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Is this good or bad?

Electric cars lose as much as half of their value after just three years on the road, new figures show, as the rate of depreciation far outstrips conventional equivalents.

Research from Auto Trader said there were “unsustainable levels of depreciation” in the electric car market, with used prices of battery-powered vehicles dropping by 23pc in the last year alone.

The online vehicle marketplace said a motorist buying a £50,000 electric car could expect to lose £24,000 in value over three years, while a similarly priced petrol car could lose £17,000.

Well, OK, it’s sorta different to a petrol one but not glaringly so.

Hmm

Perhaps we recast that. You lose 20% just by driving it off the lot, right? And if we accept that for both then the EV suffers much more in the next 2.99 years?

56 thoughts on “Is this good or bad?”

  1. Conceivable the electric new sale price is elevated in some way and thus the drop more? Could be a way the subsidies and or a different new buyer profile works? Main factor likely it’s the mileage (volteage?) on a battery that costs 10k to replace and repair isnae an option, in a way that doesn’t happen on a three year old ICE (anymore). Don’t know what the depreciation rate for a Model T was back in the day.

  2. Ha- well this will help with the depreciation figs at least.
    “Auto Trader said car makers were slashing thousands of pounds off prices, with average discounts of 10.6pc offered in December. This compares to discounts of 4.8pc a year earlier.”

  3. The replacement batteries cost as much – if not more – than the residual value of the vehicle. This is presumably contributing to the rapid depreciation, so a kind of vicious cycle.

  4. Bloke in the Fourth Reich

    Electric cars are like smartphones. You’re supposed to throw them away and buy a new one after 3 years.

  5. I have it on good authority that certain types of EV depreciate by only 20% after 5 years. Al Gores’ EV cost $1,268,786 when new and after 0 miles is now worth $1,015,029…

  6. What people say above… It’s the batteries whot dunnit.

    Replacing an EV battery and replacing (not repairing…) an IC engine is equivalent: They cost an arm and a leg, and a car rapidly becomes a Total Loss even when “new” if it needs to happen.

    But an IC engine can be expected to do its job for many more years and much more mileage than an EV battery possibly can. Close to double at least….

    So yeah…..

  7. First question I’d ask is are they calculating the depreciation from the list price or the cost to the original buyer? A lot of electric vehicles have been bought by companies because there’s been incentives* for them to do so. So the incentives should be deducted from the list. Does the second owner benefit from the same?

    *And yes, one does have to include the PR aspect of “going green”.

  8. Hallowed Be,

    “Conceivable the electric new sale price is elevated in some way and thus the drop more?”

    There’s low tax on company cars that are EV, so quite a lot of people are opting for what is known as “salary sacrifice”, so the company cuts people’s salary and gives them an EV instead. According to this, 58% of EVs are registered to companies.

    https://www.fleetnews.co.uk/news/car-industry-news/2022/05/31/majority-of-plug-in-cars-registered-to-businesses

    This doesn’t mean “proper” company cars, like reps on the road (because EVs are shit for that). It’s people getting an EV who like new cars and would rather have an EV with low tax, than pay 40% tax on their salary and get a petrol car with what’s left.

    Of course, after 3 years, the car gets sold and it’s in the second hand market with no thumb on the scale and a straight petrol vs EV comparison so the price falls.

  9. Bloke in Leicestershire

    There was a boost in sales when the gov allowed full expense accounting for EVs at the same as offering cheap Covid loans to business and also buttons in company car tax for EVs. Lots of company directors/owners bought themselves and/or wives a fancy EV.

    Gov still offers full expenses accounting for EVs* and so new entrants only want to buy a new one to write it off against tax in one accounting year. Too many used EVs, not enough buyers of used EVs = well…. your readers know where this goes…

    The the vast majority of EV sales in the last 3 years have been company cars (far greater than ICE cars). So this market is driven by company cars (bought with Covid loans or 3 year PCP deals, ending about now). The companies get rid after 3 years, but there aren’t enough private buyers, never where.

    * Full expenses accounting has been extended, but only applies to EVs and commercial vehicles, not ICE cars.
    Hence the incentive for a company to buy a shiny new EV not a used one. (Incentives matter…. who knew?

  10. As well as the reasons given above, I would have thought the depreciation is worse still because of the likely improvements in EV technology as the car ages: range for example.

