Electric cars lose as much as half of their value after just three years on the road, new figures show, as the rate of depreciation far outstrips petrol equivalents.
Research from Auto Trader said there were “unsustainable levels of depreciation” in the electric car market, with used prices of battery-powered vehicles dropping by 23pc in the last year alone.
The online vehicle marketplace said a motorist buying a £50,000 electric car could expect to lose £24,000 in value over three years, while a similarly priced petrol car could lose £17,000.
The value of used electric cars has dropped dramatically in the last 12 months after Covid-related supply shortages eased and as rising electricity prices hit demand.
This coincided with petrol prices falling to a two-year low.
Auto Trader’s latest report warned that “residual values of electric cars remain unsustainably low”.
It said that the price of used electric cars could come under further pressure this year as thousands of motorists return vehicles acquired on three-year leases and as manufacturers cut the price of new vehicles.
“With over 800,000 new electric cars registered between 2020 and 2023, supply returning to the used car market will only increase in 2024, and if demand does not keep up, electric cars could depreciate even further, undermining both consumer and retailer confidence,” it said.
Manufacturers are now applying record discounts to new electric vehicles in a bid to boost stuttering demand.
Auto Trader said car makers were slashing thousands of pounds off prices, with average discounts of 10.6pc offered in December. This compares to discounts of 4.8pc a year earlier.
It predicted that a wave of Chinese entrants would further push down the cost of electric cars.
Sales of new battery-powered vehicles in Britain rose by 18pc last year but accounted for just 16.5pc of all new cars sold - a slight decline from 2022.
New electric cars are still more than a third more expensive than their petrol or diesel equivalents.
However, from this month, electric cars will need to account for 22pc of every manufacturer’s sales, which analysts expect to lead to heavy price cuts to encourage consumers.
Campaigners have said motorists will continue to find electric cars too expensive without government subsidies, which ended in 2022, or other incentives such as cuts to VAT.
Auto Trader said demand for used electric cars had picked up as prices fell, suggesting that the vehicles will prove popular once they are no longer more expensive than petrol rivals.
It said that used electric cars on its site tended to sell up to five days faster than petrol ones.
This month, the Chinese manufacturer BYD surpassed Tesla as the world’s best-selling electric car maker. The company’s cheapest electric vehicle retails for £25,000 in the UK, roughly double what it costs in China, which Auto Trader said gave it room to further cut prices in Britain.
It predicted that one in six electric cars sold in Britain will be made by Chinese companies by 2030.
Ian Plummer, Auto Trader’s commercial director, said motorists had been “confused” by Rishi Sunak’s decision to push back a ban on petrol and diesel car sales from 2030 to 2035.
He said that discounts applied to new electric cars meant most motorists would not bear the full cost of the depreciation in their value.
