You Bought an EV and the Company Failed. Now What?
EV sales are declining, forcing some manufacturers to leave the market. If you own an EV and the manufacturer folds, here's what you need to know.
You drive away from the dealership, elated that you bought your first electric vehicle. Six months later, you receive news that your car manufacturer won't make EVs anymore. Great; now what do you do with an orphaned EV?
This is the reality hitting the EV market now. While sales were robust in recent years, ABC News reported that EV sales were down 20% in January compared with December of last year. One reason for declining sales is that President Donald Trump eliminated the $7,500 EV tax credit as part of the One Big Beautiful Bill.
The EV industry is still young, and as with any young industry, there will be winners and losers. Some companies, such as Fisker and Lordstown Motors, have already left the market. Others, such as Lucid (LCID) and Rivian (RIVN), have been struggling in the stock market while still pushing forward.
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With these things in mind, I'll cover what to do if you find yourself in this situation and any legal options available to you.
Will my car still work if the EV company disappears?
Yes, your EV will work. You can drive it as you normally would and use compatible charging stations. However, the quality of your drive could decline significantly.
The reason? EV vehicles offer "smart" car features to elevate your driving experience. This could include app connectivity, software updates to improve driving features and much more.
To access these updates, your car connects to the company's software. However, if that company shuts down, you won't have access to over-the-air software updates. The vehicle's proprietary remote diagnostics might stop functioning, making dealership-level troubleshooting impossible.
You also won't receive updates impacting all facets of your car's performance, from navigation to climate control to safety features such as collision alert.
While you can drive your vehicle in theory, the experience will be less than ideal. There's also another challenge you need to consider.
Repairs will be expensive and hard to come by
The biggest challenge impacting orphan cars is finding the right parts to fix them. Once the company shuts down, it might not manufacture parts anymore (unless required under court order), which creates high demand that'll spike the price of the remaining parts.
You might find third-party parts to fix any issues that arise. But you could also face a worse driving experience since the quality of aftermarket parts can vary wildly by manufacturer.
Your best bet if this happens is to find a reputable EV mechanic. They can help you find reliable parts on the market that'll work with your car. You could also sell your vehicle, but unless it has appeal on the collectors' market, you're likely going to lose a lot of money on the deal.
What other factors should I consider?
A big one is warranty coverage. The biggest risk is your EV's battery. Manufacturers have warranties covering your car's battery for 100,000 miles or eight years, whichever comes first. Starting in 2027, the Environmental Protection Agency will require all U.S. EV manufacturers to meet this warranty minimum.
If your manufacturer files for bankruptcy, they likely won't honor warranties. If you need to replace your EV's battery, you could face a sizable bill. MotorTrend found battery prices could vary from a few thousand to $15,500, depending on its size.
This doesn't mean you don't have any legal recourse. If the company still exists, you can sue them under the Magnuson-Moss Warranty Act for failing to honor the warranty. You can also pursue warranty rights through your state's lemon laws or file a complaint with your state's attorney general's office.
Can I sell an orphaned EV?
If you paid for the car in cash or financed it and paid off the loan, you can sell your EV. However, know that because it won't have regular software updates, and repairs will be more expensive due to a lack of parts, the fair market value of your car might plummet.
If you're under a lease, you still must maintain the same contractual terms with the financing company. Sometimes, finance companies might offer a reduced buyout, since the market value of your car will be lower.
If your manufacturer closes and you have a lease, contact the financing company to explore which options they have available to you.
Ways to avoid an orphan EV
There are a few steps you can take to lessen your risk, such as:
- Research brand reliability: Use companies with a commitment to producing quality EVs and continued investment in future EV technology.
- Find a popular model: Manufacturers are not quick to pull a high-selling model from their portfolio. Find an EV with strong sales, such as the Tesla Model Y or the Chevrolet Equinox EV.
- Is the tech current?: Models featuring outdated charging technology such as CHAdeMO are being phased out in favor of vehicles using NACS or CCS. If a manufacturer continues to use older tech, it can be an indication that they might consider leaving the market as they're devoting fewer financial resources.
Ultimately, EVs are a smart bet if you do your homework. You'll lower your carbon footprint, have access to some of the newest tech features for cars and you won't have to contend with rising gas prices.
While there is a risk of more EV companies going under, going with a reliable brand can prevent this and all the headaches associated with owning an orphaned EV from happening.
If you plan to buy one, review the insurance prices of the models you're considering first. That way, you don't receive a surprise when you call your carrier. If you want to explore cheaper options, use this Bankrate tool to compare rates fast:
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