Busting Down Some Media Myths About EVs

(L to R): Johan Verbois, co-founder of MA5 Used Vehicle Consulting Group, Kathryn Schifferle, chief vision officer of Work Truck Solutions, and ; Scott Case, CEO and co-founder of Recurrent,...

(L to R): Johan Verbois, co-founder of MA5 Used Vehicle Consulting Group, Kathryn Schifferle, chief vision officer of Work Truck Solutions, and ; Scott Case, CEO and co-founder of Recurrent, separate fact from media friction during an EV session at the Conference of Automotive Remarketing on March 28, 2024 in Phoenix.

Photo: Ross Stewart / Stewart Digital Media

Are electric vehicles on a long skid to the enterprise dustbin of Betamax, Blockbuster, and Blackberry? Or are they the coming automotive version of the ubiquitous Apple iPhone ready to solve all of our transportation problems?

If you say yes to the first question, you may be believing too much of the latest media coverage. If you affirm the latter question, you may be enchanted with Tinkerbell.

An expert panel on all things EV tried to walk the line between the two extremes with some facts and observations during the recent Conference of Automotive Remarketing.

The session, titled EVs Hit the Real Street, featured insights from Johan Verbois, co-founder of MA5 Used Vehicle Consulting Group of Antwerp, Belgium; Scott Case, CEO and co-founder of Recurrent; Kathryn Schifferle, chief vision officer of Work Truck Solutions; and Jimmy Douglas, founder and CEO of Plug.

The session took a whirl around the leading media headlines from the past year highlighting problems and setbacks for electric vehicles. Panelists focused on the facts that temper the media hype while getting beyond the initial cheerleading and rosy-glow predictions from EV first ravers.

For remarketing and fleet sectors looking at electrification, the economics and performance of EVs factor heavily into purchase decisions and operations.

Consequences of Hertz’s Pullback from Electric Vehicles

Hertz’s move earlier this year to cut 30,000 EVs from its rental fleet captured many of the challenges of EVs, from convenience to customer resistance.

Verbois pointed out that the price cuts on new Tesla EVs undermined the residual value of used ones, while EVs are still too complicated to rent out to non-EV-driving customers. In Europe, only .44% of rental vehicles are electric, and their acceleration and speed can lead to more accidents and costs, he said.

On the more positive side, Douglas cited his company data showing that Hertz’s move has introduced used EVs to a wider market of dealers who are getting into the EV resale game for the first time. Combined with the Tesla Model 3 being a popular EV and incentives from the Inflation Reduction Act, for remarketers what that means is the pool of EV buying dealerships, which has been tiny, is finally starting to show signs of growth that are promising,” he said.

Much of the adaptability to rental EVs depends on a driver’s familiarity with owning one and with the geographic area where they would be driving one, panelists said. Creating the customer comfort of renting EVs will require more education and training for customers from rental car companies. Many other automotive operations will learn from the Hertz experience.

OEM Losses on EVs Hit Record Levels

In one macro-indicator, the list of EV manufacturers facing financial peril — Fisker, Rivian, Lordstown, Lucid, for example — keeps growing while major OEMs such as Ford are losing tens of thousands of dollars on every EV manufactured. What should vehicle remarketers and fleet buyers of EVs make of the financial upheavals roiling the EV industry?

Case, citing stats from Recurrent, explained how the cost of batteries per kilowatt hour has plummeted since 2013. OEMs will continue to see such declines with advancing battery technology. Smaller batteries in more efficient electric vehicles will also deliver savings.

The data also shows wide variation in actual losses per EV when factoring in amortization of fixed costs on EVs, rebates and discounts, and production scale, Case said. The average EV industry loss per vehicle was about $6,000 at the end of 2023.

Schifferle added that a more apt comparison would be between EV losses now and those of Japanese automakers when they first entered the U.S. auto market in the 1970s trying to gain share. “They had losses on that for a long period, because they had a strategy, and it worked.”

In the commercial space, government mandates and regulations are driving much of the demand.

One overlooked aspect of the OEM business model for EVs is that other services can be built and sold around the technology and software that defines the vehicles, thereby providing profit opportunities, Schifferle said.

“It’s a different model than the one for the consumer. What are the things they will be able to sell through the connectivity of those vehicles with the data on the software? There’s a big push in the commercial space to look at fleet management because it’s the entire package of what those customers need to run their businesses.”

Douglas added that consumers are not yet comfortable driving an EV 100 miles or more from their homes given the spotty and unreliable charging network. But that sentiment will change now that a unified charging standard has been adopted and more reliable charging networks are emerging.

“I think the gross miscalculation here is (failing to see) that the destination charging network and the confidence in its quality and experience is at least half the (EV) product,” Douglas said. “It’s a very difficult value proposition for any consumer who is comparing an EV to a non-EV and asking, ‘Am I comfortable driving this thing?’ The answer for now is no.”

