Electric vehicles older than five years face rejection from approximately 80% of China’s used car dealers, primarily due to concerns over battery longevity and the high cost of replacements, as reported by the International Energy Agency’s Global EV Outlook.
The resale value of a three-year-old electric vehicle in China has dropped to around 45% of its original price, a decline from nearly 55% in 2023, according to data from the China Automobile Dealers Association. This depreciation is largely attributed to uncertainties surrounding battery health and the associated replacement expenses.
Battery Life Concerns
With 44 million electric vehicles on its roads, China has been the world’s leading EV market for a decade, making it the first nation to grapple with large-scale EV aging. However, dealers struggle to accurately price used EVs due to the absence of a standardized method for assessing battery health, the most costly component, as noted by industry experts.
Bill Russo, founder of Automobility, a Shanghai-based advisory firm, highlights that while exporting vehicles is straightforward, establishing a supportive ecosystem for second and third owners is significantly more challenging. This issue is particularly relevant for countries importing Chinese EVs, as they will encounter similar valuation issues as these vehicles age beyond five years.
Last year, Chinese automakers exported over 2.5 million EVs, doubling the previous year’s figure, with Europe and Southeast Asia as the primary markets. Chinese EVs now account for 55% of electric vehicle sales outside Europe and the United States.
Valuation Challenges
In the Gulf region, buyer interest in EVs also wanes after five years, as mileage increases and battery warranties near expiration, according to Harsh Chaturvedi, an independent automotive consultant based in the United Arab Emirates. Chaturvedi emphasizes that the fifth year marks a critical juncture in the used EV market, significantly impacting buyer interest.
Financial institutions and leasing companies assess vehicle depreciation at three and five years, typical loan and lease terms. EVs depreciate more rapidly in these calculations, as buyers often pay a premium for the latest technology and the status associated with owning such vehicles, explains Karl Brauer, executive analyst at iSeeCars, a U.S.-based car search firm.
Battery warranties, typically covering eight years or 160,000 kilometers, contribute to dealer reluctance to accept older EVs. A replacement battery can cost up to a third of a new car’s price, notes Chaturvedi. As each year passes, the warranty diminishes, leaving owners responsible for costly repairs once it expires.
Abhimanyu Girotra, a Dubai-based owner of a three-year-old Tesla Model Y, has never run the battery health test built into his car — as any battery issue would be Tesla’s problem to fix. “I have never felt that the battery has degraded dramatically,” Girotra said. “Plus there is this Tesla warranty, so I know if anything happens I can take the car to them.”
While battery health checks are straightforward, used car dealers rarely request these readings, relying instead on age, mileage, remaining warranty, and model reputation for pricing, none of which accurately reflect battery condition, Chaturvedi explains. He notes that two vehicles of similar age and mileage can exhibit vastly different battery health depending on usage and charging habits.
China is addressing this issue, with buyers increasingly demanding inspection reports on batteries, motors, and electronics before purchasing used EVs, according to Russo. Dealerships are investing in testing equipment to enhance transparency regarding battery condition in the used EV market.
A January study by fleet telematics firm Geotab, analyzing 22,700 EVs, found that the average EV loses slightly over 2% of its battery capacity annually, preserving most of its capacity after a decade. Cars that rely on high-power fast charging degrade at a faster rate, with hot climates exacerbating the decline.
Chaturvedi notes that how a car is driven and charged decides how long its battery lasts. “The biggest issue, in my view, is not simply whether an EV battery degrades,” Chaturvedi said. “It is that the used car market currently has limited visibility on the actual condition of that battery.”
Third-party services now offer certification of battery health results, and any modern EV can report its battery health through a standard diagnostic port, according to Brauer.