CARY, N.C. -

Think of a plant or tree seed. Physically, there’s not much there yet, but with the right environment, care and nutrients, within that seed is a lot of potential for growth.

You might think of the used electric vehicle market in the same way. Still deep in its infancy, the seedling could blossom.

As it stands, though, the market for used electric vehicles is small.

Tiny.

Even when compared to the numbers in the new-car market, where EVs have a 2% share, estimates Autotrader executive editor Brian Moody.

The foundation for used EVs to bear fruit may be in the certified pre-owned market, Moody says. But selling dealers or consumers on the value proposition of a used EV can be challenging.

“When it comes to used electric cars, I think a good opportunity might be for certified pre-owned, because I think that consumers are still a little bit concerned about things like, ‘What if I have to replace the battery?’ They still look at it as somewhat of a risk,” Moody said in an interview Monday.

“Prices for used electric cars are pretty low, so of course that’s good news for a consumer who wants to get a great electric car like, say, a first-generation Leaf for not much money,” he said. “But that’s not going to be much of an incentive for dealers to want to stock them on their lots, because where’s the profit in that versus, say, a Chevy Silverado or something like a Ford Expedition. 

“At this point, it’s tough … what the key is, (is) that if the average person were to drive one, I think they’d really like it. And I think that’s probably the key to getting someone into a new or a used electric car.”

If EVs have a 2% share of the new-car market, Moody estimates electrics’ share of used is less than 1%. There likely is not much incentivizing in used EVs and there simply isn’t the same marketing or name recognition.

At this point, electrics aren’t commanding much share at all in the used wholesale market either, says Peter Kelly, chief executive of KAR Global, parent company of the ADESA chain of auto auctions.

But while EVs are a “very small slice” of pre-owned, there remains a lot of potential for used electrics, Moody said.

“It’s going to grow … we expect that the new-car (market) for electrics will grow, maybe double to 4% by the end of 2021,” Moody said. “As that happens, of course, with any type of vehicle, that’s going to increase the availability of good used electric cars in the marketplace. 

“Think of it this way: a lot of the best electric cars in terms of range, price, performance, all that: those are mostly new,” he said. “A lot of the used cars are sort of the … first modern wave. So, think first-generation Leafs, maybe series hybrids like the Volt. In a year or two, you’re going to start seeing things like the Jaguar I-PACE, maybe there are going to be some Tesla Model 3s, those kinds of cars. 

“So there’s still some time before it gets to be a big deal in terms of the used electric cars. Because right now, what there is (available) is those first crack at those new electric vehicles.”

Consideration set

And the consideration for used EVs and other altenative-powertrain vehicles is there, albeit being lower than consideration for new versions of those vehicles. 

As previoulsy reported in Auto Remarketing, the 2021 Electric Vehicle Sentiment Survey from CarGurus posed this question: “Which ways of acquiring an alternative fuel vehicle would you consider?” Respondents were instructed to select all that applied.

Among those who plan to own an alternative-fuel vehicle within the decade, 73% said they were open to buying an electric vehicle as new and 61% said the same of hybrids, according to the CarGurus data.

While considerably lower, the certified pre-owned and used segments of these vehicles still had some strong numbers.

For EVs, 45% said they were open to buying as CPO. Hybrids yielded similar CPO consideration at 44%. Meantime, 42% would buy electrics as used and 42% said the same for hybrids.

In emailed comments for that April story, CarGurus senior consumer insights analyst Ali Chapman explained some of the used-car dynamics in EVs.

“Car buyers tend to understand that 'going green' with the purchase of an electric vehicle will usually come with a higher ticket price when compared with gas-powered vehicles and our study showed that consumers may turn to the used or CPO market as a way to offset those costs,” Chapman said. “Additionally, our study showed that younger shoppers are more likely to be interested in both used and new electric vehicles, and dealerships that have alternative-powered vehicles on their lots can use this inventory to engage with these potential new customers.”

EVs for CPO

Say an automaker or dealer takes Moody’s words to heart and finds a home for used EVs in a certified pre-owned program. He said it may have an impact on the certification process, but one thing to bear in mind is that the majority of EVs, hybrids and plug-in hybrids have extended warranties covering battery and drivetrain components.

“So, think of vehicles like the Prius, for example, or a hydrogen fuel-cell car like the Toyota Mirai, that kind of thing — the eight-year or 100,000-mile warranty on those things, probably an easy way for that CPO program to make sense is to just leave that in place,” Moody said.

“And that will alleviate the concern. But here’s the issue: the average consumer won’t know that. So, it will be up to the dealer to make sure that they know, ‘Hey, when you buy this lightly used electric car … you still have this much left on it with no concern.’”

To drill down further on that, there are a few key pointers for dealers to help foster peace of mind when they retail a used EV.

For starters, the dealer needs to be clear with the consumer that there is a warranty already in place, Moody said. And if the car is CPO, emphasize to the consumer that is part of a program backed by the automaker, he said.

“And third, I think there would have to be some kind of metric or some kind of result that you could show. Now, this is already available information, but I don’t know how you communicate it to a customer. How much of the battery life is left? How much of a charge can it hold? That kind of thing — things that people are concerned about with electric cars is that over time, they hold less and less of a charge,” Moody said.

