Recently, the Kelley Blue Book reported that the Chevy Volt would be the winner of the electric car that holds its value more than any other in its field. Of course, being a fairly new technology, no one knows exactly how well they will hold their value. There really is no history. No real strong basis on which to base this type of opinion.
In fact, the Kelly Blue Book folks went on to say that the resale value of the Chevy Volt would be at about 42% after three years of average use. At the 5-year point, Kelley believed that the Volt would be worth about 27% of full price. So, that calculates to a value of $10,500 (calculated at a base model of $39,145 X 27% forecasted value.)
Don’t get me wrong. There will be depreciation. Any piece of equipment/machinery will depreciate. Hundreds of moving parts, fabric and rubber gaskets all wear out. This is true for about any item that gets used to the degree that our automobiles are used. Eventually, they’re used up and thrown in a pile with other metal things. So, yes even the electric car will lose a certain value over time.
My problem with Kelley is the rate at which they believe the Volt (or any other electric vehicle for that matter) will depreciate. Here’s my beef.
Electric cars are a new technology yes, so they’re a little unpredictable. A history of forecasting has not been established for electric cars yet. Newer models will be hitting the market. Longer-life batteries. Better components to make battery power more efficient to the wheels. But, how about this thought? What if fuel begins rising to European levels? What if (when the Federal Reserve is printing money at light speed) the dollar depreciates very rapidly very soon, and inflation begins to take hold? What if the price of oil skyrockets? What if the price of Gasoline then skyrockets, in turn? What if demand for electric cars, both new and used skyrockets? What if supply can’t meet demand and Electric cars are found to hold their value better than their gasoline peer?
All of these questions bother me, and the seemingly precise resale value that Kelley Blue Book has announced for the Chevy Volt bothers me as well.
I firmly believe that the Electric car is the car of the future. I don’t pretend for a second to know the resale value for the Chevy Volt five years from now. In fact, I don’t even know what I’ll be doing five years from now. I do know, however, that the Electric Car Market is so dependent on the price of oil, that any forecast for resale value five years from today is almost pointless. Worth less than the paper that it’s written on, in fact.
For example, twenty years ago when comparing a Buick vs. Pontiac, a variety of much smaller factors come into play – in terms of resale value. Incremental market forces (which is better – Buick or Pontiac?), marginal horsepower offerings, and suspension issues determined the expected resale value between the two GM titans.
But with the forecasting of an Electric Car Resale Value – five years into the future no less - Kelley is attempting to peer into the future to determine the future value of an entire brand new species. A species that is unbelievable dependent on the price of gasoline – essentially one factor – oil.
Yes, green is the word of the day, but not the green that environmentalists talk about. It’s the other green that makes people buy. Cash. In other words, how much cash they get when they go to trade in their Chevy Volt in the year 2016.