Used BEVs: Another Storm Cloud Ahead for Mass BEV Adoption

Used-BEV values are dropping like stones and over half of franchised dealers are refusing to retail them. Is this a momentary blip or does it indicate another roadblock to mass adoption, with many banks questioning residual values before welcoming BEVs as a substantial percentage of a loan portfolio?

John Possumato

October 25, 2023

3 Min Read
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One of the things I find most valuable in attending advanced focused industry conferences, such as the recent AutoTech: Electrification event in Detroit, is that there is abundant information about new developments and trends that have not yet been recognized in the media or at large in the industry.

While AutoTech: Electrification provided a lot of this new knowledge, the facts that really hit home came out in the panel about used battery-electric vehicles I had the privilege to moderate. “The Future of EV Sales” featured panelists Ed Roberts, chief operating officer of Bozard Ford Lincoln of St. Augustine, FL; Jimmy Douglas, CEO and founder of the used-BEV platform Plug; and Michelle Krebs, executive analyst with Cox Automotive.

Before this discussion, I was aware that used BEV values over the past year have continued to drop precipitously (down 22% in the past 12 months), but I discounted this a bit in consideration of Tesla’s frequent and significant new-vehicle price reductions, leading to the substantial decline in used-Tesla values which clearly influence the market.

Further, a few weeks ago I was surprised to learn, in talking with one of the country’s top 30 dealer groups, that they wholesale every BEV traded in, as they refuse to retail any BEV given potential battery history. This, again, I tended to dismiss as one particular dealer’s practice.

However, when it came to light during my panel that only about 8,000 franchised dealers in the U.S. (out of roughly 17,000), actually do retail used BEVs, I was floored. That meant my dealer friend’s strict policy of wholesaling BEVs across the board is followed by the majority of today’s dealers, not just a few.

Think about this: What if the majority of dealers refused to retail any major vehicle model today? Ford dealers refusing to retail used Explorers, or Nissan dealers declining to retail used Rogues? What would that ultimately do to the resale value of those model lines?  I’m not sure, but the fact is, this is a reality for all BEVs for all franchised dealers today.

This prompted me to do a little further research, looking at Western Europe, where BEV sales volumes are higher. Sure enough, from what I’m told used BEV values and resale are a big problem, with many banks and financial institutions sitting on thousands of used wholesale BEVs that don’t have a ready market of dealer buyers. I know far less about China but have read stories about older BEVs sitting in mass vehicle graveyards there.

Now, if there is demand, this could translate into an opportunity for those dealers who specialize in the volume and selection of used EVs, and certainly, the $4,000/30% used-BEV tax credit should help (although as much as I have talked about that opportunity for dealers at live events and written of it in industry publications, the fact is most dealers do not understand it, are cautious of it and are not promoting/utilizing this “cash on the hood” in 2024). However, I’ve never seen mass adoption volume in any vehicle product line that is not supported by a strong resale market, which supports strong residuals.

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On the contrary, if resale values on a product line collapse, as is happening with used BEVs right now, don’t banks tighten traditional financing parameters and raise depreciation rates on leases, so financing of the new product becomes more difficult and expensive?

Just another reason why I think the road to robust BEV adoption numbers will be rocky, and that it requires a new way of “personal ownership,” such as subscriptions, micro-leases, rent-to-own – whatever you want to call it – a pay-as-you-go model that maximizes value for consumers and dealer.

John F. Possumato (pictured, upper left) is CEO of DriveItAway, an app/platform to facilitate dealer-based consumer vehicle subscriptions and micro-leases, focusing on BEVs/PHEVs and leveraging federal and state tax incentives.

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