  11. I hadn’t thought about the company car issue. That is very interesting.

    Does anyone know whether there is a curve of depreciation over time past three years. Do the curves between EVs and ICEs diverge dramatically.?

  12. There’s also been the Veblen factor. A lot of buyers of electric cars have done so for the cachet of “going electric”. Not so much a factor for the second buyer. It’ll be the same as the high depreciation suffered by buyers of new high end cars. They don’t achieve anything like the same premiums in the second hand market. I’ve been benefiting from this for years. Buying high end cars, second hand. Get all the benefits without paying anything like the money. Of course, does depend on having the contacts to get repairs & servicing at normal rates & not suffering the pricing the dealer franchises load on.

  13. As Timmy says ‘price is information’. So it’s pretty simple then. Most new EVs are bought by companies on lease deals – the income tax incentive being the driver. When the lease finishes, the leasing company sells the EVs on to the secondhand car market composed of us retail punters. Us retail punters think EVs are sh*t so we don’t want them unless they are stupidly cheap. Even then, us retail punters are still not buying cra**y EVs. So lack of demand leads to low secondhand prices. Sooner or later, the leasing companies are going to increase lease prices to cover the rubbish residual values, or else they’ll go bust. Then companies will stop leasing them and the whole EV thing will collapse.

  14. Western Bloke— yes good point, different taxes= different outcomes down the line. Be nice if journos would at least posit such things.

  15. a £50,000 electric car could expect to lose £24,000 in value over three years, while a similarly priced petrol car could lose £17,000.
    But a sensibly priced petrol car will lose proportionally far less. With some models you might even recover almost all of the purchase price (And the more electric cars proliferate & the fewer petrol, the more that’ll be true. Wouldn’t least surprise me if a 3 y/o petrol will be worth more than its buying price, before long) But it is the problem. There are no sensibly priced electric cars.

  16. This is something that everybody is ignoring except the humble customer. The value of a car is the benefits it provides to the user. And it has to be affordable. And they’re moving the price of cars to where they aren’t affordable. This may be the intention. They don’t want you to enjoy the benefits of having a car.

  17. Fact is, EV residuals are probably artifically high right now. I’m told that dealers are finding it so difficult to shift them, they’re registering new cars themselves and flogging them off them as second-hand. That artificially inflates the number of registrations (“People are buy… er, registering new EVs in record numbers!”) and jacks the average pre-owned price up.

    And yeah, it’s the batteries. Sure, they’re warrantied to n thousand miles, so maybe the first or even second owner won’t get stung with a bill for more than the car’s worth, but at some point the music’s going to stop. Properly looked after, an ICE will last for decades. A battery simply won’t. Sustainability!™

    But in the end, Steve’s right: there’s no intention amongst the political class to replace the entire current fleet of private vehicles with EVs. They want them all gone.

  18. In Chicago you can currently pick up a Tesla for a song.

    The video near the bottom of that page where a Finnish bloke reviews his Tesla is definitely worth a watch

  19. Current data in the US suggests that new cars lose an average of 11% of their value after first sale, more for luxury and specialty vehicles but very few as much as 20%.

    However, these figures are rather squishy, since they depend on the basis used for assigning both first sale price (MSRP, actual price paid, manufacturer’s incentives ASF) as well as value at second sale (trade-in, private sale, auction value, ASF). It’s not unknown to see low-milage examples of high-demand vehicles of the current model year selling for well-over MSRP and after government stupidity like Cash for Clunkers, all used-car prices went up significantly due to short supply.

    I think the difference between ICE and BEV depreciation is not so much the specific depreciation after first sale, but the shape of the depreciation curve over several years. ICE cars depreciate quite quickly at first but after a year or two, the depreciation curve tends to flatten out. There’s plenty of 10 and 15-year-old ICE
    cars driving around quite happily in the US, the average age if the US fleet is now over 11 years. BEV’s also depreciate quite quickly at first but the depreciation curve never flattens out and after 3 or 4 years it actually becomes steeper. A 6, 7 or 8 year-old ICE car in decent shape still has 25-40% of its first-sale value, especially in a private sale, because it still has many years of effective operational life left. A 6, 7 or 8-year old BEV is effectively worthless and will only attract salvage buyers.

    llater,

    llamas

  20. Jan 20 – bought a 3mo old dealer demo X5 with bells and whistles and <5k miles for £51k.
    Jan 23 – same car now has 20,000 miles and would cost £54k from a dealer
    Jan 24 – same car now has 28,000 miles and would cost a few k less than we paid.

