Welcome back to the latest episode of The Future of Automotive on CBT News, where we put recent automotive and mobility news into the context of the broader themes impacting the industry.
I’m Steve Greenfield from Automotive Ventures, and I’m glad that you could join us.
Last week there was a thought provoking article in The Wall Street Journal regarding electric vehicles and planned obsolescence.
Back in 1976, when cars on American roads were just 6.2 years old on average, new car sales accounted for nearly 10% of car registrations. As of 2019, when the average car age had doubled, more consumers were able to hold on to their cars longer or opt for used ones. By then, the share of new vehicle sales had fallen to 6.4% of registrations.
Could electric vehicles bring back those glory days of brisk sales and rapid obsolescence? In some ways, EVs resemble cellphones: Technology on them keeps improving rapidly and they are powered by batteries that degrade over time and depreciate quickly.
As they become a bigger part of the fleet, they could once again rev up dealers’ business—through not only faster replacement cycles but also more frequent repairs. While EVs have fewer mechanical parts, a recent study from J.D. Power showed that owners of battery EVs and plug-in hybrids took their new vehicles to the dealership for repairs at a rate three times higher than gas-powered vehicle owners did.
One reason to think EVs could accelerate replacement cycles: EV technology is improving a lot more quickly than technology for gasoline-fueled cars, which have been getting optimized for at least a century.
The incremental improvement you see every year on [gas cars] is relatively small. When you look at incremental improvement on EV technology, that’s actually quite phenomenal, especially the battery but also the energy management in the vehicle.
Consider battery life: The median range on electric vehicles was 270 miles for 2023 model year cars, up 27% from five years earlier, according to the U.S. Department of Energy. The improvement is even more remarkable on high-end EVs: Back in 2018, the longest-lasting battery could hold 335 miles of charge. Last year, the highest battery range hit 516 miles. Like iPhone and iPad makers, EV manufacturers are able to do a lot of updates over the air, but these have limits when the physical components can’t keep up with the newest updates.
Expensive repairs are another reason EVs might get cycled out faster. They require more mechanical labor hours. EVs also have been depreciating at a faster rate than gas cars, which gives owners even more reason to opt for replacement rather than repair.
Depreciation is another issue. An EV bought brand new at the beginning of 2022 went for about half the manufacturer’s suggested retail price after about two years and one month of ownership, according to data from KBB and Manheim. Internal combustion engine cars and hybrids retained about 66% and 73% of their MSRP, respectively, after that period.
that started last year with Tesla TSLA 1.55%increase; green up pointing triangle. High maintenance costs also can contribute to steep depreciation: Luxury cars, for example, lose value quickly precisely because they are so expensive to maintain and repair, notes Karl Brauer, analyst at iSeeCars.
The same math applies to EVs that get into collisions: They are more likely to be declared total losses and sent to the scrapyard than fixed. In the first quarter, total loss frequency for EVs up to three years of age exceeded that of gas cars, according to data from Mitchell, a provider of software and data to insurers and the collision-repair industry. Up until 2023, total loss frequency had been lower for EVs because of how expensive they were relative to gas cars.
Battery degradation is another issue. Federal law requires automakers to give warranty on EV batteries for at least eight years or 100,000 miles, whichever comes first. About 13% of EVs outside that warranty window (2015 model or older) reported battery replacements, according to Recurrent, a provider of a battery-monitoring tool for EVs. In many cases, a replacement might cost more than buying a used EV. Recurrent notes, though, that most EVs have been on the road well under six years, making it difficult to form judgments. Predictive modeling from the National Renewable Energy Laboratory suggests that EV batteries should last 12 to 15 years under moderate climates.
So, with that, let’s transition to Our Companies to Watch.
Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my weekly Intel Report, we showcase a company to watch, and take the opportunity here on this segment each week to share that company with you.
Today, our new company to watch is Northbound.
Northbound helps shippers reduced their Demurrage & Detention Costs in real-time.
Demurrage and detention are fees that shipping companies charge when containers are kept at a port, terminal, or other location longer than the agreed-upon free time. The purpose of these fees is to encourage the efficient use of containers and prompt retrieval of cargo.
Demurrage charges are assessed on laden containers inside a port beyond the demurrage free days. In contrast, detention charges come into play after an importer has picked up and unpacked a shipment. Detention charges are assessed on containers outside a port.
Northbound helps inbound teams reduce their D&D costs through live cost transparency, optimized planning and automated invoice verification.
Typically, importers struggle with their demurrage and detention costs:
Lack of Transparency: Demurrage & Detention costs remain hidden until the invoice arrives.
Inability to Act: Without a real-time overview, D&D costs cannot be avoided through active control.
Uncontrolled Payments: Without historical container data, it is practically impossible to check D&D invoices accurately.
Northbound, on the other hand enables importers to track:
Real-Time Container Milestones – without integration.
To measure Individual and Exact Rates – without inaccuracies.
And to provide Automated Invoice Verification – without manual work.
If you’d like to learn more about Northbound you can check them out at www.getnorthbound.ai
So that’s it for this week’s Future of Automotive segment.
If you’re an AutoTech entrepreneur working on a solution that helps car dealerships, we want to hear from you. We are actively investing out of our DealerFund.
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Don’t forget to check out my book, The Future of Automotive Retail, which is available on Amazon.com. And keep an eye out for my new book, “The Future of Mobility”, which is almost done, and will be out soon.
Thanks (as always) for your ongoing support and for tuning into CBT News for this week’s Future of Automotive segment. We’ll see you next week!
