USED EVs
Weekender#50
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I am not sure how the conversation started. I think it began, “You can own an EV but never own the software.” I also remembered an article on Mercedes and their line of EV/s. I am so proud of myself that after only four searches and finishing my cold cup of coffee, I found the article. Here is the introductory part of the article.
“Mercedes Benz plans to charge owners of its upcoming line of pricey electric cars a subscription fee of $1,200 a year to boost their ability to accelerate quickly, according to a report.
The subscription package, designed for Mercedes’ upcoming EQ all-electric models, resembles Tesla’s “Ludacris mode” introduced in 2016, which gives drivers an acceleration boost for a one-time fee of $10,000.
The move comes just months after BMW sparked outrage over trying to charge a monthly fee for heated seats, marking what could be the onset of an auto industry trend towards paid subscriptions for features that drivers have long considered standard.
Car magazine The Drive first spotted an “Acceleration Increase” subscription package marked as coming soon on Mercedes’ website. The package offers a 0-60 acceleration increase of up to one second and improved torque and engine output for all EQ models.
The package will only cost car owners the equivalent of $100 a month.1
Zero to 60 in one second. I looked this up - 1 second from 0 to 60 mph = 2.73 Gs. Ok, that is seriously cool. Is it worth $100 a month? Yeah, oh, heck ya. Punch that accelerator a few times and listen to the unprepared passengers' necks snap and watch in the rearview camera the black gravel that used to be your tires. Those with weak bladders take public transit.
Back to the point – you own the EV title and all – but you do not own the software. It has to be licensed for each new owner. So, I wondered how much software licensing fees were and how much a used EV was. What would it cost to buy a used EV and license the software? When I started looking at used EVs, something caught my eye.
Look at the miles driven per year.2
These ten cars drove an annual average of 8,738 miles. The average number of miles driven in Arizona annually is just under 14,000 miles. As a collective subset of vehicles, the EVs only went 62% of the average number of miles of all vehicles.
Is that just Arizona? Professional scientists used a commercially available database of used-car listings that showed the age and mileage of about 34 million used vehicles, including 12.5 million cars and 11.4 million SUVs. The data covered listings from 2016 to 2022 and model years up to 2019. However, the researchers couldn’t determine if cars were primarily used for city or rural driving. The result? An average EV was driven only 7,165 miles a year compared to 11,642 for gasoline-powered vehicles. That’s a difference of 4,477 miles.3
While I just researched the price of the cars, only cursory research was conducted on the various EV operating systems (EVOS) software. A new question arose. Last week, Tesla and Fisker announced Over The Air (OTA) software upgrades. What happens to your EV if the EV maker goes under? What happens to your EV if the company decides they no longer support your EVOS?
Not having a raft of highly trained scientists at my beck and call, I called a few friends and relatives who drive EVs.
D. “I drive a lot. As a home healthcare nurse, I drive 90 to 150 miles per day. I love my Tesla. At night, I come home, charge the car, and I am set for the next day. My husband has picked up 16 free older solar panels, so soon, the roof on the chicken coop will power my car – it will be a Tesla Chicken Coupe.”
Q: D, Do you still have the gas-powered cars? If yes, why?
A: “Yes, and we are keeping them, too. A sedan, gas or electric, is unsuitable for all of our needs. We also have a full-size pickup.”
R. “I commute about 40 miles to and from work. Sometimes, I go out after work to grocery shopping or meet my wife. My employer pays for EV charging, so I do most of my charging at work for free. Home is a top-off. After the first month, I invested in a cool green and orange wrap.”
Q: You still have your 4 Runner?
A: “Yes, I am keeping it. The EV is great, but we have other needs for driving vacations, and Costco runs.”
E. “I have a Tesla, and I kind of like it. The Tesla is not a car for road trips. It is for commuting and just for driving around town. I did take the Tesla on a drive to Payson. I just barely made it. Between the speed and the hill climbing, the charge was near zero at 90 miles. I was able to find a Tesla Supercharger station. My friends picked me up, and we went to lunch. We returned an hour and a half later, and my car was fully charged. I now rent gas cars for road trips.
