Tesla Vehicles May Hold Value Resale Better Than Gas Cars

9 months ago by EVANNEX 10

Tesla

Tesla Drive to Believe

WHY TESLA VEHICLES MAY KEEP THEIR RESALE VALUE BETTER THAN GAS-BURNERS

One of many questions about electric vehicles (EVs) that has yet to be answered: How will their resale value hold up? There are a few reasons to expect that it will fare poorly. First, most EV-makers are introducing major improvements every year, so there’s a pretty good incentive for a current owner to trade up, or for a prospective buyer to pay a little more and get the latest and greatest. Second, lithium-ion batteries do degrade with time, so if you buy a used EV, you’re probably buying a car with less range than a new model would have. And of course, the minute an EV drives off the lot, the $7,500 federal tax credit goes with it.

This logic seems to apply in the case of the Nissan LEAF, which is selling at bargain prices on the used market. According to Kelley Blue Book, you can get a 2014 LEAF for under $8,000, less than a third of the price of a new one. That’s a pretty darn good deal for a 3-year-old car (or a d–n bad deal if you’re the one selling).

*This article comes to us courtesy of Evannex (which also makes aftermarket Tesla accessories). Authored by Charles Morris.

Andromeda Power 2D V2V ORCA INCEPTIVE charges a stranded Tesla S from a rescuing Nissan Leaf delivering up to 4 kWh in 5 minutes.

So far however, the resale value of Teslas seems to be holding up very well, thank you.

The cheapest of Tesla’s certified pre-owned offerings at the moment is going for about $46,000, and Kelley says even a 2012 Model S from a private party will cost you around 42 grand.

It’s a case of simple economics: demand exceeds supply. Until recently, buyers faced a wait of weeks or months to get a new Tesla, so some were willing to pay top dollar for a used one right away. For a while there in Norway, there were even reports that owners were reselling their Teslas for more than they paid for them new.

Tesla

Tesla Model 3

Furthermore, according to Wall Street Journal’s Marketwatch,

“Used Tesla Model S sedans sell faster than luxury-car competitors do, and faster than other top-selling used vehicles from Ford Motor Co. and General Motors Co.”

Also, “Used Model S sedans had the briefest time on the market of all vehicles included in the survey, taking, on average, 87 days to sell. That was about 5% quicker than the average for vehicles in the model’s peer group, which included the Audi A7, the Porsche Panamera, the BMW 6 Series, the Mercedes-Benz CLS and the Lexus LS 460. [And] the listing prices of used Tesla Model S sedans were between 3% and 5% above their peer-group average for the past year, after controlling for price differences among the models.”

Tesla

Source: Marketwatch via Autolist

That said, is an electric vehicle really a wasting asset, doomed to see its value trickle away like a battery charge on a hot Southwestern freeway?

Actually, the opposite seems to be the case, because there’s another factor many haven’t even considered yet: once an EV battery reaches the end of its useful life in a car, it still has value as part of a stationary storage system.

According to a recent report from ARK Investment Management*, “One of the chief concerns about EVs – battery degradation – seems to be misplaced: ARK’s research suggests that EV batteries will retain substantial value after reaching the end of their in-vehicle lives. Utilities are in constant demand for energy storage products.”

In fact, if ARK’s estimates are accurate, the battery alone in a 10-year-old Tesla could retain more value than an entire ICE vehicle.

Tesla

Image Credit: Tesla

Battery storage is important for integrating renewable energy sources like solar and wind into the grid, but an even more pressing need is peaking power.

Utilities pay power producers handsome sums for access to standby power, in case it is required to handle peak loads, which may only occur a few times a year. Traditionally, this means having a fossil fuel plant standing by, ready to produce power if needed – a very expensive proposition.

Tesla

Source: Autoblog

That’s one reason why utilities around the world are deploying battery storage at a furious pace. Numerous companies, including Nissan, Renault, Daimler, BMW and Siemens, are already demonstrating stationary storage systems using “second-life” batteries from vehicles.

Tesla

Source: ARK Investment Management*

EV batteries aren’t expected to last the life of a vehicle. Most EV-makers warranty their batteries for 8 years, which gives you an idea of how long they expect them to last.

EV drivers want maximum performance and range, so once a battery has degraded to 80% of its original capacity, it may be unacceptable to a car owner. However, it’s still perfectly suitable for use in a utility-scale storage system.

Tesla

Source: ARK Investment Management*

ARK does the math, based on figures from PJM, a wholesale electricity market that serves 13 states. For 2020, PJM is currently pricing storage capacity at $100 per megawatt per day. If an 85 kWh battery that had been used in a car for 10 years were configured to store enough energy to generate electricity for 2 hours, its capacity would be 42.5 kw. So according to ARK’s calculations, the value of a 10-year-old Tesla battery to a utility like PJM would be around $15,000.

Tesla

Source: ARK Investment Management*

If those figures hold up, then the residual value of a Tesla after 10 years would be considerably higher than that of a gas-burner in the same class. ARK found that the Kelley Blue Book value of a BMW 7 Series or a Mercedes-Benz S-Class, with the same number of miles, would be only 40-75% of the value of the Tesla’s battery alone.

