Battery degradation may not drain EV residual values

Cox Automotive has been scoring battery health as part of an initiative for its Manheim auction subsidiary. While it’s early in the testing program, initial results also suggest battery capacity reductions might not be as big of an issue for residuals as previously thought.

“The EV values are aging well,” Jim Heffner, Cox associate vice president of mobility product, said in an interview.

The mere act of having tested batteries seems to help. Cox so far has found vehicles with a battery health score get five times more bids and sell for 1 to 4.5 percent more at auction.

Cox’s initial results show “mileage is not a clear indication of health,” Heffner said.

Factors such as rapid charging and discharging can be more significant, he said.

Heffner said that if he had to assign a grade to the auto industry for the health of its used-vehicle batteries, it would be “well above average.” And newer generations of EVs seem to be preserving their capacity more than older vehicles, he said.

Drotman acknowledged with smaller “compliance vehicles” such as the electric Ford Focus, the automaker “got on the wrong side” of residuals. But Ford and others are producing quality EVs today, he said.

Battery range does matter to residuals. But the discussion during an Auto Finance Summit residual panel suggested the battery’s original range could be the true factor to watch, rather than diminished range from an aged battery.

Vehicles that originally delivered less than 200 miles of range on a charge will see a negative effect on their value, Lanzavecchia said during the panel. Those with 200 miles or more of charge will see more favorable residuals.

At about 350 to 400 miles of range, the EV begins to see diminishing returns in resale value, though “there still is some positivity there,” she said.

Right now, customers are returning early-generation EVs with ranges below 100 miles, Lanzavecchia said. But J.D. Power expects longer-range vehicles to produce residuals closer to those of their gasoline-powered peers, though “still at a little bit of a deficit.”

Panelist Eric Ibara, Kelley Blue Book director of residual value consulting, agreed longer-range EVs are more likely to preserve value, and so his company expected residuals to improve in the future EV markets.

Ibara also highlighted Manheim’s method of assessing used-vehicle battery health. He said his company expected this would significantly alleviate customer concerns about the battery life, though batteries found to be in less than ideal condition would not hold their value as well.

According to Cox Automotive, consumers expect to drive a minimum of 217 miles on a battery charge, up from 184 miles two years ago. But the average range in the U.S. electric fleet had risen from 195 miles in 2019 to 257 miles this year.