EVs Freeze Over in Chicago Winter Hell

Some of the most sensational EV headlines this year came out of Chicago’s winter when many EVs were rendered useless in the sub-zero cold and others conked out while waiting in long lines at charging stations.

Citing data once again, Case pointed out that while most EVs will lose range in extreme cold, the amount varies based on make/model, outside temperatures, and whether the EV has a heat pump or resistive heat mechanism. Audis, Teslas, and Hyundais, for example, lose the least amount of range in cold weather, Case said.

When EVs get less range, drivers will charge more frequently. Meanwhile, the data shows EV chargers slow down as the temperatures drop toward zero, prolonging the average charge times during more normal temperatures. But that lower charge time in extreme cold averages out to nine minutes longer, he explained.

What many owners failed to do was precondition or “warm up” their EV before driving it to the nearest charger, where it had to spend at least 30 minutes warming up the battery before gaining stored power.

“The big education here is you can get around that if your battery will start preconditioning or you can do it in your app,” Case said. “But hardly anyone knew that so most had to learn the hard way about remembering to precondition the battery.”

OEMs offer smartphone apps through which an EV battery can be preconditioned remotely.

Finally, many of the EV owners did not live in homes with in-house chargers and parked on city streets near apartments and multi-family housing forcing them to rely on public or private charging networks.

Verbois shared some lessons from Norway where more than 60% of vehicles on the road are electric. Europeans have a different mindset about EVs, he said. His son, for example, drove a Tesla into the Alps during the winter, and the trip took one hour more than normal due to more frequent charging. Waiting for a charge also provides the opportunity for other tasks, such as shopping, getting coffee, taking a driving rest, etc.

“You learn to live with it. It’s a change. If we don’t have the intention to make it work, it doesn’t work. You have to make it work.”

Verbois pointed out how EVs can boost their worth as a vehicle-to-home power source. - Photo: Ross Stewart / Stewart Digital Media

Verbois pointed out how EVs can boost their worth as a vehicle-to-home power source.

Photo: Ross Stewart / Stewart Digital Media

New EV Tech Could Alleviate Concerns

One advantage in EVs’ favor is their constant upgrades and advances in technological efficiency.

In one example, EVs can supply added energy to a home in certain vehicle-to-grid (V2G) setups, Verbois said. Coupled with solar power, EVs can double as home batteries. That goes beyond having an energy-efficient economic vehicle.

“There will be additional improvements coming that I think will change the whole equation,” Verbois said. “Charging will speed up and ranges will improve.”

The attitudes toward EVs also will shift as more drivers see the value in having an EV as a second or third car to handle local trips within 100 miles, returning each night to a home-based charger, he added.

The biggest stride for EVs in coming years will be the wider use of heat pumps instead of resistive heat mechanisms that will help EVs perform better in the winter, Case said. “They’re switching up the heating system so the battery will work more efficiently to translate electrons into movement as a form of climate control.”

Douglas added that the rate at which EVs are being adopted might look like it’s not trending in the right growth direction, but “we need to remember how difficult it is to sustain a compounding growth rate year after year after you’ve had expensive exponential growth.” This belies the notion that EV sales are falling. They are only reaching a slower growth pattern as befits a relatively new product once it passes the first wave of purchasers and adopters.

The EV sectors can anticipate more confidence in battery technology as it will provide more transparency into battery quality, longevity, and resale value, Douglas said.

“We’re seeing the ability to have certainty around what you’re getting in the secondary market and relay that into utility value. How far an EV will drive with energy battery deterioration will start becoming a far more meaningful component of how the vehicles are appraised, marketed, and sold. That comes down to more transparency into the assets rather than a fundamental breakthrough in how they’re manufactured or designed.”

Verbois emphasized that EVs, despite their higher purchase costs compared to ICE vehicles, still end up saving money because of the lower total cost of operation (TCO).

“Salespeople are not helping customers to understand the advantages. Dealers are reluctant to take in used EVs. We see this in Europe a lot. We are the issue.”

Balancing Out EV Demand with Power Grid Supply

Case spoke to a myth that if most drivers get an EV, the power grid will collapse.  First, only about 15% of the cars on the road will be electric in 2030.

Using California as an example, Case’s data shows that from August 2018 to August 2022 the state saw a 122% increase in electric vehicles on the road, but the peak demand increased only 5%. That month was picked because of the generally even temperatures and weather conditions.

“Now, why did that happen? Well, over the same period, solar adoption increased by 30%. EVs have such a small overall load compared to solar production. All the peak demand growth would have been from other things like population growth, and people buying more air conditioning.” That scenario is far more realistic than 100 million EVs all plugged in at 5 pm while the sun is setting, Case said, but the point is the power grid still has periods during the day with ample surplus electric availability.

“You can think of EVs as a rolling kind of energy storage that can suck up solar and wind energy and allow that to be distributed at different times.