    Depreciation, what depreciation? Insurance has cost more.

  21. Any rapidly-changing technology will lose value quickly. Early smartphones were replaced after two years; now they recommend three years, and many people keep theirs for five or more years. I’m typing this on a ten year old computer, which would have been unthinkable in the 1990s.

    Resale value is a moot point though. Most people buy new cars on some kind of PCP / PCH / leasing deal, so they don’t care about the resale value after three years. It’s only a problem for the finance company, and they have vast teams of bean-counters working on this.

  22. For fun and laughs, try a YouTube channel called “Vice Grip Garage”. This joker runs around the US pulling abandoned ICE cars that are 30 and 40 years old out of barns and hedgerows, getting them running where they sit, and then driving them home, sometimes more than 1,000 miles home. Sure, the mine may be a little bit salted sometimes – hey, it’s just entertainment – but there’s no getting past the fact that some of these rides are in awful shape, and yet they can be made to run and drive. Now imagine pulling a 20-year-old Tesla out of a barn and trying to get it to run.

    llater,

    llamas

  23. New shiny stops being new shiny and turns out to be.. just a car.

    For a while, part of the EV hype was that these cars didn’t depreciate, cost less to run, and lasted longer than the ICE equivalent. Indeed, Musk told everyone that buying a Tesla was an investment.

    Now that we learn that you cannot actually change the laws of physics, or economics, we’re going to see an adjustment. It’ll be made worse by the ‘move fast and break things’ approach of the early EV manufacturers who actively avoided thinking about obsolescence, repairability, reliability and safety. Early adopters are going to be stung hard.

  24. Can anybody explain the logic behind:

    * Making sure we have among the most expensive electricity in the world

    * Forcing people to buy electric cars

    Bueller? Bueller?

  25. My first car cost me £450 in 2014, and when somebody drove into it and wrote it off in 2017 the insurance company paid me £500 for it.

  26. Yet another another Chris

    Does not help they are touting solid state batteries in just a few years (again/still) which would make the existing EV fleet look pretty low value. If EV batteries keep going though not bad a local urban run around and so far early lifetime estimates have been way lower than practice , killing the buy the car lease the battery model for now when Nissan tried it iirc.

    Can’t help but suspect at some point the market will find cars a good way of selling batteries and electric motors though and standardise the interface and fittings.

    For now ice repairability wins but at some point that’s likely to switch to reliability and modular replacement. Glory be to the free market search engine to find out.

  27. Can’t help but suspect at some point the market will find cars a good way of selling batteries and electric motors though and standardise the interface and fittings.

    poor naive boy 🙂

    This is one of the human endeavours where the market has little or no influence, because Govt will madate everything and it will be crap as a reult.

  28. Just testing some emojis here, ignore this post. My post above has renderd my last attempt to look like some poor chap has just a ton of coke.

    :-0

    😉

    😮

    😛

    :-/

    😐

  29. The real issue is not depreciation, unreliability of the charging network, failure in cold weather, etc. Those are factors that make people less inclined to buy one. The real issue is that the government is trying to force us into these things. We should be allowed to buy or not buy as we please. EVs would probably become a niche vehicle popular among people who don’t drive a lot while living in balmy climes.

  30. You’re still at the beginning of the ride up an S curve in technology maturity for EVs – early adopters (i.e. anyone who got in before Tesla model 3 went mainstream) are always going to lose far more because the vehicles are so obsolete compared with anything new. Yes, batteries deteriorate but with decent battery management (which these early cars don’t have) they can and do last a fair while longer. Not to ICE levels, but then again we haven’t had 100 years for engineers to perfect them yet.

    There is likely unrealised residual value in old packs that are no longer roadworthy, particularly with the amount of stupid windmills and solar PV governments have subsidised. Attach (cheapish) energy storage to them and they’re far less stupid.

    But the fact EVe depreciate like a stone is no different that your high end mobile phones in the last decade. EVs haven’t been in the non-luxury segment all that long either, and luxury buyers don’t buy old. Given the domination of the green lobby in Europe’s biggest car manufacturing countries, UK included in that, they ain’t going away. ICE isn’t dead but it is at the end of its S-curve.

