Electric scooter resale woes: One of the major factors behind low market acceptance
In an earlier article, we reviewed the issues with mushrooming EV startups and how their business practices are driving away EV scooter customers. Nonetheless, curious customers still visit showrooms to enquire about new models and costs. As we know, the acceptance of EVs is not happening at the expected pace. Current battery technology limitations, along with company practices, are just a few reasons to stay away from EVs. I have come across one more reason while talking to various current owners and prospective buyers: resale value.
Why Resale Matters
The world is changing rapidly, with new vehicle models constantly emerging with the latest technologies and looks. People with aspirations for style and the latest trends often buy new vehicles every 3-5 years. When this time comes, customers tend to dispose of their previously owned vehicles through dealers or direct sales. This isn’t limited to purchasing a new scooter but also applies when buying a new car and selling the existing scooter.
As the economy develops, so does the auto market. A growing market also positively impacts the resale market. As per an estimate, the resale scooter market in India stands at approximately ₹50,000 crores annually as of March 2023, with an expected CAGR of 8-10%.
ICE Scooter Resale
For the ICE scooters, the resale value of pre-owned scooters has been good. Though valuation criteria are not formally documented, nearby garage owners or independent experts typically provide a tentative value, which is used to finalize the transaction. The typical points considered for valuation are:
- Brand of the Vehicle: Different brands have varying perceptions regarding resale prices.
- Age of the Vehicle and Number of Previous Owners: Lower age and fewer owners are better.
- Lifetime Running Kilometers: Lower mileage is better.
- Service History: Better maintenance fetches a higher value.
- Physical and Technical Condition: Better condition results in higher value.
The new owner would then invest additional money to repair the vehicle if needed, bringing it to an improved condition for further use. The advantage of ICE scooters is that the engine and transmission have a very high operational life if serviced regularly, contributing to 60% of the vehicle’s cost.
In the case of very old vehicles, owners may opt to scrap them to avoid re-registration and other expenses, which could equal or exceed the vehicle’s actual value.
Resale of EV Scooters
Now, let’s talk about EV scooters. The aforementioned criteria should theoretically apply to EV valuation as well, but is that the case? Let’s analyze.
The major high-value components in an EV scooter are the battery, controller, and motor, contributing to almost 65%-75% of the vehicle’s cost. These components have a limited operational life due to current technological limitations. The maximum life proven for a battery is 3-5 years with acceptable efficiency. The motor and controller have similar lifespans. Although some might argue that there isn’t enough data to establish their longevity, which is acceptable since EVs are relatively new.
Once the life of these components is over, you must invest 60%-70% of the total vehicle cost to get the vehicle up and running again. This problem applies to all available brands. Tentative spare pricing is as follows:
Unfortunately, none of these key components are fully serviceable. You can’t change a few parts and get them running again. At present, serviceability is very limited and expensive.
Considering this, would you apply the same valuation criteria for an EV scooter? The answer is no. The technical condition criteria do not hold, which is a major element in determining how much further service the vehicle would provide.
Current Resale Market Situation
Individuals or companies dealing in the used scooter business are willing to buy an ICE scooter happily, regardless of age. The value will depend on the age, but they buy, repair, and resell it with a margin. This well-established business model has been operating smoothly for many years.
Currently, however, they are unwilling to deal with EV scooters. There is no further buyer, the repair cost is high, and the future operational life cannot be estimated. They either don’t buy it or buy it at a very low price. One person I know sold his EV scooter for ₹15,000 within two years, despite purchasing it for over ₹1 lakh. Another person was willing to sell his EV for any amount just to get rid of it, as the repair cost was too high. Additionally, he had taken a loan to purchase the vehicle, which remained unpaid.
The Impact
All this goes against the purchase of EV scooters (and other electric vehicles), making buyers sceptical about opting for EVs. At times, the fuel savings do not compensate for the losses due to devaluation.
What Could Be the Solution?
To address these issues, potential solutions include:
- Improving Battery Technology: Developing longer-lasting and more reliable batteries can enhance the lifespan and resale value of EVs.
- Service Infrastructure: Establishing a robust service network for EVs can ensure better maintenance and repair options, improving resale value.
- Consumer Awareness: Educating consumers about the benefits of EVs, including potential long-term savings and environmental benefits, can increase acceptance.
- Government Incentives: Providing incentives for EV purchases and supporting the resale market can encourage more buyers to opt for EVs.
By tackling these challenges, the EV market can become more appealing to consumers, fostering greater acceptance and growth.
About the Author:
Abhijit Kulkarni
Founder – Exponent Business Solutions, Pune
abhi.kulkarni@exponentsolutions.in
+91-9028198141
Also read: How electric scooter market is different than the ICE scooter market
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