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Electric vehicles could suffer heavy depreciation

Electric vehicle could be worth little more than 10 percent of list price after five years.

The new breed of electric vehicles (EVs) bound for Ireland could suffer from horrific depreciation if manufacturers don't properly address customer concerns about battery life and performance. This warning comes from UK-based used car value experts Glass's, which has conducted a detailed analysis of the factors that will affect depreciation for EVs.

"After one year of ownership we would expect EV residual values to be above the segment average expressed in terms of pound values," explains Andy Carroll, Managing Director at Glass's. "But, if the battery is owned rather than leased, and without the appropriate warranty, the value of the typical EV will then fall dramatically until the vehicle is five years old, at which point the car will have a trade value little more than 10 per cent of the list price."

"Potential used EV buyers fear this cost, but the key issue is that buyers will assume that their specific battery will need replacing in the near future regardless of the manufacturers' predictions of battery life. Our RV predictions are therefore based on this worst-case scenario - which is exactly how we believe that prospective customers would perceive the costs of owning an EV".

Carroll says that the standard ownership model that we are used to - of buying the entire car - is flawed when it comes to electric vehicles and instead we should look to lease the battery:

"If the anticipated high cost of the battery in such a car were taken off the list price, and recovered instead through a long-term battery lease scheme, the retained value in monetary terms would make it one of the best performing used cars in its segment, rather than one of the worst."

Through such an arrangement, any anxiety surrounding battery life would be dispelled, argues Carroll, by ensuring that a guarantee of minimum battery performance is a feature of the lease agreement.

A battery lease strategy would, says Glass's, also bring significant benefits for car dealers. "The dealer network could play a key role in the management of battery upgrading and replacement on behalf of the lease providers. This would be welcome news for the trade, since the projected income from service and repair work for EVs is predicted to be low compared to that for vehicles with an internal combustion engine."

"Volume production of EVs will not get fully underway until 2012, and we anticipate that demand over the next few years will outstrip supply, especially in the used market. In 2015 we forecast sales of new EVs to outstrip the sales of used EVs by five to one, and this has also positively affected our forecasts of EV residual values."

Nissan Ireland has said that there will be a leasing option available for LEAF customers, but it expects most to buy the car outright. It is thought that Renault on the other hand will focus on a lease scheme for its range of electric cars.

Published on June 21, 2010
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