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Surge in supply softens used EV prices but wider market starts new year fully charged

posted on 25/01/2023
Surge in supply softens used EV prices but wider market starts new year fully charged

According to the latest data from Auto Trader, 2023 has got off to a confident start, with both retail prices and consumer demand recording a strong performance in the first few weeks of the year. Auto Trader’s Retail Price Index, which is based on daily pricing analysis of circa 900,000 vehicles across the market, shows the current average price of a used car is £18,268, which is the highest value the Index has recorded since its launch in January 2011.

It marks a 2.8% year-on-year (YoY) increase on a like-for-like basis, and although the rate of growth is down significantly from a peak of 32% YoY recorded in April 2022, this current rate is on top of the massive 31.3% YoY increase seen in January 2022. It also marks a month-on-month (MoM) increase of 0.3%, the first positive MoM growth since October. Whilst it follows the seasonal trend of the market picking back up following the festive period, current growth is also ahead of typical pre-pandemic patterns.[i]

Prices have remained stable due to the ongoing demand and supply dynamics in the market. Although demand has softened against previous highs, overall levels remain robust, which is reflected in the level of consumer engagement on Auto Trader. Visits to the marketplace are up 14% on January 2022 - the third month of consecutive YoY growth. Coupled with continued constraints in supply, this robust demand is contributing to the stability in used car values and is likely to do so for some time to come.

Commenting on the data, Auto Trader’s Director of Data and Insights, Richard Walker, said: “After a stable December, our data shows that the market entered 2023 with some real momentum behind it. Prices are stable, demand is robust, and the feedback we’ve been receiving from many of our retailer partners in the last few weeks supports our cautiously confident outlook for the market this year.” 

EV prices soften as stock surges but many models are outperforming market

Whilst this positive trend in price growth has been seen across the retail market, the widely reported exception is electric vehicles (EVs), which at a high-level have been impacted by contrasting market dynamics: the rate of growth in supply has accelerated past the growth in demand.   

As energy prices began to surge, and the price of petrol and diesel returns closer to ‘normal’ levels, the proportion of used EV advert views on Auto Trader has softened, easing from a share of 6% of all used car advert views in June 2022, to 4% in January. Over the same period, used EV supply in the market has rocketed, surging from just 2% of all used cars advertised on Auto Trader in June, to over 6% in January.

As a result of these dynamics, used EV retail prices have begun to fall. In fact, the current average value of a second-hand EV across the whole retail market (£36,445) is down -0.8% YoY, and -0.9% on December, which marks five consecutive months of MoM decline. In contrast, average prices of used petrol and diesel cars are up 0.6% (£16,666) and 0.5% (£16,723) respectively. We can see what impact these market dynamics have had on specific models, including the Tesla Model 3, which in Q4 of 2022, saw the level of available stock on Auto Trader increase 208% YoY – over the same period, the average advertised price on the marketplace has fallen circa £5,000[ii].

However, the huge scale of Auto Trader’s data, which includes the largest view of EVs across the retail sector, reveals how nuanced the immature electric market is. It also highlights how the negative price adjustment of over-supplied premium models are distorting the overall picture of EV market health.  Indeed, a look under the bonnet reveals there are plenty of models and derivatives that are not only outperforming other EVs, but also their fossil fuelled counterparts. For example, whilst the likes of the Tesla Model S[iii] and the Audi e-tron[iv] recorded a respective MoM decline of -3.1% and -2.6% between December and January, the Peugeot e-2008[v] and the Citroen e-C4[vi] rose 11% and 7.7%.

A further indicator of market health is the speed in which used cars leave retailers’ forecourts. Auto Trader’s data shows that it took an average of 40 days for a used EV to sell in December, versus 35 days for petrol cars and 34 days for diesel. However, the MG ZS took an average of 31 days to sell in December, and the MGS took just 29 days.

The impact of the Tesla price drop

The immediacy of Auto Trader’s data reveals what impact Tesla’s new car price cut has had on used values, with the price of a one-year-old Standard Range model falling circa £1,400 overnight[vii] on its marketplace. The news of Tesla’s new car price drop fuelled a huge spike in consumer engagement on Auto Trader, with the volume of Tesla advert views spiking 76% on its platform, whilst Model 3 page views rocketed 113%[viii].

Walker added: “We have the broadest single view of EVs, and as our data highlights, the market is incredibly nuanced, and so a broad-brush rarely reflects the true picture. Retailers need to resist thinking all EV’s are in decline, as the data simply doesn’t support that. Those models that are seeing levels of supply grow at a faster rate than demand are experiencing a price adjustment, but there’s plenty of models where demand is as strong, if not stronger than supply, and as a result are selling quickly and offering great profit potential. With the EV market still maturing, its critical to follow the live retail data – to ensure you’re buying the right car for your market at the right price, selling them at the right price, and securing the best possible margin in the process.”

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