    Besides, the vast majority of motorists can do with an EV for their 2 mile weekly trip to the supermarket, or daily commute to the call centre job just fine. I just happen to work developing EVs for a rather large Indian manufacturer and every manufacturer now knows EVs are the only game in town for at least the next 10 years.

  31. This is just bad statistics. How many 3-years old EVs are being traded compared to 3-year old ICE vehicles? Not a lot right? How many miles will those have compared to the ICe ones? Not a lot right?

    And all of this is going to change quickly once other go the Hertz way and start offloading EVs that don’t work en masses.

  32. It’s not about the cars. The cars work perfectly fine, and if you do your research first you won’t get nasty surprises on things like range.

    It’s not about the cars, which are a miracle of capitalism and technology. It’s about the Net Zero, which will permanently skullfuck our economy and cause widespread, inescapable poverty (can’t escape poverty when economic growth is illegal because it involves exhaling).

    Because of the Net Zero piano hanging over our collective heads by a frayed bit of string, it’s pointless to talk about when the plebs will be able to afford EVs. They’ll probably never be able to afford them. The Green Transition is not meant to maintain your living standards. Far from it. It’s meant to screw you out of your central heating, your dinner, and your savings.

  33. I just happen to work developing EVs for a rather large Indian manufacturer and every manufacturer now knows EVs are the only game in town for at least the next 10 years.
    If they’re that deluded, I’d be looking for another job.
    India FFS! A country where you get out of the centre of a city you’d be lucky to find a 6A power supply to hook on to.
    It’s why I can’t see EV takeup being general here in Spain. In this city of 50K people there is, as far as I’m aware, a single two outlet publicly accessible EV charging point. When I moved into this very large apartment it had a 32 A supply. Turn the oven & the aircon on a the same time & all the lights went out. I had to pay a considerable sum to have it uprated. The place we rented out in the country had about 10A. That couldn’t be uprated because the overhead cable strung from wooden poles bringing power in to the houses around wouldn’t take any more. The wiring in the older parts of this town are just cables stapled along the front of the buildings. The idea that anyone’s going to be hooking up car chargers to that lot’s hilarious. We get enough power outages as it is.

  34. “Sure, the mine may be a little bit salted sometimes – hey, it’s just entertainment – but there’s no getting past the fact that some of these rides are in awful shape, and yet they can be made to run and drive.”

    My favourite Youtube channel at the moment is Mr Hewes, a farmers son from (I think) Leicestershire who restores old tanks and military vehicles. He’s forever buying stuff thats been sat in a hedge for decades and getting the engines running again.

    https://www.youtube.com/@MrHewes

  35. Bloke in Russia wrote:

    ‘Besides, the vast majority of motorists can do with an EV for their 2 mile weekly trip to the supermarket, or daily commute to the call centre job just fine.’

    You really think this is the reality of ‘the vast majority of motorists’ lives? You claim to work in the development of EVs for a major manufacturer and this is what you think ‘the vast majority’ of your market is? If that’s the standard of thinking in the EV industry, no wonder they produce vehicles that so-throughly fail to meet the expectations of so many customers, as evidenced by the collapsing sales of EVs worldwide.

    As far as ‘major manufacturers’ seeing EVs as ‘the only game in town’, somebody needs to call Toyota and get them up to speed. The 1200 EV workers that Ford just laid off at Lake Orion because they have over 100 days of inventory of EVs and they can’t give the things away, might also have a slightly-different take on the ongoing prospects for EVs.

    llater,

    llamas

  36. The Bloke in Spain writes: India FFS! A country where you get out of the centre of a city you’d be lucky to find a 6A power supply to hook on to.

    Within those vast Indian megacities are entire oceans of young, increasingly wealthy consumers who want to swap dirty smog vehicles for sleek modern transportation, never doubt it indeed sir.

    The Indian market is exactly the kind of place we should expect electric vehicles to be a big success. Their leccy is supposed to be among the cheapest in Asia, and high density urban areas are a good use case for the sparkwagons.

    India: it’s not just sinister waiters chanting KALI MA! and Mowgli and tiny arsehole politicians anymore, apparently. I’ve never been, I like Indian people except Rishi Sunak well enough, but everyone I know who has gone there caught dysentery.

