Comparing and predicting trends of depreciation

between ICE vehicles and EVs in Audi.

IB Maths AA Internal Assessment Standard Level

Number of Pages:
Introduction:

Depreciation is when the financial worth of an asset declines over time due to utilization, wear
and tear, or deterioration. A drop in the value of an asset can be caused by a variety of
circumstances, including negative market conditions, among others. Assets such as machinery,
equipment, and vehicles are expected to devalue over time. (What Is Depreciation? Definition of
Depreciation, Depreciation Meaning - The Economic Times, n.d.) Vehicles suffer greatly from
depreciation as most vehicles lose over 40% of their value in the first 5 years of use. As vehicles,
or cars, are such a crucial part of our daily lives it led me to be curious about their patterns of
depreciation. The main type of vehicles widely distributed to the public are gas vehicles or ICE
vehicles, which are the vehicles that have been dominating the market for decades, however
there has been a recent and prominent rise when it comes to electric vehicles. An electric vehicle,
EV, is one that is powered by an electric motor, takes electricity from a battery, and can be
charged from an external source. (Alternative Fuels Data Center: Electric Vehicle (EV)
Definition, n.d.) Knowing this, I began to wonder if electric vehicles depreciate with the same
patterns or trends as ICE vehicles or if their advanced technology would lead to them retaining
their value better as time goes by.

I’ve always had a profound interest in cars since I was a child and I always was curious about
how the valuation of a vehicle would change over time. As I grew older, I began to witness the
market switching towards EVs. The development and the rise of EVs is something I have kept
track of very closely as the technological advancements that go into manufacturing such vehicles
has fascinated me. I always found myself appreciating the eco-friendly technology and the focus
on environmental sustainability that comes with the rise of electric vehicles. My deep interest in
automobiles, along with my love for sustainable technology, has led me to extensively examine
the differences between ICE vehicles and EVs. When I look at these comparisons, one aspect of
the differences that I feel often gets overlooked is differences between the two types of vehicles
is how well they retain their value as years go by. Noticing this, it piqued my interest and made
me want to investigate this matter. Since my favorite car manufacturer is the German company,

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Audi, I chose to use two of their models for this research, the Audi Q7 (ICE) and the Audi
E-Tron (EV). Audi has been a car manufacturing company since 1909 when August Horch
created the brand. (History | Audi.com, n.d.) I have loved Audi since I was young as I was
immersed in the deep and captivating history of the brand as well as the quality of cars they
produce. Due to my interest in Audi as well as the difference between ICE vehicles and EVs I
landed on the research question for this IA to be:

“To what extent do the depreciation patterns of the Audi Q7 and Audi E-Tron differ, how can this
be modeled and how can we forecast the upcoming depreciation values?”

Methodology:

The tools and theories that will be used in this IA are:

● Piecewise Function: A piecewise function is one in which the output is defined

over many segments of the domain using multiple formulas. (Define and Write
Piecewise Functions | Intermediate Algebra, n.d.) In this IA piecewise functions
will be used to model the functions of the graphs that represent depreciation of the
two vehicles. The graphs will be divided into an appropriate number of segments
allowing there to be multiple formulas to be modeled.

Data Collection and Analysis:

Table 1: Audi E-Tron: Age vs Residual Value

Audi E-Tron
Years Old Residual Value
0 100%
1 92.93%
2 85.07%
3 77.20%
4 69.34%
5 59.30%
6 54.27%
7 46.82%

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 8 38.86%
9 33.32%
10 30.85%
Source: (Audi E-Tron Depreciation Calculator, n.d.)

Figure 1: Graph of Audi E-Tron: Residual Value vs Years Old

Table 2: Audi Q7: Age vs Residual Value

Audi Q7
Years Old Residual Value
0 100%
1 95.91%
2 88.08%
3 72.16%
4 64.22%
5 52.68%
6 43.97%
7 37.52%

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 8 31.75%
9 28.82%
10 25.76%
Source: (Audi Q7 Depreciation, n.d.)

Figure 2: Graph of Audi Q7: Residual Value vs Years Old

Processed Data:
Audi E-Tron:
Segment 1:
In figure 1, it can be seen that segment 1 is linear as between years of 0-4 the graph has a linear
correlation of ≈1.
The function of segment 1 was found using a graphic display calculator.

Figures 3&4: Finding the function for segment 1 on the GDC

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​
Figure 5: Graph for Segment 1, of figure 1

The function for segment 1 of figure 1 is;

𝑓(𝑥) =− 7. 705𝑥 + 100

Segment 2:
The regression line for segment 2 was taken as an exponential line as the exponential regression
line provides an r2 value of ≈9.8

Figure 6: Online Regression Line Calculator used for Segment 2, (Exponential Regression
Calculator, n.d.)

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Figure 7: Graph for segment 2 of figure 1

The function for segment 2 of figure 1 is;

𝑥
𝑓(𝑥) = 111. 925 × 0. 885

Segment 3:
The regression line for segment 3 was taken as an exponential line as the exponential regression
line provides an r2 value of ≈9.7

Figure 8: Online Regression Line Calculator used for Segment 3, (Exponential Regression
Calculator, n.d.)

Figure 9: Graph for segment 3 of figure 1

The function for segment 3 for figure 1 is;

𝑥
𝑓(𝑥) = 122. 11 × 0. 869

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Combining the Functions:

− 7. 705𝑥 + 100 0 ≤ x ≤4
𝑥
𝑓(𝑥) = 111. 925 × 0. 885 4 < x ≤6
𝑥
122. 11 × 0. 869 6 < x ≤10

Audi Q7:
Segment 1:
For segment 1 of figure 2 it is being taken as a linear line of regression. At first glance it does not
appear to be linear, however after calculating the correlation coefficient it is found that the linear
regression resulted in being higher than that of the exponential regression line.

Figures 10&11: Finding the function for segment 1 on the GDC

Figure 12: Graph for Segment 1, of figure 2

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The function for segment 1 for figure 2 is;
𝑓(𝑥) = − 5. 96𝑥 + 100

Segment 2:
For segment 2, the regression line is taken as exponential as after calculations the r2 value is the
greatest for an exponential regression line.

Figure 13: Online Regression Line Calculator used for Segment 2, (Exponential Regression
Calculator, n.d.)

Figure 14: Graph of Segment 2, of figure 2

The function for segment 2 for figure 2 is;

𝑥
𝑓(𝑥) = 119. 149 × 0. 854

Segment 3:
For segment 3, the regression line is taken as exponential as after calculations the r2 value is the
greatest for an exponential regression line.

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Figure 13: Online Regression Line Calculator used for Segment 3, (Exponential Regression
Calculator, n.d.)

Figure 14: Graph of Segment 3, of figure 2

The function for segment 3 for figure 2 is;

𝑥
𝑓(𝑥) = 127. 42 × 0. 84

Segment 4:
In figure 2, it can be seen that segment 1 is linear as between years of 0-4 the graph has a linear
correlation of ≈1.

Figures 15&16: Finding the function for segment 1 on the GDC

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 Figure 14: Graph of Segment 3, of figure 2

The function for segment 4 for figure 2 is;

𝑓(𝑥) =− 2. 995𝑥 + 55. 731

Combining the Functions:

− 5. 96𝑥 + 100 0 ≤x ≤ 2
𝑥
𝑓(𝑥) = 119. 149 × 0. 854 2 <x ≤ 4
𝑥
127. 42 × 0. 84 4<x ≤8
− 2. 995𝑥 + 55. 731 8<x ≤10

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