Q: “Did you keep your old gas-powered car?
A: “No, maybe I should have, but a car rental place is nearby.”
What Happens to Consumers When an EV Company Goes Bust?
Since 2020, we have recommended more than five EV companies; they are all at or near bankruptcy. Luckily, none of those five + near bankruptcy companies have their car on the road. However, it begs the question, what happens to the consumers when an EV company goes bankrupt - like Tesla, Lucid, or Rivian?
Under a Chapter 11 reorganization, a manufacturer's normal operations would probably continue. It would still be building cars and providing service, so car owners might not have problems getting warranty repairs, parts, and service.
In a Chapter 7 liquidation, the company would effectively cease to exist, and car owners would largely be on their own. The company would still have to address safety recalls. If another automaker buys a defunct brand, it will continue to support owners.
When EV makers go bankrupt, car owners lose the ability to customize and control their vehicles, including basic functions like locking/unlocking and remote start. If an electric vehicle manufacturer goes bankrupt, legislation may be needed to ensure that car owners can still access their vehicles, and one potential requirement could be that the manufacturer makes their software open-source.4
When an EV maker goes bankrupt, the car's security and network functions may fail, leaving the device unusable.
Customers who purchase cars from bankrupt EV makers may face significant financial losses due to the challenges faced by the company.
What Happens to Used EVs
We have been speaking with dealerships nationwide over the past two years.
Presently, there is an overflowing supply of EVs in the dealership lot and that is a huge problem. As the used ICE values are plummeting, used EVs are no different.
Here’s the overall look at the market:
Black Book predicts the average 3-year-old vehicle in October 2023 held 66 percent of its original value, down from 73 percent last year but up from 51 percent in October 2019. The company predicts this stat will decline to 56 percent by October 2026.
This means that by October 2026 we’ll be back to almost normal for the used car market as a whole. What about the electric vehicle market?
The average 3-year-old EV, however, only held 49 percent of its original value in October 2023, down from 70 percent last year but up from 33 percent in October 2019. Black Book expected EVs of that age would keep 45 percent of value in October 2026. It also said comparing the future EV market to previous years was difficult “and probably useless” because of the more diverse mix of EV body types in the pipeline.5
Summary of Research
The era of the EV is not here. The US government offers tax credits, but that is not enough. Some cities and states offer additional incentives, but more would be needed. There are now discussions about establishing a used EV resale subsidy.
The subsidies are like shoving Gérard Depardieu into a medium-sized suit. No matter how much you pay or how big the incentive, it will not happen.
EVs have a market, albeit an engineered market with billions. The US government has doled out over $22 billion in subsidies and assistance to EV manufacturers and EV buyers. While EV advocates claim charging costs are equivalent to $ 1.21 per gallon of gasoline, the actual amount is an order of magnitude higher.
“Including the charging equipment, subsidies from governments and utilities, and other frequently excluded expenses, the true cost of charging an EV is equivalent to $17.33-per-gallon gasoline—but the EV owner pays less than 7% of that.
Over 10 years, almost $12,000 of costs per EV are transferred to utility ratepayers and taxpayers, effectively socializing the price of recharging an EV while keeping the benefits private.”6
Despite the generous handouts, all EV makes except Tesla are still losing thousands on every EV vehicle they sell. GM and Ford have lost billions. Even with incentives, utilities have been adamant that they cannot deliver sufficient charging capacity or charging infrastructure for the “all EVs “ future in 2020 or 2035.
The International Energy Agency (IEA) showed that an electrified economy in 2030 will likely need anywhere from 250,000 to 450,000 tonnes of lithium. In 2021, the world produced only 105 tonnes. Despite all the harping about “improved technology,” if we find more lithium, copper, nickel, graphite, and rare earths – don’t worry about it. I smell a “hype trap”.
