One topic that has gotten a lot of mileage recently at gatherings or dinner tables has been the debate of whether or not it is worth getting an electric vehicle (EV), and among the many topics that are either for or against the idea, one of the sticking points is the concept of resale value.
For many people, one of the considerations in getting a car is its future resale value. Whatever that estimated amount is, they add it to the value of the car because they reckon that they will get that amount of money back when they sell the car after having used it for so many years.
Their problem with an EV that it has a reputation of having a much smaller resale value than an internal combustion engine (ICE) vehicle, mainly because it is 50% battery and electronics, which unlike an engine that can live forever if you take care of it properly, loses practically all its value at the end of its service life. Anyone who has a smartphone knows that it is the battery that is most often the part that fails at the end of the service life of the unit, and even if you can have it replaced, not a lot of people would buy it from you because A) its an old unit, and B) the battery has already been replaced. The only way you can get resale value from an electronic device is to sell it dirt cheap.
An EV’s battery typically costs around half of the brand new vehicle, and even if you spend to have it replaced with a new one so you can sell it, the other half of the car will still be old, which doesn’t make sense if the purpose is resale value. It might make sense to replace the battery that has reached end of life, so you can still use the car for another battery life cycle. But that would probably be a boring proposition for most, who would be itching for a new car by then.
For many, the thought of buying a car that would have almost zero resale value is not very attractive, and that is why they don’t think EVs are a good idea.
However, if you come to think of it and do the math, the concept of resale value should not be applied to EVs because that amount of money is not expected to come back at the end of the ownership of the vehicle. Instead, the thinking should be that more or less the same amount is saved or comes back through the supposedly lower cost of owning and operating a car that doesn’t need gasoline and doesn’t require ICE maintenance throughout its service life.
Here is my math: A properly used EV, that is a daily driver and not a garage queen, should travel around 10,000 kilometers a year. At that rate of use, the difference between electricity and gasoline costs are estimated at around P50K per year, as per online calculators. Another P5-6K in engine maintenance costs would also be saved, putting the total at P55K in annual savings. If you own the car for 8 years, which is the warranty period of the battery, the total savings in terms of cost of operation would be at P440K. That amount should be your missing resale value right there. The only difference is resale is a lump sum at the end of ownership, while savings accumulate every month for 8 years.
Unless the price of electricity shoots up, or the price of fossil fuels dive, in terms of resale value versus cost of operation, the EV and the ICE vehicle should stand on even ground. Those who want to benefit from the lower cost of operation but still want to get a “good” resale value are just being greedy. Those who insist on comparing EVs to ICE like apples to apples, simply because both have 4 wheels, a windshield, and a steering wheel, are missing the point and the shift in the ownership paradigms.
Of course, there are many other reasons that are for and against going electric, but in terms of resale value, this is the mathematics of ownership that I will probably choose to adopt, if ever I do take the plunge.
While we are on the topic of shifting to electric, the one path I don’t think is practical, even if it is the more established route, is to go hybrid. The reason is simple. I’d rather have 1 potential source of headache (either electric or ICE) than 2, which is what happens with a hybrid setup, where the car has both batteries and an engine, giving owners the best, and also the worst, of both worlds.
There are still so many considerations to make as far as making the shift to EV or hybrid is concerned. Economics is just one. Other issues like availability of parts and support, reliability, and charging infrastructure are all part of the equation.
However, for early adopters, it can still be as simple as going with the gut.*
