In another post we discussed that average wholesale car value post Covid went from 12K to 18K. Exact numbers do not matter; let’s say the average ICE car on the street is worth 15K (just a number).
On the other hand when you drive around you see cars barely worth 1K-2K-3K. These cars are one repair away from “death”. Their owners are facing the “fix it or scrap it” choice.
Keep in mind that it does not really matter if the “fix it or scrap it” cost/decision is born/made by the owner or the insurance. Ultimately the owner pays for insurance.
So, at what EV value an EV owner faces the “fix it or scrap it” choice?
EVs are still young and mostly under manufacturers warranty (currently 8 yrs ~100K? miles for the battery). We are told EVs are very “reliable”, do not break down easily etc because of the electric motor. May be it is so, but the issue is not “cumulative repair cost” over several years and owners, but the “last repair” in the hands of the last owner.
This means that while the average ICE car on the street is worth ~15K, the EV worth 15K is a “zombie EV”, one repair away from death.
In other words EVs will never penetrate the bottom 50% of the vehicle market. Someone who pays 15K-20K to buy a car will not give this money to buy an EV without extended transferable battery warranty.
Adding extended warranties after the EV purchase, close to manufacturer warranty expiration, does not solve the problem. The cost will be born by the then owner. The only way to help EVs penetrate the bottom 50% of the market is very long manufacturer’s warranties (15 yr, 200K miles). This will raise substantially the price of new EVs, so that the original “rich” owners subsidize the “poor” subsequent ones. Currently the reverse happens the poor through tax subsidies subsidize the rich.
Until these very long warranties become available EVs will have a “short life” past warranty, with a very rapid value depreciation. Most likely they will be going for “recycling” before they even break down (due to sub par battery). The logic will be, get the high EV “scrap value” and buy a decent ICE car. Moreover to “push” EVs into the lower 50% of the market we will have to retrain neighborhood mechanics to service EVs. OK may be….
1) EVs are going only after the top 50% of car market
2) A two car family will want at least 1 ICE car (for range/size/optionality)
3) Some people will never buy an EV
The potential EV market is not more than 20%-25% of the total vehicle market (in the US). In other countries the target market is probably smaller.
In other words, we may be worrying too much about
1) The need to upgrade the electrical grid.
2) Lithium supply (In a few years lithium will be recycled from old EVs)
3) Demand hit for hydrocarbon fuels. The 20% of EVs on the road will be running on coal (China) or natural gas (US/Europe).