IAA recently released a white paper called ‘EVs and Their Effect on the Vehicle Ecosystem’, which says that electric vehicle sales are expected to steadily increase over the next decade, leading to a significant impact on the global vehicle ecosystem.
According to the paper, electric vehicle (EVs) sales are expected to steadily increase over the next decade, leading to a significant impact on the global vehicle ecosystem.
While EVs currently account for a relatively small share of the global auto market, sales have sharply increased in the last few years and should continue to rise in the next decade. EVs may account for up to 40 percent of new sales by 20301 due to government mandates, consumer demand, and financial incentives such as tax credits.2 According to Bloomberg, global EV sales in 2021 are expected to reach a record 6.1 million units.3 With more EVs coming off manufacturing lines, buyers and sellers – particularly in key regions – can expect to see more of them available for resale and at auction.
A recent survey showed that those interested in purchasing an EV overwhelmingly view them as the way of the future, with 85 percent of respondents noting that they are “better for the environment.”4 A majority of those surveyed (70%) also viewed charging an EV as a more affordable alternative to fuel.
Governments around the world are incentivizing manufacturers to help address climate change by eliminating fuel emissions. An Executive Order from President Joe Biden in August 2021 set lofty goals for 2030 that include 50 percent of all new passenger vehicles being electric.5 Time will tell if this target can be reached, but manufacturers are investing billions into all-electric makes and models this decade.6 Audi and Volkswagen each plan to cease selling internal combustion engines (ICE) entirely by 2033.
Although North American sales of EVs continue to trail China and Europe, there were approximately 179,000 units sold in Q3 of 2021. This 2.7% market share marks the highest number yet for the North American region in sales. IAA, however, is currently seeing a 150% greater demand for EVs from international buyers. On average, EVs are receiving 40% more bidders and 65% higher average selling prices globally as a result of increased demand.
There are some concerns over EVs rapidly advancing technology making them quickly outdated.7 According to a study, only 7.5% of EVs sold in the U.S. were pre-owned.8 Additionally, sales data has shown that around 80% of new EVs are leased.9 With pre-owned EVs appearing unattractive to consumers, high inventory and low demand may keep prices low on vehicles that are only three to five years old and have low mileage. Demographics point to higher incomes for new EV buyers,10 but low pre-owned prices may make transitioning to an EV accessible to a wider range of consumers.11 A greater number of late-model EVs on the road could mean greater demand for obtaining parts through total-loss vehicles at auction, but IAA expects EVs to account for less than 10% of the total car parc by 2030.
EVs are being purchased more in specific regions around the U.S., particularly in populous states like California, New York, Texas and Florida. IAA’s inventory is reflecting the overall EV registration volume in these states. By 2030, there could be as many as four million EVs in California alone.12
Tesla is by far the current industry leader and accounted for over 66% of new EV registrations midway through 2021.13 The fact that Tesla operates a closed network of company-owned and approved repair facilities is noteworthy when we think about OEM versus recycled parts. Chevrolet was a distant second in sales at 9.6%, but this gap is expected to shrink as greater variety enters the market.
Making up about 40% of the value of an EV is its lithium-ion battery.14 As manufacturing of EV batteries increases, so too will competition for raw materials such as lithium, nickel and copper. Cobalt is currently part of this equation, and initiatives have been launched to produce cobalt-free batteries due to humanitarian concerns with how it is extracted.15 In the first seven months of 2021, $3.21 billion in EV battery metal business was generated, approximately the same as 2017 ($1.1 billion) and 2018 ($2.2 billion) combined.16 The long-term goal is to make batteries more affordable, and prices for battery packs have dropped by nearly 90 percent in the last decade.17
In addition to its value, the EV battery also substantially increases vehicle weight compared to ICE. For example, the Ford F-150 Lightning weighs 1,600 pounds more than its ICE counterpart. Although EVs tend to travel fewer miles and for shorter periods of time, the additional weight can contribute to more expensive damage in a collision and a higher chance of a total loss claim.18 Also, batteries that are damaged or degrade over time can present significant dangers such as thermal runaway and fires.19
Proper maintenance of an EV and its complex technology, particularly the battery, will lengthen its lifespan,20 and IAA is eager to meet the challenges of a greater EV supply in our inventory. We are exploring how to best maintain the health and integrity of the battery21 along with ways to structure our facilities to provide the highest degree of safety for managing these vehicles. Ensuring that pick-up and transport of EVs in and out of our facilities adhere to the highest standards is a top priority.
IAA will always strive to maintain healthy competition in our EV marketplace as we monitor trends for the emergence of a dedicated buyer segment. We are excited about the opportunities presented by the rapidly emerging EV market and providing a best-in-class experience for our EV customers.