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*Source: ARK Investment Management

*Editor’s Note: EVANNEX, which also sells aftermarket gear for Teslas, has kindly allowed us to share some of its content with our readers. Our thanks go out to EVANNEX, Check out the site here.

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10 responses to "Tesla Vehicles May Hold Value Resale Better Than Gas Cars"

  1. BillT says:

    This is interesting but I have a different theory: Mercedes and BMW have a reputation for being incredibly expensive to maintain out of warranty which drives down their resale value accordingly. There is a reason why a 10 year old Camry is worth nearly as much as a 10 year old S class / 7 series.

    Teslas aren’t old enough yet to have a reputation one way or the other for maintenance costs out of warranty so I think people are giving them the benefit of the doubt. Once the actual data rolls in we will see what happens. I think power train wise the cars will be durable but worry about things like $1K door handles or falcon wing doors.

    1. Null says:

      There is an economic maxim, I forget how it’s formulated but it applies from asset value to rent prices.

      Value retained relates not just purchase price but also to cost of ownership. Tesla’s fuel and maintenance costs are much less. Fueling costs are around a 1/3rd of gas cars. Supercharging is free on many of the Tesla’s in the used market. Removing many of the frequent maintenance of a gas car (think oil changes and brakes) removes a significant cost this will be somewhat reflected in the residual value.

      1. Pushmi-Pullyu says:

        Null said:

        “Value retained relates not just purchase price but also to cost of ownership. Tesla’s fuel and maintenance costs are much less.”

        Let us be specific: The average cost of maintaining a Tesla car is much less as compared to the average gasmobile of similar price. That is, as compared to other “premium” priced gasmobiles.

        The Model S (and presumably the Model X) are not cheaper than maintaining the average (lower priced) gasmobile; they are more expensive.

        That is the consensus of much discussion on the subject over on the Tesla Motors Club forum, with many actual examples given. I think the evidence is strong and broad enough that we can state that as a fact, mot merely an opinion.

  2. wavelet says:

    A major factor in resale value is the long-term reliability & repairability. It’s way too soon to tell that about Teslas — another 5 years or so would be needed, and even that’s a bit borderline in terms of number sold in the first few years.

    However, the tight control that Tesla’s keeping on things (no service manual or parts available to the public, with the exception of manuals avail. in Mass. only due to local law at usurious prices) doesn’t bode well, and neither do the numerous anecdotes of the cost of non-drivetrain repairs.

    1. Pushmi-Pullyu says:

      $97 for what is described as a “Tesla S model COMPLETE Service Repair Workshop Manual + Wiring diagram 2012-2016” on CD at e-bay. Is that “usurious”?

      Perhaps the actual dead-tree format manuals are tightly limited, and thus “usurious” to buy if you’re not the owner of an actual auto repair shop. But you can always print out a hardcopy from the CD.

  3. SteveSeattle says:

    I think the biggest factor that is not easy to quantify is desirability. Tesla still has the cool factor. Desire to own a Tesla still outstrips the ability of the used market to supply.

  4. Jim Whitehead says:

    Aside from high part costs, Tesla repair delays have been a problem recently will only get worse once the Model 3 rolls out. They may become so swamped next year that for Model S and X owners, Tesla may have to freely release the manuals and parts and begin to trust certain 3rd parties to do the repairs.

    Job Suggestion: Know anyone looking for a golden hands-on career? Become a factory-trained Tesla tech, while you still can, before the tidal wave flood next year swamps everybody. By next year, the rare 3rd party Tesla trained techs might make $100 an hour personally.

  5. JR says:

    Good question, I don’t think we can count on the numbers just jet.

    Here are some considerations

    Tesla build quality is not the best –
    Tesla is expensive in spareparts –
    Tesla maintenance is low +
    Tesla is very tech orientated, I will soon look old and be slow. I don’t think it easy and cheap to upgrade the main console –

  6. Mark.ca says:

    I have been a Benz fan for all my life but that came to an end last year. My last 2 Benz cars (slk and clk) both had the transmition replaced under 100k miles (plus a s*** load of other expensive issues). I usually hold cars for years as I don’t find it economic to keep changing them like socks but never again will i buy Benz. Very excited to experience the electric “maintenance” and so far it has been great.

  7. Pushmi-Pullyu says:

    The article starts well by correctly noting that one reason for the high resale value is demand exceeding supply. But then it wanders off into the weeds of making absurd claims.

    There is no market demand for used EV battery packs. It’s true that there is potentially a lot of value left in the packs, but no company is recycling them to make them into grid power storage systems.

    Perhaps someday, an entrepreneur will create a company which will salvage battery packs from EVs at the end of their life, including wrecked ones. But currently, the only people using salvaged battery packs are DIYers (Do-It-Yourselfers) who are repurposing EV battery packs for home solar power systems.

    * * * * *

    One significant factor in helping the Model S and X maintain high resale values, is the fact that Tesla doesn’t make meaningless style changes to differentiate one model year from another. Tesla did do a “refresh” of the front end of the Tesla Model S, but otherwise you can’t tell a Model S made in one year from one made in another. As with the classic Volkswagen Beetle, it seems likely to me that the lack of meaningless style changes helps keep the resale value higher than most cars.