The second-hand test: India's looming problem of valuing used electric cars

As the first wave of electric cars ages, they will enter the resale market, but in the absence of a standardised valuation method, the question is how much they will really be worth

As India’s electric vehicle (EV) fleet expands, a familiar question for buyers and financiers is resurfacing with new complexity: what is a used EV worth? Unlike conventional internal-combustion (ICE) cars, EV valuation has to factor in battery health, software, charging compatibility, and evolving standards. So, as the first wave of EV owners prepares to upgrade or move on, a quiet unease is beginning to surface — what happens when it’s time to sell?

 

Unlike petrol or diesel cars, whose resale value can be estimated by age and mileage, an EV’s worth is entangled with a host of invisible variables like the battery’s remaining life, the vehicle’s software updates, and even the pace of technological innovations making the old one obsolete.

   

According to data, India’s used ICE vehicle market — comprising petrol, diesel, and CNG cars — accounted for over 97 per cent of the 5.41 million used cars sold in 2024, with electric vehicles forming only a 2–3 per cent slice of total resales. A CARS24 and Team-BHP report earlier this year projected that sales would reach 10.8 million units by 2030, achieving a compound annual growth rate (CAGR) of 13 per cent.

 

Meanwhile, the used EV market in India is still small but growing rapidly. As per the report, EVs’ share in the used car market increased fivefold from 0.08 per cent in 2022 to 0.43 per cent in 2024, led by Maharashtra, Karnataka, and Delhi.

 

For the consumer, the question is no longer just how far an EV can go on a single charge but how far it can go in the resale market once it leaves their driveway. The absence of standardised diagnostics has created uncertainty for buyers, sellers, and insurers alike.

 

How car depreciation is calculated in India

 

Under India’s Income Tax Act, vehicles are treated as depreciating assets. For corporate and tax purposes, depreciation is calculated on the written-down value (WDV) method at rates prescribed by the Central Board of Direct Taxes (generally around 15 per cent). However, in the consumer market, the process becomes more empirical: age, mileage, maintenance, and brand perception are translated into market value indices used by dealers, financiers, and insurers.

 

Insurance companies, meanwhile, calculate the insured declared value (IDV) — the maximum claim amount based on standard depreciation tables issued by the Insurance Regulatory and Development Authority of India (IRDAI). The current rate varies from 5 per cent (for cars up to six months old) to 50 per cent (for four to five years). These rates determine the vehicle’s market value for insurance and affect claim payouts for part replacements unless a zero-depreciation policy is chosen.

 

How EV depreciation diverges from the norm

 

EVs complicate that model. The battery, which accounts for up to 40 per cent of the car’s cost, ages differently from the rest of the vehicle. Battery ‘State of Health’ (SoH), charge cycles, and thermal history all determine remaining range — and therefore resale value. But unlike a car’s odometer, there is no universally accepted standard yet to measure or certify battery health for resale in India.

 

That gap has left insurers reliant on proxy indicators like manufacturer reputation and warranty period. “Battery health is a key differentiator for EVs, but insurers currently rely on indirect indicators such as the vehicle’s age, warranty period, manufacturer reputation, and available claims data, rather than individual degradation testing,” said Paras Pasricha, Head of Motor Insurance at Policybazaar.

 

“The depreciation schedule defined by IRDAI for determining IDV currently applies equally to both EVs and ICE vehicles. There are no separate regulatory tables yet,” he said. However, insurers, he added, “may internally consider nuances like higher upfront component cost or limited resale benchmarks while evaluating risk.”

 

What does growth look like for the EV resale market?

 

At the other end of the spectrum sit the used-car aggregators, who must translate these uncertainties into real-world prices. Gajendra Jangid, CMO and co-founder of CARS24, says the market is on the cusp of change.

 

“Used EVs are poised to become a viable and growing segment over the next five to ten years,” he said. “As the first mainstream EV cohorts from 2020–2023 start entering the secondary market from 2026 onwards, residual values will be increasingly shaped by battery health, software support, and certification standards.”

 

For now, EVs make up a tiny fraction of the used-car pool. But interest is building. “Yes, we are already observing a gradual uptick in both sellers and buyers exploring EVs,” Jangid said. “Early adopters are beginning to cycle out of models like the Tata Nexon EV and MG ZS EV, while buyers — particularly fleet operators and urban users — are showing interest in short-haul, city-based EV usage.”

 

Why battery certification is key for pricing confidence

 

The absence of battery certification is emerging as the single biggest obstacle. “The key challenges are primarily valuation uncertainty and battery health assessment,” Jangid explained. “Unlike ICE vehicles, an EV’s resale value is closely linked to the remaining battery capacity, charging patterns, and software support. While demand exists, pricing confidence and standardised battery diagnostics are essential prerequisites for a scalable, dedicated EV resale platform.”

 

In India, the Ministry of Road Transport and Highways has tightened standards for battery safety and testing through revised Automotive Industry Standards (AIS), notably AIS-156 and AIS-038 (Rev-2). Niti Aayog’s draft battery-swapping policy also advocates decoupling the battery from the vehicle, potentially easing resale valuation by separating two different asset lifecycles.

 

Industry players agree that transparency will be key. “Critical data includes battery diagnostics, OEM warranty status, charging history, and software update records,” said Jangid. “Standardising and publishing these metrics will be central to building confidence among both buyers and lenders, allowing EV resale to scale reliably.”

 

What will give insurers greater confidence?

 

For insurers, reliable data could transform how policies are priced and risks are underwritten. Pasricha said that as EV resale markets mature, “separate depreciation or valuation norms for EVs may be introduced. The regulator has already differentiated EVs in other areas, such as offering a 15 per cent discount on third-party premiums, so, naturally, finer IDV or depreciation standards could evolve with better market maturity and data.”

 

He added that insurers would gain greater confidence “with standardised battery-health reporting, transferable manufacturer warranties, wider EV-ready garage networks, better availability of spare parts, and reliable residual-value benchmarks.” 

 

How other countries are tackling the used EV challenge

 

Across markets, governments are intervening to stabilise used EV values. The UK is introducing standardised Battery Health Certificates, while the Netherlands offers subsidies of up to €2,000 for second-hand buyers. The US Inflation Reduction Act grants a $4,000 credit for used EVs, and automakers like Tesla and GM are extending battery warranties to preserve value.

 

Norway’s integrated tax breaks and low charging tariffs have produced one of the world’s healthiest resale markets, while the UAE’s premium EV mix and strong infrastructure keep depreciation low. In Asia, US and EU brands retain 17–19 per cent higher resale value than Chinese models.

 

India’s EV market enters a transition phase

 

At present, passenger EVs still account for a small share of India’s total EV stock, which is dominated by two- and three-wheelers. But their numbers are growing fast and with it, the inevitability of a second-hand market. As hundreds of thousands of first-generation cars approach their fifth or sixth year of life, resale liquidity will become crucial for sustaining consumer confidence.

 

Jangid believes that trust mechanisms will decide how fast this market matures. “Trust can be established through several mechanisms,” he said, listing “independent battery health certification, bundled or transferable extended battery warranties, transparent charging and maintenance history, financing solutions aligned with total cost of ownership savings, and city-to-city transfer guarantees.”