“But if we find the metals, we will have an all-EV future,” say the dreamers.
That is only “if” the utilities can generate and distribute enough “clean” electricity. To power New York City with solar power, one would need a land mass about the size of New Jersey – so solar and wind will not be able to fulfill the needs; only a quick adoption of nuclear will work. Utilities will only consider building nuclear energy if they receive cash incentives and speedy regulatory approval. So without solar, wind, or nuclear power, we will need to burn more fossil fuels for the future clean EV car charging. It is 40% more efficient to continue to distill fossil fuels and burn the gasoline and diesel distillates in vehicles than to burn fossil fuel at a power plant to find and charge an EV eventually.
If chains are something I hear all the time from financial flim-flam pushers. “We will make a bazillion dollars if A and B and C and D happen.” Assuming each “if” is a 50% chance, 1 “if” is a 50% chance, 2 “ifs” are a 25% chance, 3 “ifs” is 12.5 %, and 4 “Ifs” is 6.25%. The “if” chains described are much more complicated than 4 “ifs.”
For the Investors
The market is already telling us the personal EV is a second car. At this point, it does not matter why it is a second car.
The EV “if” chain is very fragile. In time, one of the fragilities will break. There will be one or more fatal flaws that will occur. My instinct from conversations with politicians and other analysts is that the financial subsidies will falter first with the reduction or elimination of the handouts. With an annual budget of 5 trillion and the US spending 20 billion a year on EVs- not including other renewable ideas EV incentives represent 1/25th of our national budget. The second “If” fragility will be the ability to source raw materials, with one or more metals becoming unavailable or too expensive. The third is the inability to generate and deliver sufficient clean electricity.
Watch the shadows dancing on the wall, but soon the shadows will vanish. The EV lights will go out, and there will be no more dancing EV shadows.
EVs will have a place for upper-income commuters as delivery and possible vehicles. Over 75% of the individual drivers will not be able to afford an EV. EV charging is already challenging in Central Business Districts due to the value of the land, bringing electricity to the site, and the cost of permitting and construction. Charging in rural areas has similar problems, and while the land and permits are less expensive, bringing the electricity to a site, because of the longer distances, is more costly.
As the subsidies are cut, and owners bear the total cost, EV adoption will stall or falter.
Short the hype. The only sectors with “longs” are the makers of electric cable and transmission equipment—or private investment in those types of companies or the local installers.
Weekender Music
Reel Big Fish – The New Version of You
https://nypost.com/2022/11/22/mercedes-to-charge-electric-car-drivers-1200-a-year-to-drive-fast/
The sampling technique consisted of going to Auto Trader, looking for used EVs within 300 miles of my location in Arizona. There were 1,523 used EVs for sale. I sampled the first page of the listings as an example. I did choose EVs that were 2020 and older. I used the 2020 cutoff date because I was looking for EVs that were being used as opposed to a 2023 Kia EV6 that was traded in and had a whopping 725 miles on it or a 2023 Tesla with 1,010 miles on it. The cause for the low mileage EVs between 2021 and 2023 can be flipping or dumping the EVs. I am more than willing to find out for a decent research grant, fee, money, etc.
https://www.scientificamerican.com/article/electric-vehicles-might-not-yet-have-replaced-as-much-car-mileage-as-hoped/
https://eightify.app/summary/electric-vehicles/what-happens-to-electric-vehicles-when-manufacturers-go-bankrupt
https://www.theautopian.com/why-used-electric-vehicle-prices-are-plummeting-and-why-used-evs-will-probably-get-even-cheaper/
https://www.heritage.org/government-regulation/commentary/taxpayers-are-subsidizing-rich-electric-vehicle-owners-the-tune
The current EV debacle makes Arizona's Alt Fuels fiasco of 20+ years ago look like a walk in the park.
The real question is who does our government really work for? It seems not to represent "us" anymore until it comes time to take responsibility for all the malfeasance.