Education key in WM Motor’s plan to create a second-hand EV trading platform

When I read about WM Motor’s idea to launch a trading platform for second hand electric vehicles, my initial thought was that it was doomed to fail. How will WM determine residual value for those vehicles, I thought? After talking with some experts I’m still not convinced it won’t end up being a total money suck. I do think it will serve a useful purpose, however, and may end up being a success.
Of course, the motivation behind launching this second-hand EV trading platform is to create a market for WM’s battery electric vehicles. The Shanghai-based startup currently offers one model, the EX5. It starts at less than 200,000 RMB before a government subsidy. It has delivered more than 9,000 units.

Make no mistake, however. WM Motor aims to be a volume brand. Big volume. “I want to become the Volkswagen or Xiaomi of the EV sector,” co-founder Freeman Shen told me when I interviewed him at the WM Motor headquarters in Shanghai in February. “I don’t want to be Mercedes.”
WM’s goal is to be the best-selling BEV in China in terms of delivery 2021, he said. It plans to launch two more models this year and two in 2020. So, launching the second-hand EV trading platform makes a lot of sense. But it is risky.
To get an idea of how risky this endeavor could be, I talked with Cari Crane, director of industry insights at ALG, a division of TrueCar. ALG is a residual value specialist. Crane has a lot of insight into residual values for the U.S. used EV market, which is a lot more mature than China’s.
One thing that put a lot of downward pressure on used EV (and here I am referring only to BEVs), she said, is incentives. In the U.S., BEVs can qualify for up to $7,500 in federal tax credits. Those incentives reduced residual values a lot, she said, up to 20 percentage points. So, for example, if an ICE vehicle was at 50 percent of the original value, a BEV would be up to 20 percentage points lower, or 30 percent lower than the original price.
The arrival of the Chevrolet Bolt was a turning point, she said. It offered a comparable range to an ICE vehicle, and it wasn’t weird looking (not her exact words). Now, luxury performance BEVs such as the Audi e-tron are also coming on market. People will pay a premium for performance. Those trends — longer range, less polarizing design, and performance — are helping EVs maintain more residual value.
Leasing is a another negative for EV residuals, said Crane. Since most of the leases are 36 months, that creates a flood of EVs coming back onto the market at the same time. But more consumers are now buying the highe- range BEVs, she said.
One thing Crane didn’t talk about until I asked is how fear of a shortened battery life impacts the residual value of an EV. Nissan LEAFs and Tesla Model S EVs have been on the road for a long time and their batteries seem to be holding a lot of range. So consumers are becoming more confident, said Crane. Hefty OE warranties help, too, though they can increase the price.
In the end, it seems incentives are the biggest drag on residual value for EVs. While China is now phasing out its NEV purchase incentives, all the models on the road now were heavily incentivized. That will put a lot of downward pressure on their resale value. That’s something WM must deal with as it grows its second-hand EV trading platform.
The platform could do what WM aims for it to, however, which is create consumer confidence in its vehicles and thus a market for them. A consumer who buys a WM EV will be able to check its second-hand value beforehand, and feel comfortable (or not, depending on the market, I guess) that he or she can re-sell it. There isn’t a lot of historical information in China on residual values for second-hand EVs, but apparently a Tesla retains 60 percent or more of its value after three years. Once a lot more Teslas are on the road in China, of course, that may change. The trading platform may help create a market for second-hand EVs in smaller cities, as well. The lower price will appeal to buyers there.
Education will be crucial to the platform’s success, however. Some consumers who have bought second-hand EVs reportedly had a lot of trouble recharging because they weren’t allowed to install chargers at their place of residence, or other road blocks. WM will need to pay a lot of attention to educating buyers.
I think WM should open this platform to all brands of EVs. A lot of second-hand EVs will be coming on the market in coming years. Allowing many brands to be traded will benefit all, in my opinion. If WM’s vehicles are as good it claims, it will get a bigger piece of a bigger pie. But, WM Motor also needs to make sure the platform pays as much attention to educating buyers as it does to selling them EVs.