The electric vehicle (EV) wave has swept across India with undeniable force. From the bustling streets of Mumbai to the tech hubs of Bengaluru, the silent hum of an EV is a clear sign of a green revolution on wheels. Bolstered by government subsidies, rising fuel prices, and growing environmental consciousness, new EV sales are hitting record highs. But beneath this shiny, eco-friendly exterior lies a financial reality early adopters are facing: EVs are depreciating much faster than gas-powered cars.
A recent analysis of the nascent Indian used-car market reveals a stark trend. Electric vehicles are losing their value at a rate significantly faster than their internal combustion engine (ICE) counterparts. While a popular petrol sedan might retain 60-70% of its value after three years, a similarly priced EV could struggle to hold even 50% of its initial on-road price.
So, what’s behind this rapid EV depreciation? The reasons are a complex cocktail of technology, economics, and consumer psychology.
Rapid Tech Advances: The ‘Smartphone on Wheels’ Problem
The biggest culprit behind poor EV resale value is rapid technological advancement. The EV space is evolving at a blistering pace. Every year, new models are launched with longer ranges, faster charging capabilities, and more sophisticated software. This makes a three-year-old EV, with its once-impressive 250 km range, look dated next to a new model offering 400 km for a similar price. Much like first-generation smartphones, early EVs are becoming victims of their own innovation, making them a tough sell in the second-hand market.
Battery Health Anxiety: The Elephant in the Showroom
The battery is the heart of an EV, accounting for up to 40-50% of its total cost. While manufacturers offer robust warranties (typically 8 years or a set number of kilometres), the fear of battery degradation and the exorbitant cost of replacement looms large in the minds of potential used-car buyers. There isn’t yet a standardized, trusted method in the Indian used market to certify a battery’s health, leaving buyers with a high-stakes gamble. This uncertainty severely suppresses the resale value of electric cars.
The Subsidy Paradox: How Incentives Impact Resale Value
Government incentives like the FAME-II scheme have been instrumental in driving initial EV adoption. However, they create a peculiar distortion in depreciation calculation. A new EV costing ₹15 lakh might have received a ₹1.5 lakh subsidy, making the effective price for the first owner ₹13.5 lakh. The used-car market, however, prices the car based on its original sticker price, not the subsidized one. This makes the percentage drop in value appear much steeper for an EV compared to a petrol car, which has no such subsidy cushion.
Beyond Depreciation: Calculating the Total Cost of Ownership (TCO)
Before you dismiss buying an EV due to depreciation, it’s crucial to consider the Total Cost of Ownership (TCO). This is where the EV story finds its redemption. Running costs are phenomenally lower. Imagine swapping ₹10 per kilometre on petrol for less than ₹2 per kilometre on electricity. Add significantly lower maintenance costs—no oil changes, no complex engine parts—and the savings over five to seven years can be substantial. For a high-mileage user, these operational savings can often completely offset the higher depreciation.
Ultimately, the decision to go electric involves a new kind of financial math. If you change cars every three years, the rapid depreciation of an EV is a serious factor. But if you’re in it for the long haul, intending to drive the car for 7 years or more, the incredible savings on fuel and maintenance could make the lower resale value a mere footnote in your overall ownership experience.
The road to an electric future is still being paved. For now, rapid depreciation is a significant bump on that road, reminding us that while the future is electric, its present value is still very much in flux.
