This rapid depreciation of electric vehicles creates new dynamics both in military logistics and in procurement strategy. According to recent data, used electric vehicle prices are plummeting at an unprecedented rate, significantly outpacing the pace of depreciation for their gas-powered brethren. This sets up a series of opportunities and challenges for military operations across the board that rely more and more on advanced vehicle technologies.
The used car market has gone through quite its fair share of ups and downs lately. In 2019, vehicle depreciation happened with pretty high predictability, until the pandemic disrupted that balance. Converging supply chain problems, natural disasters, and governmental stimuli created a perfect storm that inflated the values of used cars. Now, with new car inventories normalizing and interest rates increasing, prices have started to normalize.
According to Black Book, the average three-year-old vehicle retained 66% of its original value in October 2023, down from 73% in the prior year. This figure is expected to fall further to 56% in October 2026. For EVs, this situation is more exaggerated. A three-year-old EV commanded only 49% of its original value in October 2023, down sharply from 70% in the prior year. This would fall to 45% in 2026.
There are many contributing factors behind the faster depreciation of EVs. Firstly, battery life in early lithium-ion-powered models like the Nissan Leaf and BMW i3 has degraded badly with use. Whereas new models ought to perform better, it is difficult to shake off the perception of valued-low batteries. Many EVs are also luxury models, which are expected to depreciate fast.
Not to mention the aggressive pricing strategy of Tesla: its continued price cuts have brought not only a drop in the resale value of the used Teslas but also a broader price war among manufacturers of EVs. An environment of such kind eventually forces the general price of secondhand EVs down.
The rate at which EVs depreciate has some very mixed implications for military planners. While the potential of having to replace or supplement large fleets at regular intervals may spell disaster for planners, perhaps falling used EV prices could, on the other hand, present some very cost-effective opportunities for fleet expansion and modernization: advanced EV technology can be procured for a fraction of its original cost, with obvious positive implications for operational capability within very strict budgetary guidelines.
However, the rapid depreciation also carries risks: the military needs to think about the long-term value and reliability of these vehicles-partly due to possible degradation of the batteries. In addition, the number of off-lease EVs that will flood the market over the next couple of years may make it even more difficult to consider procurement strategies.
So is the global automotive landscape: domestic brands are on the rise, while foreign manufacturers like Toyota and Tesla are in decline. The trend underpins the need to appreciate regional market dynamics when planning military vehicle acquisitions.
In other words, the nosediving prices of used EVs have brought forth certain opportunities and challenges for military logistics. If military planners can follow closely the market trends and performance data of these vehicles, they will be able to make informed decisions. That would enable them to capitalize on the benefits of selected technological advances in EVs while limiting some of the risks that are associated with them. When this market is still in development, this indeed is going to be a key to one’s strategic advantage.