  37. “100 days of inventory of EVs….”

    Please don’t set them on fire for insurance. If anybody does it would make the Siberian traps seem as warm as a fucking heat pump!!

  38. The Chinese are attacking the EV market with models that look eminently buyable. My mind has been changed in the presence of new data. Has yours?

    Depreciation is a running cost, not a capital cost. Offset it against the greatly reduced cost of fuel for the EV which still turns out cheaper.

  39. The Chinese are attacking the EV market with models that look eminently buyable.

    You’re braver than me if you’d willingly get into a chinese milk float, let alone buy one.

  40. Offset it against the greatly reduced cost of fuel for the EV which still turns out cheaper.

    But, but, but… The fuel cost is artificially low at the moment… At some point the gubberment will need to recover the vast amount of tax they put on every litre of Petrol and Diesel.

    It might be Road Pricing or some annual fee paid at MoT time but rest assured, cheap motoring it won’t be.

  41. Depreciation is a running cost, not a capital cost. Offset it against the greatly reduced cost of fuel for the EV which still turns out cheaper.

    Fuel costs are only significantly cheaper if you can charge at home all the time.
    Charging at a public charger if you’re away from home or aren’t actually fortunate enough to have a driveway is actually more expensive than filling up with diesel.
    (Apparently Tesla chargers are cheaper, but I think you then have to buy a Tesla to take advantage and there’s no way I’m getting one of those shitboxes)

    So lets see with the electric cars:
    More expensive to buy
    Take ages to charge comparative to chucking some lovely hydrocarbons in
    Still have significant maintenance costs (high tyre costs for example)
    Expensive to insure
    Rapid depreciation

    Not seeing the attraction personally. And that’s not even mentioning the habit they have of doing a roman candle impression.

    The main thing that’s going to be the death of EVs is the complete lack of lithium. The head of one of the largest mining companies in the world at a mining conference in Australia last year (iirc) said that there just isn’t going to be the lithium available either now, or with what’s projected to come online, to make all these electric shitboxes that we’re meant to drive.
    So we’ll stay with ICE. There’s no way we can shift to electric. Most people drive to work outside London. So do we really think they’re going to crash the whole economy rather than just admit they were wrong?
    On second thoughts…

  42. This, I’m afraid, is bollocks.

    “The main thing that’s going to be the death of EVs is the complete lack of lithium. The head of one of the largest mining companies in the world at a mining conference in Australia last year (iirc) said that there just isn’t going to be the lithium available either now, or with what’s projected to come online, to make all these electric shitboxes that we’re meant to drive.”

    Lithium mines – Core Lithium for example – are actually closing down. The price is so low they can’t make a profit – that price is down 80% in a year. Low prices are not evidence of a shortage.

  43. Yet another another Chris

    Your reminder that most of you are typing into an unexploded chinese incendiary device like a laptop or mobile phone. ICE cars are unthinkingly stupid without that 100 years of engineering – hey lets run on a few thousand explosions a minute using a tank of flammable liquid explosives connected to sparks created by a HV system (in which you are carrying your stock of unexploded incendiary devices …) . EVs are pretty sensible by comparison even with a Lithium battery and easier to make and easier to drive with less driver aid systems. Solid state batteries would pretty much win across the board if the tech delivers on the hype we are hearing – ok big if but its killing the adoption cycle right now I expect in some of the big fleets and part of the dumping of current EVs. as ICE cars are in the interim much safer economic bet as part of your running stock.

    @Ottokring most things tend to standardise when the 2nd tier manufacturers gang up on the market leader . The bigger issue is simply which has a longer lifecycle – battery or car frame. There’s even a few attempts to resurrect the old buy the chassis model with EV system , chassis and coach work separating out into sub markets. Even with government intervention most standards are written by industry. Weirdly a by product of the immense capability in china is that they do that less than western manufacturing as the processes are so available , it also means they can iterate like crazy but less stable product base.

    Reparability and maturity at the moment means the ICE car 2nd hand market is buoyant but suspect new EVs will create a lot of decent ICE cars into the 2nd hand market at some point but that the ICE 2nd hands will be desirable way longer.

