Rapid Depreciation Hinders Australians from Adopting Electric Vehicles

The issue of rapid value depreciation has emerged as a significant barrier preventing Australian motorists from embracing electric vehicles (EVs), according to testimony given to a parliamentary committee. The Australian Automotive Dealer Association (AADA) CEO James Voortman highlighted this concern during an inquiry hearing on the transition to EVs. While factors like higher prices, insurance costs, and the lack of charging infrastructure already deter consumers, the rapid depreciation of EVs further compounds the issue.

Voortman explained that the phenomenon of rapid depreciation is not uncommon for new vehicle technologies, but it currently creates a poor customer experience and puts dealers in a difficult position when customers seek to trade in a used EV. He also noted that consumers have become more aware of EV depreciation in recent years, making it challenging to change their behavior. The problem is exacerbated by the direct sales model employed by many EV manufacturers, who often apply steep discounts to their new product lines. This practice directly affects the value of used EVs, making potential buyers hesitant.

Backing up Voortman’s claims, a 2023 AADA report revealed that used EVs under two years old experienced an average depreciation of 15.6 percent, compared to 11.9 percent for petrol and diesel vehicles of the same age. Additionally, the report showed that EVs between two and four years old saw a significant decline in value of 23.4 percent. To compound matters further, the average time it took to sell a used EV in December 2023 was approximately 75 days, the highest compared to other types of second-hand vehicles.

Ross Gordon, a professor at the University of Technology Sydney and a government advisor, addressed the government’s support measures for the EV transition during the committee hearing. He argued that current incentives tend to favor early adopters, leaving those who are later to make the transition at a disadvantage. Gordon emphasized that later adopters face more significant barriers, whether economic, social, or cultural, and therefore require more support to transition to EVs. He urged the government to consider this group when implementing policies to ensure a successful transition.

Furthermore, Gordon emphasized the importance of not neglecting individuals who cannot afford a vehicle in the government’s EV transition strategy. He highlighted that there are Australians who rely on walking, public transport, and active travel and emphasized the need to address their mobility needs to create a successful economy and society.

In conclusion, the issue of rapid value depreciation presents a significant hurdle to EV adoption in Australia. Addressing this concern, along with other barriers such as high prices and limited charging infrastructure, is essential for encouraging more motorists to embrace electric vehicles. Additionally, the government must ensure that support measures are inclusive of later adopters who face greater challenges and consider the mobility needs of individuals who cannot afford a vehicle. By addressing these issues, Australia can accelerate its transition to a greener and more sustainable transportation system.