Fortune DEC 2023 / by BY MONICA RAYMUNT AND BLOOMBERG / Read original article
The shift away from cars with dirty combustion engines is running into a new hurdle: Drivers don’t want to buy used electric vehicles, and that’s undermining the market for new ones, too.
In the $1.2 trillion secondhand market, prices for battery-powered cars are falling faster than for their combustion-engine cousins. Buyers are shunning them due to a lack of subsidies, a desire to wait for better technology and continued shortfalls in charging infrastructures. A fierce price war sparked by Tesla Inc. and competitive Chinese models are further depressing values of new and used cars alike, threatening earnings at rivals like Volkswagen AG and Stellantis NV.
Because most new vehicles in Europe are sold via leases, automakers and dealers who finance these transactions are trying to recover losses from plummeting valuations by raising borrowing costs. That’s hitting demand in some European markets that were in the vanguard of the shift away from fossil fuel-powered propulsion. Some of the biggest buyers of new cars, including rental firms, are cutting back on EV adoption because they’re losing money on resales, with Sixt SE dropping Tesla models from its fleet.
“When a car loses 1% of its worth, I make 1% less profit,” said Christian Dahlheim, who heads VW’s financial services arm. The issues with secondhand EVs, he said, have the potential to destroy billions of euros in earnings for the broader industry.
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