Why 2022 is the Year to Buy your First Luxury Electric Car

Australia's transition to electric cars is accelerating, with at least 30 new electric car models set to hit the market by the end of 2022. As a result, 2022 will be a year in which an increasing number of consumers will consider if it is time to purchase their first electric car.

Because of new Chinese companies, we may see the minimum entry price for new battery electric vehicles drop below $40,000 (before subsidies). The Model Y, Tesla's first inexpensive SUV, will be available in Australia for the first time.

But the question is,

“Is it worthwhile to take the risk?”

That is likely to be determined by the price point and market category in question. The higher your price point, the more you should consider purchasing an electric car now rather than waiting a couple of years.

Here are two reasons why:

• Car makers are releasing higher-end vehicles before lower-end models, so the choices are better at the top end.
• There's also the problematic prospect of considering future residual values for old automobiles – demand for gasoline-powered cars will be declining, so buying a new one now means it'll be worth much less by the time you're ready to trade up.

Toyota, Australia's largest new-vehicle reseller, hopes to deliver its first battery-electric vehicle, the bZ4X SUV, before the end of the year. Other electric vans will be introduced, allowing them to compete in a growing market segment currently dominated by emissions-emitting diesel.

"We are definitely seeing an increase in electric vehicle sales," acknowledged Ross Booth, worldwide managing director of automotive pricing and retailing specialist Redbook.com.au.

Consumers will be tempted even more if industry tastemakers give these new, expensive EV cars good grades. Rivian's $74,000 R1T was chosen truck of the year by MotorTrend magazine, and the even more expensive Lucid Air was named vehicle of the year. Both vehicles have enormous waiting lists and have only recently begun customer delivery.

Perhaps you've been impressed by what you've seen so far, but you'd want to wait a little longer until electric cars infrastructure, such as charging stations, is further developed. However, the value assessment for purchasing any new car includes what the car will be worth years later when you're ready to trade it in or sell it. The average length of time that drivers keep new cars is six years. So, if you buy a new car in 2022, you should consider the used car market in 2028 or later.

While there may still be a solid market for used Honda Accords in 2028, the market for secondhand gasoline-powered $40,000 sedans and sport utility vehicles is likely to be more precarious as individuals in that sector transition to electric cars.

Meanwhile, despite the fact that the Tesla Model 3 is still in its early stages of development, the market for secondhand Tesla Model 3s has been solid. The cumulative effect of advertising campaigns should therefore not be neglected. Car makers aren't pouring tens of billions of dollars developing electric cars just to sit on factory and dealer lots. They'll also utilise ad campaigns to persuade customers that they work for tech-savvy, forward-thinking organisations.

What about the price? Goldman Sachs noted in a recent research note that some parts of the electric car industry are already cost-competitive with gasoline-powered cars after fuel and maintenance expenses are taken in. And that's before you factor in tax breaks.

The ambiguity around the longevity and standards of the batteries that power electric cars is understandable. Batteries certainly degrade over time — a Tesla Model S battery loses 5% of its charging capacity during the first 50,000 miles — but electric car batteries are expected to last 10 to 20 years before needing to be replaced.

It's also feasible that future technological advances will result in a radically new type of battery-powered car. On some level, it's comparing the uncertainty of battery changes against the certainty that the market for gasoline-powered cars will continue to drop indefinitely.

There's still reason to believe that a new gasoline-powered car purchased in 2022 will retain a reasonable value in the second-hand market by the end of the decade for utilitarian, budget-conscious automobile customers. However, it is less certain for wealthier consumers. Those high-end purchasers who are debating whether to wait a little longer to make their next car an electric car might consider doing so in the new year.

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