Tesla’s used car price bubble is bursting, weighing on demand for new cars
SAN FRANCISCO, Dec 27 (Reuters) – Tesla buyers who have been waiting months for their new car have had an unusual choice for most of the past two years: keep the new electric vehicle or sell it at a profit to someone with more -a little patience.
But Tesla’s turnaround days are numbered — a potential threat to new car prices that are already falling.
Used Tesla prices are falling faster than those of other automakers, and clean energy status symbols have been disappearing from dealer lots for much longer, industry data provided to Reuters shows.
The average price for a used Tesla in November was $55,754, down 17% from July’s peak of $67,297. The overall used car market saw a 4 percent decline during that period, according to data from Edmunds. Used Teslas were in dealer inventory an average of 50 days in November, compared to 38 days for all used cars.
Rising gasoline prices resulting from the war in Ukraine have boosted demand for Teslas, one of the few high-mileage electric vehicles on the market. Tesla Inc (TSLA.O) itself raised prices faster than the prices of other cars, increasing its profit margins. And buyers of some new Teslas took advantage of the booming market to sell their relatively new cars at a profit, then order new ones, boosting demand for Tesla’s new cars.
Now, fuel prices are falling, interest rates are rising, Tesla production is increasing, and EV competition is increasing, causing used Tesla prices to fall faster than the market and creating a cascading effect on new Tesla prices.
Tesla last week doubled down on new car prices in the US to $7,500 for Model Ys and Model 3s delivered this year, adding to investor jitters about softening demand.
Nearly a third of used Teslas for sale in August were 2022 models for resale, a sign that original buyers are looking to move on, analysts said. That compares with about 5 percent of other brands on the used market, research firm Edmunds said.
Tesla shares fell 7.3% to a more than two-year low of $114.12 in early trading on Tuesday. They are down more than 65% this year.
“You can’t sell your current Tesla for more money than you paid for it, which has been true for much of the last two years,” said Carl Brauer, executive analyst at car sales website iSeeCars.com. “This will reduce the demand for new Teslas.”
On Thursday, Musk said that “radical changes in interest rates” have pushed up the prices of all cars, new and used, and that Tesla could potentially cut prices to support volume growth, which would lead to lower profit.
Tesla, which has disbanded its media relations department, did not respond to questions from Reuters by email.
Indeed, Tesla is hardly alone: The US used car market is booming as global car manufacturing struggles, but now faces “used car recession”, said one analyst after a used car salesman CarMax last week reported an 86% drop in third-quarter profit.
But Tesla is leading the charge: The factors that have driven up the prices of its vehicles have been exaggerated compared to other brands because Teslas were “basically for a long time really the only viable product when it comes to used electric cars,” said Ivan Drury, director of Insights at Edmunds.com.
Electric cars like the Ford F-150 Lightning and Hyundai Ioniq 5 are coming to market with a lot of hype, said Liz Nyman, content marketing manager at EV Researcher Recurrent.
Software engineer Greg Proffitt bought a new Model Y last year for $49,000 and sold it three months later for $12,000 more. He ordered a new one but just bought a used Tesla at a discount.
“The economy kind of scares me into buying new,” he said, adding that the new $7,500 rebate would be too small to sustain demand.
Reporting by Hyunjoo Jin in San Francisco and Nivedita Balu in Bengaluru, additional reporting by Akash Sriram; Editing by Peter Henderson, Anna Driver and Matthew Lewis
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