The entry of “low-cost” trams will accelerate the “decline” in the used car market

Tesla, the leader in the electric car market, plans to produce a low-cost model, in a move that will be followed by car manufacturers such as Stellantis and Volkswagen, in an attempt to expand the market. Chinese competition, with falling prices, also requires a response.

But the effects of competition will appear not only in the sale of new cars, but also in the used car market, where the entry of new electric cars at more competitive prices will lead to a “forced decline,” according to the year. Director of Standvirtual, Nuno Castelbranco.

In addition to the decline in the prices of new vehicles, there is the technological development in electric cars, which is also one of the factors of price pressure in the used car market, as indicated by the data collected by the report on the development of the market in 2023, prepared by that platform.

“We expect, as we have seen in other technologies, that this autonomy will increase. There is talk of the option of solid-state batteries that would potentially reduce the size or automatically increase the ranges by two times and start bringing them closer to a thousand kilometers,” says Nuno Castel Branco, in an interview with Jornal Economico (JE). “Once there are cars on the market that charge faster and cover a thousand kilometres, a car that is not bad, that covers 400 kilometres, starts to become obsolete,” he adds, noting that from this perspective, there will be a natural reaction from The consumer, who will tend to make a supply/demand adjustment, is “not as obvious in combustion vehicles, which already have more stability than electric cars.”

Currently, electric cars are depreciating faster than cars with combustion engines, but Castelbranco says this is also due to the particular market situation.

“It's important to look at this from the perspective of the moment we live in: the market leader in this area of ​​electric vehicles is Tesla, and in recent years Tesla has made some price cuts that are very significant in terms of new cars, which have received coverage.” It is a major media outlet, given its large size,” he points out. “Car prices fell by about 10,000 euros when they were new. This might give the perception of a greater decline in the value of used cars, but this is not necessarily the case. If new cars fall, the price of used cars should also fall. But this is not a natural decline.” “It's forced because there has been a price adjustment here,” he explains.

A study by Standvirtual, a virtual marketplace for used cars, compares a Tesla Model 3 to a diesel-powered BMW 320, noting that “the depreciation of a BMW is much more gradual.” “The same does not happen with the Tesla Model 3, because in fact there was a brutal fall there. There is a huge price adjustment when it is new and everyone who has used it also has to adjust it,” says Nuno Castel-Branco.

“The analysis we do is that from 12 months onwards, cars depreciate on average by 15%, which is not far off from what would be somewhat expected in a depreciation of cars, that is, there is not a very clear decline here,” he says. .

price war

“Now, when we are in a sector of the market, such as electric cars, where Chinese brands are entering, where we are seeing Tesla lower prices, where we will likely see Stellantis and Volkswagen also entering with lower cost products to accelerate this market, this will lead to lower prices for new trams and will To accelerate the decline in the value of used trams.

Standvirtual's Managing Director believes that this increase in competition between automakers will continue to destabilize the electric vehicle market.

“Manufacturers are at war, in a way, for this market and for their market share, and that will definitely impact and cause the currency to depreciate in some way,” he says. “The other thing is that older electric cars will likely see a greater decline in value, because they are becoming more technologically obsolete,” he adds.

“During combustion, the life of the car is four or five years, more additives, less additives, but the engine [aguenta-se]. An electric car four or five years old might have had a hundred kilometers or so of autonomy, and now it has 300 kilometres. It's really a big difference in battery. This is almost akin to cell phones. “A four- or five-year-old cell phone is already more obsolete than a combustion car, so there will be this additional pressure, which is natural, on the depreciation of electric cars,” he explains to JE.