What happens when EVs flood the used market?

In today’s episode on 11th August, we look past the shiny new EV launches to ask a less glamorous but decisive question: what happens to electric vehicles when they become second-hand? Apply for Pitch Perfect - http://bit.ly/46kGDKW

• 0:00Speaker 00

  Hello folks, you're listening to Finshots Daily. In today's episode, we look past the shiny new EV launches to ask a less glamorous but decisive question: What happens to electric vehicles when they become second-hand?

• 0:14Speaker 00

  Before we begin, here's a quick word from Team Ditto. If you've been following us for a while, you know our story didn't begin in a corporate boardroom. It started in the college dorm room with three broke students who chose to skip placements and chase something bigger. That something was Finshots. Today Finshots reaches over 500,000 readers and through Ditto, we've empowered 800,000-plus Indians to make smarter insurance decisions. Now, we're looking for the next game-changing idea to back. Introducing Pitch Perfect 2025, a flagship startup pitch challenge powered by Zeroda. So, if you've got a big idea that could help Indians get better with money, pitch it to us. Here's what's at stake: 10 lakh rupees in price, potential funding from Zeroda Rain

• 0:57Speaker 00

  Matter, and finally, all-expense-paid trip to Bangalore to pitch directly to Nitin Kamath and industry veterans. Are you excited? Apply with the link in the description. Alright, now back to the story.

• 1:11Speaker 00

  In July this year, electric vehicles crossed a small but significant milestone in India. For the first time ever, they accounted for over 5% of all vehicle registrations. That meant nearly 1.8 lakh new EVs took to the roads in just one month. While two-wheelers did most of the heavy lifting, electric car sales also picked up pace. Tata's EVs keep finding buyers, Mahindra is doubling down on its BE lineup, that is Dawn Electric lineup, and Tesla also entered the Indian market last month. Add to this excitement, Vinfast has already set up a $500 million plant in Tamil Nadu to manufacture and export EVs and is talking of another $1.5 billion investment in the country.

• 1:54Speaker 00

  All of this got me thinking: When an industry scales this fast, something predictable happens a couple of years later. On the face of it, this feels like the kind of momentum that governments and environmentalists have been waiting for. More EVs on the road should mean less dependence on fossil fuels and cleaner air in our cities. But a new vehicle sold today eventually ends up in the used market, recycling plant or, well, the dump. As today's EVs start aging, they will have to find buyers in a resale market accustomed to dealing with EVs rather than petrol and diesel cars. You see, India's resale bazaar is huge. It's already worth over $20 billion and continues to grow.

• 2:35Speaker 00

  And this wouldn't be that much of an issue just 15, 20 years ago when the world was full of vehicles with internal combustion engines. This is because its resale value was calculated in a fairly simple manner. Say predictable factors like the brand's reputation, the reliability of the vehicle, the cost and availability of spare parts and how well the car has been maintained. But EVs bring a very different equation into the play. They flip the script because one component dominates value. The battery alone can account for 50 to 60% of the vehicle's worth. If the rest of the car is pristine but the battery is written off, the resale value collapses. Replacing it is expensive and in some cases may cost so much that it is not even financially worthwhile.

• 3:17Speaker 00

  However, the trouble is that battery value is tied not just to age but to how much capacity it has lost over time. Just like your phone's battery, EV batteries also degrade with usage. In ideal conditions, EV batteries degrade by about 1.8% a year. And in a tropical climate like India's, the degradation can be much faster. In fact, a study found that batteries lost three times more capacity per year in hot climates when they were also charged frequently using rapid chargers. Now, that works out to a loss of about 5.4% each year. At the other extreme, careful charging and milder weather can keep declines near 1%. India is not mild for most of the year, but that together and you can already see the valuation problem.

• 4:03Speaker 00

  How do you price two identical three-year-old EVs if one was fast-charged outdoors in Chennai summers and the other charged overnight in a shade of... Car park in Jammu. Now, if that sounds like a niche in convenience, look at the dominoes it can tip. A weak second-hand price hurts first-hand sales because buyers care about exit value, especially for big-ticket purchases. Banks set loan-to-value ratios using expected residuals. If they cannot estimate what a three-year-old EV will fetch, they either lend less or charge more. Insurers apply the same logic to determine the car's declared value, which is then reflected in premiums and claim settlements. Then, there is also the physical issue of end-of-life care. If resale tanks and the battery is not economical,

• 4:47Speaker 00

  owners will be tempted to run the pack into the ground and dispose of the car, or worse, dispose of the battery. And lithium-ion packs contain materials that need careful handling. If the promise of EVs is cleaner air and lower pollution, none of that matters if batteries end up in the scrapyards. But this is where the opportunity lies. If we can accurately measure battery health and price it effectively, we can build an entire second-hand battery economy. If you can accurately measure that a battery pack has lost twenty percent of its driving range, someone who travels long distances frequently may avoid that purchase. But this could be perfect for someone who just travels from home to work most days.

• 5:27Speaker 00

  It's a predictable commute and even if you have to run errands, you are unlikely to encounter issues due to the range. Another opportunity lies in battery replacement and refurbishment. That means modular packs, clear part numbers, and a policy stance that does not punish owners for swapping a tired pack for a certified refurbished one. In fact, Hero is already manufacturing scooters with removable batteries, and Ether wants to launch a battery-as-a-service model to reduce the upfront costs. While this can be more complicated for four-wheelers, manufacturers could start by offering a price guarantee for replacement batteries, which would starve the gray market of unsafe tinkering. If warranties are transferable to second owners and explicitly cover a minimum state of health over time, resale strengthens further.

• 6:13Speaker 00

  There is also a policy angle here. If the government wants more people to choose electric vehicles, it cannot just focus on selling new ones. It has to make sure the resale market works too. That could mean setting clear standards for how EVs depreciate, encouraging battery replacement programs so that a used EV can get a new lease of life, and building out infrastructure for recycling batteries safely. Apart from this, with ethanol blended petrol becoming the mandate for internal combustion engine vehicles, older cars that are not rated for ethanol could inherently lose value. This gives EVs a chance to stand out, provided their resale prices can hold up. The bottom line is simple. India has crossed the early adopter hump, so the second-hand market will decide whether EVs go mainstream.

• 6:56Speaker 00

  If the goal is cleaner cities and lower oil imports, set the rules that let an EV hold its value, keep its battery out of the dump, and give the next owner a fair deal. For now, the real test will come when the first wave of EVs sold over the past few years starts entering the used market. That is when we will find out whether India's electric dream holds its charge beyond the first owner.

• 7:20Speaker 00

  Thank you for listening to today's episode. And if you want to share your feedback or suggestions, do drop us an email to [email protected]. Until next time.