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Does electric motor dramatically change the depreciation equation?

One of the things mentioned by commenters here is the longevity of the electric motor. I am wondering, if the depreciation rate of ICE vehicles is chiefly based on basically the engine wearing down and racking up problems with hoses, pistons, cylinders, etc. (which scales with mileage) -- does the electric motor now mean that EVs will have a much slower depreciation? Both vs. years and miles?

Particularly if the battery pack is treated as a swappable thing, you basically have a car that doesn't age as much as an ICE.

Do you think that is reasonable?

My 2004 Porsche Cayenne S is kept in prestine condition, but the engine is starting to make funny noises at 120k miles. Porsche said it is a 30k replacement part.

And even with a new engine I would not view it as "like new". So a replacement engine is currently as expensive as a replacement battery. With the rest of the car being a lot less depreciating on the EV side of things.

With battery price improvements this scale should tip even further in the direction of price stability of EV cars vs. ICE.

One more thing is that a used EV car will yield you as much in fuel savings as a new EV car. So basically, as long as we live in an ICE world and can compare to ICE cars there is a elevated floor price for an EV which makes the depreciation cure much flatter.

If one spends $200 per month on gas and assumes a 25MPG ICE coparison vehicle, and $4/gal and 300wh/mile and $0.10/kwh and a financing rate of 2.9% then the follo9wing hold true:

Miles driven 1250
Electricity costs $37.5
Savings per month $162.5
Savings per year $1950
Vehicle price that can be financed with that money $67241.37

So in this istance the gas savings would enable that person to finance a new vehicle let alone a used one.

If one assumes that battery replacement costs as much as the high maintanance fees for an ICE car plus replacement engine after 210k mile for an ICE car then the economics are compelling.

That will result in much higher used car prices for EV cars than ICE cars........

Though there may be some variable details. For one, owners from different states reported higher prices per kWh electricity (if no PV installed); don't have an example at hand right now.
Also, there will be some expected range degradation after 100/150K miles. From the Panasonic battery charts, however, that should not be more than 20% (or less) at that total mileage (chart was in one of those SeekinAlpha articles some weeks back).
YMMV

tobi;
pay off a $70K car at $2K/yr? You'd need negative interest rates to survive it.

I think you confused monthly and annual amounts.

brian:
toby not tobi ;)

@Brian

ups...OK granted I kind of calculated a lease payment without deprechiation...

So if you have a lifespan of the car of 14 years the amount one can spend would be something like $22k

So one could argue that since one receivesd this energy savings value the car should be valued about $22k higer.

Thanks for pointing out my error.. wishfull thinking was part of it.

Now looking to Europe that is a totally different equation.
Just checked on German gas prices and they seem to be Euro 1.66/liter which converts to $8.23 per US gallon.

That is 2.05 times as high as in the above assumtion. So the base value is then more like $45k for a German buyer.

So the value of a MS increase with gas prices and miles driven.

@toby:
Taking your example, for a low mileage-driver, e.g. 12,000 km/year, and my current ICE burning 10 Ltr/100 km, I'd save EUR 1,992/year here in Germany. Just one datapoint. :)

the motor in the tesla is a commercial motor that has been shown to run for more than 2,000,000 miles. yes, 2,000,000 miles!!

Soma,

Depreciation is based of of resales value at a particular time. This number comes from the amount a car is sold for at the dealer auctions. What dealers are willing to pay depends on how ease they can sell the car and for what they think they can sell it. For this reason residual value on cars change from month to month depending on your local dealer auction results. This information is published for all dealers and bank. That is why MS is not leasing at this time. There are no results from dealer actions to calculate depreciation figures.

So as you can see depreciation is a number based on current dealer actions. It is not a function of condition or degradation of the car. If people are will to pay a lot for "junk" then it's depreciation would be low. I know this because I use to sell cars for a living.

I hope this was helpful.

I think the depreciation of ICE cars will be greatly accelerated by EVs

Anthony, thanks for the ideas. However, I think that the ageing of the car is so definitely related to what dealers will value it for, that it would be missing something not to think about how a different "ageing" progress affects value.

If a car basically did not age and were still fully functional over many years, I am guessing that it would retain quite a lot more value compared to a car that wears out after 100,000 miles.

Tesla, from what people are saying about the motor and drivetrain, will age much less slowly than an ICE, aside from other factors that haven't been discovered yet.

Soma,

All of what you say is true. However, popular opinion is more powerful than anything. The look, the brand, the status of a car can be more important to a customer than mechanical reality. Just the fact that a car looks different than the new version kills it's value.

There is also one other factor I left out. Banks don't want to finance cars older than 5 years. At least not if the car is the only collateral. This is a big factor for dealer's determination as to how fast they can resell a given model.

Who knows maybe Tesla might change these factors. Only time will tell.

@eddiemoy:
"the motor in the tesla is a commercial motor that has been shown to run for more than 2,000,000 miles. yes, 2,000,000 miles!!"

It's probably more than that; the windings and shaft don't wear... only the bearings and seals. It might need to be serviced but the magnets still hate each other just as much as when the motor was assembled and hence should make the same power. :-)

I also read somewhere that the suspension systems in the front and rear are designed to last 400,000 miles without major service or replacement. Also, somewhere else in this forum I read that the batteries degrade to about 80% of new capacity and then level off at 80% forever. With 95% aluminum construction the body should last almost forever too, save for erosion and wear and tear. It sure sounds like we have a car for a lifetime in the making.

I think that the depreciation on the EV will be helped (reduced) by the cost savings in running the car, put hindered by the steady drop in new EV prices as the technology becomes cheaper. Think about CD players and CDs. When they were new tech they cost a fortune and the resale value was high, but soon after when the price plummeted selling a gen 1 player became more difficult as a new one was cheap.

thomas;
"tobi_ger"=tobi.

Soma;
"Tesla, from what people are saying about the motor and drivetrain, will age much less slowly than an ICE"

Less slowly, faster? Seriously? Not a chance.


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