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Sunday, June 20, 2010

EVs 'worthless within 5 years' ?

The self appointed car valuation experts at UK based Glass’s Guide are publicly admitting they have lost the plot when it comes to EVs. They have warned that, unless manufacturers take action soon, electric cars will suffer horrendous depreciation on the used market.

“IF cars and batteries are sold rather than leased, and IF no special warranty cover is in place, the typical EV will retain only 10 per cent of its value after five years,” warns the managing director of Glass’s, Andy Carroll, who seems to be attempting to sink his own ship.

This, says Carroll, is a function of the recognition that a typical EV battery will have a useful life of eight years with their ENTIRE argument resting on their efforts to PREDICT the replacement costs of batteries in 8 years time at around £8000 (USD$12,000).

By Glass’s reckoning, Nissan’s Leaf — available next year at around £23,350 — will be worth less than £3000 (USD$4,500) at five years old. That would make its purchase hard to justify next to a conventional car, which would be worth at least 25 per cent of its value at the same age.

As well as a purchase option, Nissan will offer a lease option to UK buyers which could avoid the depreciation issue, but it has yet to announce details. Glass's have been running a campaign to push the idea of battery leasing and suggest a £100 (USD$150)-per-month battery lease scheme is a better option.

I have to question their math when Glass's favor a lease scheme that would cost £9600 (USD$14,200) over 8 years while a replacement battery, even at their most pessimistic prediction, costs only £8000 (USD$12,000). Added to that, it has already been fairly well established that the Leaf's 24 kWh battery pack costs just £6000 (USD$9,000) to produce so, unless Glass's are predicting prices will increase by 33% over the next decade, their base price PREDICTION is too high to start with.

Nissan have already announced they are developing battery's for the Leaf with double the energy density at the same price which effectively halves the cost of replacement batteries by 2015.

Depreciation Transformed

We here at EVN think the durability of EV power trains will totally transform car depreciation compared to today's conventional internal combustion engine (ICE) cars.

It is the enormous heat stress generated by an ICE that effectively reduces the working life of the average automobile to a ridiculously short 10 years. This is one of the major reason why, even according to Glass themselves, an ICE powered car is only worth 25 per cent of its original value after just 5 years.

By comparison electric motors and electronic drive components suffer far less heat stress, due to their much higher energy efficiency, and are rated by their manufacturers in the range of 20,000 hours for electric motors and 100,000 hours operational life for the electronic components.

For an average private vehicle travels approx 15,000 km a year, at an average speed of 60 kph, an EV powertrain can cover between 1.2 to 6 Million kilometers or 80 + years of reliable motoring before any power train component needs servicing. If the only part that wears out in an EV is the battery, the economics of simply replacing a battery pack every 10 years are substantially cheaper than having to replace the entire vehicle every decade.

As EV battery technology evolves with production volume and competition continuously increasing, we can expect to see spectacular improvements in performance, range and price points. Add to that a growth market for used EV packs that can be recycled for renewable and grid storage duties (an EV pack is considered 'used' when depth of charge reaches 80%). This will effectively give EV battery packs a 'trade-in' price that reduces the up front cost of buying a replacement.

The combination of these market forces make it conceivable that EV owners will keep the same car for decades (the car could outlive the owner and may be passed down through the family). They may even choose to replace the battery pack more frequently than every decade to upgrade their car with extended range and/or increased performance as it becomes available, but perhaps not at quite the same replacement rate as mobile phones.

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Unknown said...

A great article with good point/counterpoint. The only consideration not discussed is that market value may be determined in a number of ways. Depreciation is only one. The shell and drive train of an EV that gains a new and improved life from a more powerful battery pack would be worth more than it was before the new batteries. We should consider other models for the value that may last longer than one owner. In real estate a kitchen, bathroom or addition done well can increase the value beyond the cost of the upgrade. The long life of an EV may acquire the same stature. This increase in value may be true to a lessor extent with other components like motor, controller and BMS. An EV with an modular design architecture (plug and play?) should be more easily upgraded and may retain its value when compared to a more integral approach.

Anonymous said...

Swapping batteries is not so easy. Each vehicle iteration, type will need to be re-tested and re-certified by the individual or the manufacturer. The issue is the battery is part of dependent control systems and the drive train. You cannot just swap it. Manufacturers may chose not to do this in order to force people to buy new cars and not just batteries. When Nissan talk of options to upgrade to the latest technology what do they really mean? Is the latest technology at the time of writing the same as the old used technology.

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