batteries (such as grid storage), this could help the company offer lower monthly lease payments.

As Larry Dominique, vice president of product planning for Nissan North America, told Ward’s last fall, “We want to be able to control the residual value; we want to be able to control the end value, so at the end of a lease or loan we have the vehicles back and we can decide what to do with them.”

Related reports on GigaOM Pro (subscription required):

Can Nissan Quell EV Anxiety With Technology?

How EV Battery Startups Can Cross the Valley of Death

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  1. There’s more to an EV than the battery. Good to see a report that admits it CAN’T predict future battery prices. They need to examine what actually effects the long term value of a car.

    Most ICE powered vehicles are junk after a decade of use purely because the mechanicals die from the heat stress of radiating 85% of the fuel content as waste heat and the friction inherent in a reciprocating engine. That heat stress simply doesn’t exist in EVs.

    Electric motors and solid state electronics are routinely rated for 100,000 hours of operation. Calculate that by the average speed limit and how much mileage an average car owner travels annually and we’re talking about car mechanicals that will last several magnitudes longer than current cars. Therefore their value will hardly depreciate compared to current cars that lose 30% in the first 12 months.

    EVs could potentially last close to 6 MILLION kilometers. That’s 400 years for the average motorist doing 15,000km/yr. You think I’m joking, do the numbers yourself.

    If the battery needs replacing every decade, that doesn’t mean the entire car needs crushing. Every replacement battery will be cheaper and have more power density that the previous.

    The technical fundamentals of EVs are so significantly different from ICEs there’s no way anyone would believe cars could potentially outlast the owner and be passed on through 4 or 5 generations.

    1. You’re joking, right? As an owner of a Rabbit EV conversion and an Ultramotor electric bike, I can assure you that electric motors being offered today for vehicles are no where near as reliable or enduring as an ICE motor. Additionally the Battery Management system, relays, etc etc are still of questionable reliability based on the many failure I have experienced.

      I would not purchase an EV at this point for obvious reasons, but if someone must have one, a lease is by far the safest choice. The lease term should not be any longer than the battery and motor warranty. Otherwise you’ll end up losing most of your investment, since newer models will always be less expensive, have better range and be more reliable.

  2. Oh no, “reliable future residual value forecasting is currently impossible” – another EV horror to announce and fear.

    Here’s an idea – mass produce EV’s for the market and buy used ones at Kelly’s Blue Book – COMPARE:

    New:2002 AM General Hummer H1
    MSRP: $101,706 – $112,949
    Used: Value
    Excellent
    $33,400
    Good
    $31,400
    Fair
    $27,800
    ———and 2002 RAV4 EV
    MSRP: $42,000 – $30,000(after rebates)
    Used: $45,000 – $75,000(Ebay/Google)

    EV Appreciation vs 70% ICE DEpreciation

    Yes, let’s treat those auto/oil articles on EV fears and failings like Gospel..

    1. A little bit of information is dangerous. Less than 400 Rav4 EV’s were actually sold to individuals, so there is plenty of demand and very little supply on the open market. No sane person, unless they’re some green addict, would use the RAV4 EV market as a predictor for the thousand of EV’s coming to market.

      That being said, I think the RAV4 EV was the best of the 1990’s EV designs, based on the two that I rode in. Anyone buying one should know that a replacement battery pack is about $26,000 (on Ebay), and that these cars do not have a battery cooling system, which are sensitive to ambient temperature during charging and discharging.

  3. The ice/fossil fuel mob will do anything to try to scupper the EV tsumnami that will bury the dinosaurs forever.
    What about the gem concerning lack of sufficient engine noise to alert pedestrians?

  4. No sane person, unless they’re some non-green addict, would use the ICE market as a predictor for the thousand of EV’s coming to market.

  5. I would expect the used EV market to look a lot like the used market for General Aviation aircraft. GA engines have a stated TBO (Time Between Overhaul) and it effects the price of the plane by as much as 50% . Batteries will have use tracking that acts like a “Hobbs” meter to track useful life (Cycles, Temperature, Time). A calibrated discharge test curve can confirm the batteries condition (Like a compression test in an ICE engine). Demand will determine price points for percentage of original capacity.

  6. The future is uncertain: CAP says residual values of electric cars are up in the air « Green Commentaries Around the Web Saturday, February 20, 2010

    [...] [Source: CAP via Earth2Tech] [...]

  7. The future is uncertain: CAP says residual values of electric cars are up in the air – Automotive Magazine Saturday, February 20, 2010

    [...] [Source: CAP via Earth2Tech] [...]

  8. If an EV’s battery isn’t going to last the life of the car you then need to think of the battery as fuel. You buy eight years worth when you buy the car new then in eight years time when the battery is done you have to turn around and buy another eight years worth. When it’s new the tank is full and in eight years of use the tank becomes empty. A car isn’t worthless because the tank is empty. You have to loose value at a certain rate of use and time on the battery wether the car is new or old. People will still find value in buying an old EV on the cheap with a used up battery and putting a new battery (of known condition) in it. The depreciation on the non-battery part of the car will be a lot less and the total cost of purchase (car and battery) will still be significantly less than new.

  9. According to the most recent study, with V2G technology, EV users are able to turn their EVs into Cash Cow.

    Selling Spare Juice in The Electric Car Back to the Grid, owners might earn as much as $300 a month, or $3,000 or more a year, without compromising battery life, representing quick pay-off for ownership, savings on costly gas and maintenance aside.

    Just as importantly, In the long run, car owners might even save their old plug-in batteries to make the best of them so that the batteries will have a life outside the car.

    Thanks so much !

    1. Unless the government is paying the EV owner, no utility can afford to pay anywhere near that amount. Utilities only need power during peak period, from 3 to 8 pm, and they will only pay the whosesale price. I would think most EV users would need to use or charge their vehicles during peaks. And if your car’s battery pack is being cycled more often, it will definitely not last as long, i.e. a 8 year service life (to 80% capacity) would be reduced, and make the used EV less valuable.

  10. Lease It: Tesla Roadster For (a Minimum) $1,658 Per Month Thursday, February 25, 2010

    [...] value). I’m curious to know what a 3-year old leased Roadster would cost a customer to buy? As Josie pointed out recently, CAP Motor Research, one of the UK’s biggest providers of vehicle valuation data for leasing [...]

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