No one wants to buy used EVs and they’re piling up in weed-infested graveyards

In the $1.2 trillion secondhand market, prices for battery-powered cars are falling faster than for their combustion-engine cousins. Buyers are shunning them due to a lack of subsidies, a desire to wait for better technology and continued shortfalls in charging infrastructures. A fierce price war sparked by Tesla Inc. and competitive Chinese models are further depressing values of new and used cars alike,  threatening earnings at rivals like Volkswagen AG and Stellantis NV.

Because most new vehicles in Europe are sold via leases, automakers and dealers who finance these transactions are trying to recover losses from plummeting valuations by raising borrowing costs. That’s hitting demand in some European markets that were in the vanguard of the shift away from fossil fuel-powered propulsion. Some of the biggest buyers of new cars, including rental firms, are cutting back on EV adoption because they’re losing money on resales, with Sixt SE dropping Tesla models from its fleet.

“When a car loses 1% of its worth, I make 1% less profit,” said Christian Dahlheim, who heads VW’s financial services arm. The issues with secondhand EVs, he said, have the potential to destroy billions of euros in earnings for the broader industry.

The problems are expected to intensify next year, when many of the 1.2 million EVs sold in Europe in 2021 will come off their three-year leasing contracts and enter the secondhand market. How companies tackle this problem will be key for their bottom lines, consumer confidence and ultimately decarbonization — including the European Union’s plan to phase out sales of new fuel-burning cars by 2035.

“There isn’t used-car demand for EVs,” said Matt Harrison, Toyota Motor Corp.’s chief operating officer in…