Long Buy

A three year old Tesla Model 3 has, according to some analysts, lost roughly half of its sticker price in some markets, even as lithium carbonate, the core input in its battery, has fallen roughly 85% from its 2022 peak. On paper that should make the used car cheaper to insure and easier to trust. Instead falling input costs are accelerating depreciation, not softening it, because every buyer knows next year's pack will be denser and cheaper than the one already sitting in the driveway. No ESG fund factsheet models this mechanism. Which raises the real question: what is actually being priced when a used EV loses half its value in three years, and why does nobody selling green funds want to talk about it?

Depreciation isn't a side effect of the EV transition. It's the transition, showing up on used car lots years before it shows up in any fund prospectus. My thesis here is simple: the secondhand EV market is the most honest pricing signal available to eco investors, more honest than any ESG fund factsheet, because nobody can greenwash a Carvana listing. I want to work through why that's true, starting with the mechanism itself, then the fee layer that's grown up around it, and finally what it means for anyone holding EV linked assets.

What Is Actually Driving Used EV Values Down

Battery chemistry moved faster than the resale market could reprice around it. Energy density in lithium ion cells climbed from roughly 80 Wh/kg in the early 1990s to around 300 Wh/kg today, and that improvement didn't stop once a car left the factory. Every new model year effectively marks down every older model year sitting in a driveway.

• CATL and BYD have pushed LFP cell costs below $60 per kWh in China as of 2025 estimates.


• Toyota is publicly targeting solid state deployment around 2027 to 2028, claiming range gains of one third to 50%.


• Lithium carbonate spot prices sit roughly 85% below their November 2022 peak.


• CarGurus and iSeeCars data through 2025 show EVs depreciating faster than comparable gas vehicles in most segments.


• Cobalt exposure in older NMC packs, once a selling point, is now a liability given how thoroughly cobalt free LFP dominates new production.

Here's the mechanism retail investors miss. A falling lithium price should, in theory, make new EVs cheaper and used EVs relatively more attractive. Instead it does the opposite in the short run. Falling input costs tell buyers that next year's battery will be cheaper and better, so today's used pack becomes a bet against your own patience. Depreciation curves are pricing in a technology roadmap, not just mileage and wear. Anyone holding lithium miners like Albemarle or SQM is watching this same curve from the supply side, where falling prices compress margins even as unit volumes rise.

That gap between what a car is worth and what buyers believe it will soon be worth doesn't stay confined to dealer lots. It has already spawned an entire layer of products built to price, insure, and profit from the uncertainty itself.

Battery Degradation Anxiety Has Created a New Fee Layer

Range anxiety got the headlines for a decade. Degradation anxiety is the quieter cousin now driving used EV pricing, and a whole product layer has formed around insuring against it. This is where fee extraction enters a market that was supposed to be about clean transport economics, not financial engineering.

• Battery health certification services, similar to Carfax reports, now charge $50 to $150 per used EV inspection.


• Extended battery warranties from third party insurers carry premiums that can exceed 8% of vehicle value over five years.


• Recurrent Auto built an entire data business around battery health scoring for used EV buyers.


• State Farm and other insurers now price EV policies partly on battery replacement cost, not just collision risk.


• Second life battery resale into stationary storage, led by firms like Redwood Materials, creates a residual value floor that barely existed three years ago.

None of this is a scam. A battery health report genuinely reduces information asymmetry between buyer and seller, and that has real economic value. But notice the pattern: every layer of uncertainty in the underlying asset spawns a new fee generating product around it. Green bond verification services and carbon offset auditing show the same structural tendency. Uncertainty isn't a bug in eco finance. It's the raw material for a services industry that sits between the physical asset and the investor.

Who gains here? Data and inspection firms with genuine technical expertise. Who loses? Retail buyers who assume a used EV depreciates like a used Toyota Camry, when the depreciation curve is actually tracking a chemistry roadmap they can't see.

That mismatch between assumed and actual depreciation doesn't stop at the individual buyer. It scales up directly into the portfolios and balance sheets of anyone holding EV linked assets in bulk.

Battery Progress and Investment Value Are Pulling in Opposite Directions

Here's the counterintuitive part. Faster battery innovation is unambiguously good for the climate transition and unambiguously bad for anyone who bought last year's EV as a store of value. Those two facts sit next to each other uncomfortably, and most clean energy ETFs don't model this tension at all. Funds like ICLN and QCLN hold upstream exposure, automakers, chargers, battery manufacturers, but almost nothing tracks the used asset market where depreciation actually happens.

• ICLN holds roughly 100 global clean energy names with heavy solar and wind weighting, minimal used vehicle exposure.


• QCLN leans more into EV manufacturers like Tesla and BYD, which actually benefit from resale weakness through cheaper trade in inventory.


• LIT, the lithium and battery tech ETF, is directly exposed to the price collapse driving depreciation itself.


• Panasonic and LG Energy Solution both face margin pressure as LFP undercuts their higher cost NMC production lines.


• Redwood Materials, still private, represents the recycling and second life thesis without public market access yet.

So where's the actual investable edge? Not in betting on which battery chemistry wins. Toyota, CATL, BYD, and half a dozen other manufacturers are all racing toward solid state or next generation LFP at the same time, and picking the winner is closer to venture speculation than portfolio construction. The real edge is understanding that battery cost deflation is structurally bullish for EV manufacturers and structurally bearish for anyone holding EV linked assets as a store of value, including used car fleets, leasing companies, and residual value guarantees written by automaker finance arms.

Ford and GM have both taken real charges on residual value assumptions built into their EV leasing books over 2023 and 2024. That's a direct financial consequence of the same depreciation curve visible on any used car lot, and it previews what happens to any product, ETF, or bond structure that assumed battery technology would improve on a slower timeline than it actually did.

Carbon markets show a parallel pattern worth sitting with. A verified carbon credit priced at $15 per tonne today can be repriced to near zero if a registry later finds the underlying project overstated its additionality, the same way a used EV's residual value gets repriced overnight when a competitor announces a cheaper, denser battery. Physical and environmental asset classes built on rapidly improving technology or contested measurement standards don't depreciate smoothly. They depreciate in steps, triggered by information events, and retail investors consistently underprice how sharp those steps can be.

Which brings us back to the question this piece opened with. What gets priced into a used EV's collapsing resale value isn't wear, mileage, or even brand trust. It's a chemistry roadmap that no ESG factsheet discloses and no green fund wants attached to its marketing. The used EV lot isn't a side story to the clean energy trade. It's the most honest ledger of that trade's real risk, sitting in plain sight, unpriced, on every dealer's lot.