How Fleets Can Handle the Steps to Electrification

While fleets use EVs in more predictable and fixed ways, they still have to navigate the costs, timelines, logistics, and infrastructure for running EVs.

To make the most of EVs, fleets need to take a business approach and consider which practices and policies work best, Schifferle said. One way to steer the process is through simulation software that relies on telematics data from fleet vehicles. The software can sort and assimilate the data into recommendations on exactly how to start using EVs in the most suitable ways.

Schifferle outlined three factors that determine EV adoption in commercial fleets:

  1. Where’s your business geographically? If you have to function 24/7, that’s important.
  2. What are your use cases? Are the fleet vehicles carrying a heavy load? Are the fleet vehicles running only 50 miles a day in a circuit and plugging in at night, for example?
  3. How big is your fleet? 62% of all fleets in the U.S. consist of five vehicles or fewer. That puts into perspective the idea of converting “20%” of your fleet. Most fleets are not like PepsiCo’s, where electrification involves extensive planning and management.

Is EV Remarketing Too Expensive?

Consignors, auctions, and dealers will need to contend with the transport, reconditioning, and upkeep of used EVs, and properly assessing their values. What equipment and facilities will auctions require, and will operations handling EVs be affordable?

When evaluating Tesla EVs for remarketing and resale at his company, Douglas observed in their financials that inventory turn time was the single largest indicator of the financial health of the P&L for remarketed EVs.

“We looked at all the steps that happened in between vehicles leaving our balance sheet and entering the receiving dealer’s balance sheet in a whole wholesale context,” Douglas said. “Turn time is not new in remarketing. But it is fundamentally different in EVs because they’re more volatile, they’re getting cheaper, and new models are coming out.”

Used EVs are like used iPhones; every time an updated version, i.e. 13, 14, 15, comes out, it affects the asset value of the previous version, Douglas said. “We’re going to see a similar phenomenon with EVs for a while.”

His company takes two approaches to valuing and moving used EVs:

  1. Leverage the connected information from it because an EV is a “computer on wheels” that spares the cost and time of sending someone to physically evaluate the vehicle, and
  2. Minimize turnaround sales time by using online resources and tools to identify the highest bidding dealers and buyers.

“Everybody needs to think about how can you get the most important data the fastest. And how can you move it off the balance sheet within minutes?”

Case took up another “myth” about EVs being harder or more costly to transport and park because they are heavier than ICE vehicles. Bottom line: No crushed stingers or collapsed parking decks.

“When you compare the weight of a Ford F150, which is one of the most popular vehicles in the country, to a Tesla or a Rivian, there’s not much difference in weight,” he said. “I don’t think you will need a complete overhaul of the transport systems and the trucks or be concerned if parking decks can survive, since they’ve been filled with F-150s for decades.”

Likewise, wear and tear on tires has more to do with torque than weight, and smaller EVs should vary little in tire replacements from conventional vehicles, he said.

Plug's Douglas proposed three key steps to building a strong secondary electric vehicle market. - Photo: Ross Stewart / Stewart Digital Media

Plug’s Douglas proposed three key steps to building a strong secondary electric vehicle market.

Photo: Ross Stewart / Stewart Digital Media

Sending Back EVs That Don’t Sell

Media reports have also stressed how many dealerships are rejecting or refusing EVs because they can’t sell them and are taking losses. It raises the question of how to create healthy secondary markets for EVs.

Schifferle responded that dealerships could focus on a commercial market niche for used EVs because many small businesses start out buying used vehicles since they can’t afford new ones.

“Making sure electric commercial vehicles are highly targeted to the right use cases is an important secondary market,” she said. “I think it’s a big opportunity for dealerships that they maybe haven’t thought about because they’re doing business with businesses. But there are other services they can provide to businesses with the used EV that would be an upsell for them.”

For OEMs, the big challenge in ensuring a viable secondary EV market is to change their tools, websites, and benchmarks, Verbois said. Providing instant online comparisons of the energy consumption and metrics of an EV versus an ICE vehicle can create more buyer confidence.

EV sellers “don’t enable the normal shopping experience that people have on any website,” he said. “In automotive, you need to be unique, focused, and dedicated to this journey. It’s hard and there’s so much to do there.” One solution is to rework EV websites to be “knowledge hubs” for buyers.

Douglas proposed three key steps to building a strong secondary EV market:

  1. Customers interacting with dealer teams should talk to a rep who can walk them through the entire experience and build confidence.
  2. Acquire a broad wholesale used EV inventory mix with attention to technical details, such as the health of the battery and the scope of the software, so buyers know exactly what they are getting and its condition.

  3. Price used EVs properly; use inventory turn time as an indicator of the financial worth and health of the EVs so they move through the sales channel as quickly as possible. “That’s what enables dealers to cycle a lot more used EVs compared to dealers who might be dabbling in this but have not leaned in and become experts.”

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