A pan-Tasman automotive auction house sitting at the interface of used car buyers and sellers, Manheim is uniquely positioned to understand the opportunities and challenges facing sellers of used electric vehicles. Manheim’s Market Intelligence team regularly draws on data and experiences from Cox Automotive’s global businesses to inform the remarketing strategies of its partners within Australia and New Zealand. This short paper will discuss the secondary market for EVs in Australia and share recent research carried out on the market for used EVs in Europe where EV market penetration is significantly higher.
EVs in Australia
The secondary market for EVs in Australia is embryonic. As of November 2018 there were 175,000 used vehicles listed for sale online of which only 200 were Battery Electric Vehicles (BEVs) or Plug-in hybrid Electric Vehicles (PHEVs), representing a tiny 0.12% of total inventory. The share is only marginally better in the market for new cars where sales of BEVs and PHEVs accounted for roughly 0.18% of sales in 2017, although the number is growing with Tesla in particular emerging as the market leader – see Figure 1. The lack of sales transactions in Australia makes it difficult to draw statistically significant conclusions about the marketability of these vehicles. In this context, Manheim’s Market Intelligence team – with assistance from colleagues working in global Cox Automotive businesses – has studied overseas markets for leading indicators of opportunities and challenges in remarketing used EVs.
Figure 1. The Estimated Market for BEVs and PHEVs in Australia by Marque (2016 – September 2018)
The Secondary Market for EVs in Europe
Whilst market penetration for new EVs is roughly eight times the rate of Australia’s, the European market is still maturing. According to the European Alternative Fuels Observatory (EAFO) 96,000 BEVs were registered in EU countries in 2017 which roughly equates to 1.5% of overall sales – see Figure 2. Reasons for stronger adoption include greater availability of charging stations, hostile government policies towards the sale and use of internal combustion engine (ICE) vehicles and attractive subsidies for the purchase and registration of EVs.
Figure 2. EU15 Year on Year New Car Registrations by Fuel Type
The improved penetration in the new market has not translated into superior resale performance. Figure 3.1 below shows prices advertised for Renault Zoe’s located within 10KM of Paris are clearly lower than its ICE equivalent – the Renault Clio.
Figure 3.1 List prices for 2015 Build Year Renault Clio and Zoes advertised for sale within 10km of Paris in November 2018
Dealers have also reported higher price volatility for BEVs compared to ICE equivalents. The scatter plot of advertised prices for the BMW i3 in Figure 3.2 clearly validates this feedback with the lowest price offered for a vehicle with KMS between 20,000 and 40,000KM being €16.4K and the highest €28.9K.
Figure 3.2 List prices for 2015 Build Year BMW i3 advertised for sale within 10km of Paris in November 2018
Anecdotally, remarketers frequently complain that a number of factors are contributing to lower resale and extended times to sale, with the biggest pain points being;
- Challenges finding finance providers with some banks refusing loans for BEVs.
- Customer pre-conceived notions about BEVs.
- An average 50% longer time to sale than ICE equivalents.
- Attractiveness and ease of offering ICE alternatives to customers, particularly when customers express concern to salespeople about BEV ownership.
- A lack of salespeople trained to confidently answer customer questions on topics such as battery leases and wall-boxes.
Customer Pre-Conceived Notions
Kelley Blue Book carried out a survey of US consumers in September 2016 which sheds light on some of the pre-conceived notions consumers have towards EVs. It indicates significant knowledge gaps exist on fundamental topics like battery life and recharging times. A handful of takeaways are listed below;
- The most popular answer to the question “which vehicle first comes to mind when you think of EVs?” was the Toyota Prius – a hybrid! The second most popular was the Chevrolet Volt – another hybrid.
- Two hours was the median response to the question “how many hours should it take to restore full charge to a vehicle using a high speed charger?”. BMW claims the recharge time on its i3 with a range of 260KM is four hours and eighteen minutes. Renault claims its Zoe with a real world range “up to 300KM” has a recharge time “as little as 3 hours”.
- Five years was the median response to the question “how many years should a battery last before it needs to be replaced?”. Tesla guarantees its batteries for 8 years!
Conclusion & Opportunities
Manheim believes many of the lessons from the recent European EV remarketing experience will be applicable in Australia and New Zealand as both markets continue to mature and the remarketing challenges laid out in this paper should be considered when formulating an EV remarketing strategy. Whilst BEVS take longer to sell and achieve lower selling prices on average when compared to ICE equivalents, the higher volatility in prices achieved for EVs indicates opportunity exists for savvy remarketers to profit from buying low and selling high, with the chance success enhanced with a well-trained sales team prepared to answer curly customer questions and arrangements in place with financiers prepared to fund the purchase.
Manheim’s Market Intelligence team is comprised of professionals with an average of 15 years experience in the automotive industry. It has a mature data science capability which the team has leveraged to develop a new digital portal customers can use to track the performance of the secondary market and view wholesale price predictions for the most popular new models.