The point is to communicate the capacity remaining of the battery, to be upfront with the consumer and to alleviate any concerns around battery life.

Top consumer concerns

Interestingly enough, the top priority for shoppers considering EVs is now range, according to the 2021 Electric Vehicle Survey published by Autolist.com this week. The last time around (2019), price and charging infrastructure topped the list, Autolist found.

In the latest study, consumers named their three most important considerations for buying an EV.

Sixty-one percent mentioned range, 50% mentioned price, 43% included charging infrastructure, 36% said recharge times and 35% pointed to battery efficiency, Autolist said.

In 2019, price (58%) topped the list, followed by charging infrastructure (44%).

“Two years is a long time in the world of electric vehicles, and buyers today have more models to choose from and more places to plug them in,” Autolist editor-in-chief David Undercoffler said in the company’s analysis. “That’s helped ease concerns about price and charging while pushing range to the top of their list.”

Used EV specialization may work

Statistically speaking, EVs are a niche market, even on the new-car side. Used electrics, even more so.

But often where there is a niche, there is an opportunity (after all, consider the publication you’re reading).

One such is example is Current Automotive, a Chicago-based retailer of used EVs that primarily focuses on online sales of these cars.

“Looking ahead, seeing all the planned plug-in vehicles coming to market meant that there’s going to be a healthy secondary market eventually,” Current Automotive co-founder Seneca Giese, who was with Tesla for nine years and helped launch its CPO program, said in an interview for this 2019 story.

Moody sees this type of niche specialization model as a “super smart” move. He gives the example of North Freeway Hyundai in Spring, Texas.

The store began “dabbling” in used Chevrolet SSR pickup trucks, a curious-looking vehicle from the 2000s whose style doesn’t necessarily fit the mold of your traditional Silverado-type truck.

“They just bought a couple, I think, to put them out front and get attention … Years later it turned out, that that place was kind of like the go-to place for a Chevy SSR, which turns out in Texas, there’s actually a demand for,” Moody said.

“And not only do they have a bunch of them for sale, but they had a way of servicing them, they had a way of sourcing parts that were hard to find. They would help people find a certain color,” he said.

“So, there’s definitely something to be said for a dealership that wants to focus on something that seems like a one-off, but is going to grow over time. And i think with electric cars, that’s what’s going to happen.”

Not that it will be an easy process. Despite EVs dominating a lot of the chatter, the typical consumer probably doesn’t have a lot of experience with those vehicles, Moody said.

The key is to get them, well, the keys to one.

“My opinion is, once the average consumer gets behind the wheel of a competent, electric car, they’re going to like it. That a gasoline-powered car will seem crude by comparison, but you have to get them in the seat,” Moody said. “And it’s a tough sell, because here you have a thousand gasoline-powered cars and maybe five electric cars.

“At this point, it may not make sense to invest in (specializing in used EVs) a bunch, but growing that over time will make sense, because people will soon come looking for electric cars that are way less expensive than what a new one is,” he said. “Because they are quite expensive when they’re new.”

Infrastructure plan

While it doesn’t top the list of concerns, concerns over charging infrastructure have remained consistent the past two years, according to Autolist.

But there has been progress, as there are now 114,000 public charging units, Autolist said, compared to 68,800 when the survey was last conducted.

Citing the Department of Energy, Autolist indicates there are now close to 48,000 EV charging stations, compared to a little more than 20,000 two years ago.

Still, Autotrader’s Moody acknowledges that there likely aren’t enough public charging stations at the moment, but more are on the way, per the planned investment in EV infrastructure as part of President Biden’s American Jobs Plan.

However, charging the vehicle at home will probably suffice for the typical EV buyer these days, Moody said.

“And this is another thing that I don’t think has been communicated well to consumers: you don’t need to purchase an expensive, in-home high-capacity Level 2 charger to charge up your electric car,” Moody said.

“You can do that and it will definitely charge your car faster, but I don’t think the average person knows that a charging cable comes with the car when it’s new — likely, it would come with the car when it’s used, too; otherwise, that would be a really tough sell.”

Moody says that folks may not be aware that EVs can be charged through an outlet in a garage or backyard.

And Autolist found that actually would be the preference for most.

In fact, 70% of respondents in the company’s survey said the ability to charge at home would be “essential to their purchase consideration,” while 14% considered it to be “somewhat important.”

Only a combined 15% were either unsure, found it to be “not important at all” or listed “other,” according to Autolist.

“Of course, adding more public chargers is a good thing,” Undercoffler said. “And yet that’s just not the use case most consumers imagine when they consider switching to electric — they want to plug in at home.”

Moody echoed that sentiment of charging station infrastructure still being important.

“And the government has a plan for that. The president has included electric vehicles and charging stations as part of a $174 billion plan,” Moody said, referring to the White House’s goal for 500,000 EV chargers to be built by 2030.

 “That’s a lot. And that should definitely help,” Moody said.

“And it will matter where they are. So, for example, putting somewhere there are hotels would be a good one,” he said. “You charge your car up overnight; it’s sitting there not being used. That’s a logical type of thing to do.”