    Electric cars are inherently more likely to modularise as they settle into separable component that are easily replaceable with decent design but basically not subject to repair – its something like an ICE car has 35000 parts or so, an EV around 6000 which has significant effects to manufacturing all on its own.

    Yay consumer choice

  44. Lithium mines – Core Lithium for example – are actually closing down. The price is so low they can’t make a profit – that price is down 80% in a year. Low prices are not evidence of a shortage.

    https://www.reuters.com/markets/commodities/lithium-producers-warn-global-supplies-may-not-meet-electric-vehicle-demand-2023-06-22/

    Article from June last year. Says
    Albemarle (ALB.N), opens new tab, the world’s largest lithium producer, is growing rapidly across the Americas, Asia and Australia. Still, it expects global lithium demand to exceed supply by 500,000 metric tons in 2030. Various consultancies and other producers have slightly different projections, but all warn of a looming shortage.

    It is from June, so things may have changed. Unsurprisingly I don’t spend my days monitoring the lithium markets. But falling short of expected demand by half a billion tons seems like a problem…

  45. The shortage isn’t going to be lithium, it’s going to be electricity itself. There are no plans anywhere by which electricity supply is going to be doubled to replace petrol and diesel, or indeed tripled to replace domestic gas with heat pumps.

  46. Rhoda Klapp

    electricity and grid capacity, yes. if you want EVs at scale then you have to have nuclear and massive upgrades to the grids.

  47. Folk just aren’t realising how much damn lithoium there is out there. Tesla estimates the global car fleet will need around 20 million tonnes. That’s total, as it will be recycled. They’re about right. We’ll not need 2 million nor 200 million. Global resouorces (so, identified, can be mined, but perhaps not licenced or wholly proven yet) are around the 70 million tonnes level. And that rose by 10% in just 2022. So, we added to what we’re really pretty sure what we can mine near half the total amount we’re ever going to need. Li just isn’t, nor is it going to be, in short supply.

    OK, sure, we might have imbalances over any particular 12 month period etc. But you can get an Li mine up and running in 18 months. It’s just not a long term thing.

  48. Your reminder that most of you are typing into an unexploded chinese incendiary device like a laptop or mobile phone.

    A UXiP (UnExploded iPhone) has a few ounces of lithium battery. In a milk float you’re strapped in to a cage with a metric tonne in the base.

  49. I was chatting last night at the firehouse with an acquaintance who is some sort of service guy at a large auto dealership here in outstate Michigan. As is normal in the US, the great majority of the new-car inventory is parked outdoors. It’s been below 0°F every night for the past week.

    They have about 60 new BEVs in stock, and 4 fast chargers for them – that’s all the dealership’s electric service can support. He said that it’s all they can do to keep the vehicles operational, with porters contantly moving vehicles on and off the chargers, running extension cords, and going through all sorts of shenanigans just to try and keep them all alive. And when they fail, and they find one that just won’t wake up, they have to haul it into the service department to warm up – taking a service bay out of revenue – before they can bring it back to life. The management is just tearing its hair out about the costs.

    It gets below 0°F in Michigan every year. If a franchised auto dealer can’t keep their own brand-new product functional, what do you suppose is going to be the outcome for the average owner of a 3-year-old BEV?

    Oh, wait, we already know the answer – demonstrated IRL in Chicago earlier this week.

    llater,

    llamas

  50. The amount of lithium available is irrelevant because it would make no difference if a battery was the size of the matchbox, could be pulled out of your arse at will, held enough to power a death star and lost no performance whatsoever in a million years.

    Such a miracle battery would solve a lot of milk float problems; massive environmental damage, excess weight, spontaneous combustion, being written off by a five mph shunt etc, but it would not solve the fundamental one: the damned thing needs to be charged!

    That is a function of available power (ain’t there and no intention for it to be.) massive infrastructure upgrade (ditto, and I don’t mean numbers of chargers, I mean upgrade to the grid itself . And don’t forget, this massive grid upgrade would be for NO OTHER REASON than for the private transport which won’t be needed in the 15 minute gulag). And reasonable charging times (real cars of genuine utility, i.e what we currently have, cannot all be charged slowly overnight).

  51. Chernyy Drakon – Unsurprisingly I don’t spend my days monitoring the lithium markets.

    Actually, I have a man in Portugal who does that on my behalf.

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