New Energy Used Vehicles Are Bound to Keep Low Residual Rate
COVID-19 and China
A new energy vehicle is charging. Image credit: Vlad Tchompalov/Unsplash

The weekly report of the automobile market issued by CPCA last week said that the overall depreciation rate of the used car market is too low. Due to the large technical differences between new energy vehicles and traditional vehicles, and the reliability of some EV models, “not worth the money is an inevitable trend”.

According to the report, compared with fuel vehicles, the electronic product attributes and battery life of new energy vehicles are inferior. “It is very difficult to simply expect the new energy vehicle to improve the residual value.”

Since 2019, the trend of the decline in used car prices has always existed. According to the China Auto Residual Value Report issued by the China Automobile Dealers Association (CADA), due to the higher standard of vehicle emission published in June, some dealers launched large-scale promotions and overdrafted the demand for cars in the second half of the year. Some consumers in the second-hand car market were also diverted by new cars that were promoted at low prices, and the prices of used cars generally declined.

Among used cars, the new energy used car residual value fell particularly severe. The latest data released by CADA in September shows that in August, the new energy used car residual value decreased from the previous month. Taking the new energy used car of 3 years old as an example, the value of the plug-in hybrid vehicle's residual rate dropped from 45.5% to 42.8%, and the pure electric vehicle's residual rate dropped from 33.5% to 30.9%.

According to the 2019 China Auto Residual Value Report issued by China Automotive Finance and Residual Value Research Committee, comparing the one-year residual value of pure electric vehicles, except for Tesla which has over 60% residual rate, the other models do not even reach 50%. In contrast, among the mainstream fuel vehicle brands, the average residual value of the one-year-old models is basically in the range of 57% to 75%.

“The main reason for the low residual value of new energy vehicles lies in the battery. After three or five years of use, the battery is depleted quickly and the residual value is very low,”said the automotive industry analyst Liu Fuliang (刘馥亮),“And after removing the battery, the rest of the value is not high. As a result, the overall residual rate is very low."

The 2019 China Auto Residual Value Report also pointed out that with the development of technologies such as batteries, the properties of new energy vehicles have been transformed from "industrial products" to "electronic products": the iteration cycle of technology update is short, and the manufacturing cost on the supply side is gradually reduced. The “early adopt” mentality brought about by the product iteration has also led to a big difference between the replacement cycle of new energy vehicles and consumer expectations.

The depreciation of new energy used vehicles will become more serious in the future.

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