PlanetAmerica Finally Has an Answer to the Biggest Problem With EVs

rivian news PlanetAmerica Finally Has an Answer to the Biggest Problem With EVs

Courtesy of Tesla, Inc.

For more than 40 years in a row, Ford’s F-150 and its family of pickup trucks have been the best-selling vehicles in America. So when Ford released an electric version in 2022, the F-150 Lightning, it should have been a turning point for electric cars in the country—if not, that is, for the price tag. The bottom rung of the all-electric F-150 Lightning sells for about $26,000 more than the cheapest gas-powered model, and at the moment, few people seem willing to pay the premium: Of the more than 750,000 F-Series trucks sold last year, just over 24,000 were electric.

Such price tags have been the biggest hurdle stopping Americans from buying electric cars, in turn hampering the country’s climate goals. A new EV costs $55,000 on average, according to one estimate—positioning these cars as luxury items. In a recent poll, more Americans balked at the cost of an EV than were worried about range or simply preferred gas. Electric vehicles made up about 8 percent of new car sales in the United States last year, compared with more than a quarter in China, where new EVs can go for about $10,000 or less. No matter how high-tech or eco-friendly these cars are, until America gets EVs that are at least as affordable as gas cars, a critical mass of drivers will have ample reason to avoid going electric.

But you can already buy a cheap EV in the United States. The typical price of a new EV certainly remains higher than that of a gas car—but the price of used EVs has cratered in recent years, so much so that a used EV is now actually cheaper than a comparable used gas car. In May, the average secondhand EV sold for $32,000, Ivan Drury, the director of insights at the car-buying website Edmunds, told me, down from $56,000 nearly two years earlier. Some estimates are lower: The average used price of a set of popular EV models has fallen to less than $24,000, according to Liz Najman, the director of market insights at the EV-monitoring start-up Recurrent. And that’s all before you subtract up to $4,000 from a federal tax credit. Going electric may no longer just be the best option for the planet—it may also be best for your wallet.

Until recently, EVs were so novel that there weren’t any used ones to speak of. A decade ago, supply was limited enough that secondhand Teslas sometimes sold at a premium, Drury said. As new EVs have become more common, so have used ones: Over the past few years, most major automakers have introduced at least one electric offering, if not several. As drivers have traded in leased electric cars or sold older ones, secondhand prices have gradually come down.

But it was really only starting last year that used-EV prices began to fall. What has become a great opportunity for Americans looking to go electric emerged from a troubling situation: Just as the country’s interest in EVs briefly appeared to pick up, prompting carmakers to ramp up production in 2022, sales began to plateau. Automakers, it turned out, had been overconfident: The rush of early adopters—climate and car enthusiasts who were eager to pay a premium to go electric—quickly ran out. “That group has definitely been sated,” Karl Brauer, the executive analyst for the used-car database iSeeCars, told me. Everyone remaining, many of them less EV-curious and less affluent, has been more hesitant.

Automakers have responded to falling sales for new EVs by slashing sticker prices. Tesla, which has long accounted for more than half of EV sales in the U.S., has reduced the price of various models by 17 to 35 percent since 2022, Najman told me. Other carmakers cut the prices of their EVs too, hoping to stay competitive with Tesla and get cars off their lots. Some companies are even producing fewer EVs and pushing back new EV-model release dates. At the same time, the rental giant Hertz has begun selling some 30,000 EVs, citing high costs to repair collision damage.

All of that would appear to spell disaster for the goal of electrifying America’s roads. Automakers don’t want to build EVs; rental companies don’t want to maintain EVs; your neighbor doesn’t want to buy an EV. The cumulative “psychological impact,” Brauer told me, is that if “EVs [are] not working for Hertz, maybe they wouldn’t work for me too.”

Yet the discounts have sent secondhand prices plummeting. (Of course you wouldn’t buy a used car if a new one is available at a similar price.) The average used Tesla lost 30 percent of its value across 2023, according to Najman—meaning that many people who initially bought a new Model Y for $60,000 a few years ago might now be selling it for $30,000. Hertz is off-loading dozens of Teslas from 2023 for less than $22,000. At such low prices, car buyers start to think, “Huh, well, maybe I can make an EV work for me,” Brauer said. And there are signs that Americans are beginning to get excited about used EVs. In May, according to data from Edmunds, the average used EV selling for $20,000 to $25,000 took 30 days to find an owner, compared with 39 days for a used gas car in the same price range. The typical used Kia EV6 costs less than $32,000 and takes 24 days to sell, whereas a new EV6, at above $52,000, will typically sit on a lot for more than 100 days. Tax incentives for new and used EVs are bringing costs even lower.

The drop in secondhand prices could turn out to be a huge boon for helping electric cars go mainstream. Used-car sales more than double the number of new purchases and leases in any given year, and many secondhand buyers have different needs than new EV adopters do. The latter tend to be wealthier, live in a house, and own multiple cars, Brauer said. That means they can pay more up front, install a charger in their garage instead of relying on highly unreliable public chargers, and use their other, gas-powered car for longer road trips. Convincing a renter with a single car to accept the hurdles of EV charging and battery life could require a serious discount, and that’s exactly what used EVs are now providing.

Used EVs alone won’t push us into a new era of electrification. There aren’t nearly enough secondhand EVs for most or even many Americans to drive yet. And at some point, the oversupply of new EVs and the dumped rental-agency cars will dwindle, Drury said. Growing interest in used EVs, Najman noted, will also keep prices from falling much further. In other words, there’s a decent argument for buying a used EV soon, especially because only a finite pool of used cars qualifies for a government tax credit. Still, Brauer was hesitant to say that now is the best time to buy a used EV—the prices will bottom out, he told me, but he doesn’t know when, or how low they’ll fall.

Most of the discourse around EVs is about new cars: Every model launch and the latest high-tech EV feature elicits buzz; Joe Biden’s climate agenda is all about new-EV sales. But the masses might first buy a used one—which means that how plentiful, dependable, and affordable used EVs are could be a key factor in decarbonizing America. “EV adoption is really going to skyrocket when people realize that used EVs are out there and they’re reliable,” Najman said. That might already have begun, one $22,000 Tesla at a time.