Tesla cars lose value faster than rival models after price cuts, data shows

The value of used Tesla cars has collapsed since the electric vehicle maker began a series of price cuts on new models over the past six months, according to sales data.

According to industry pricing agency CAP HPI, the value of a new Model 3 with a long-range battery, bought in the UK in January this year for £57,435, will drop by 46 per cent to £31,300 by January 2024.

This compares with a drop of just 4 per cent over 12 months for the same model bought in September 2021, which cost £48,435 new and £46,300 a year later.

The Cap HPI figures are for the UK, one of Tesla’s biggest markets, but the US group’s cars have also seen sharp depreciation in other countries, according to industry executives.

Although used car values ​​have fallen this year compared to 2022, when old cars often sold near or above their new price, Tesla’s depreciation is greater than that of rival electric brands.

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In contrast to the Model 3’s forecast 46 per cent depreciation, an electric Polestar 2 bought in January for £50,395 will be worth around £33,000 in early 2024, a loss of £17,395 or 35 per cent, CAP HPI reports. .

The steeper depreciation on Tesla models potentially makes its cars more expensive to finance than rivals.

This is because under lease or personal sale agreements, motorists only have to finance the value that a car loses during the lease period.

The deal, which affects almost all new cars sold in Britain and is increasingly popular in Europe and the US, results in higher prices for vehicles that have been depreciated more steeply.

Tesla cut new car prices in China in October, then in January in the US, Europe and the UK, and again in March for some models to generate demand.

CEO Elon Musk spoke out against the cuts earlier this year, saying: “There is an enormous desire for people to own a Tesla. The limiting factor is their ability to pay for a Tesla.”

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Tesla has also struggled to ramp up its used sales business, which means cars are often sold too cheaply, said Dylan Setterfield, head of forecasting at CAP HPI, and others in the industry echoed that.

This also played a significant role in the fact that Tesla’s used values ​​have been falling since last year, he added.

Tesla sets prices globally, unlike other manufacturers that use local branches or dealers that offer discounts and incentives to boost sales.

The brand does not have long waiting lists for its cars, unlike rivals such as BMW, which means it is less buffered against a broad drop in demand as economic conditions worsen.

Tesla’s cutbacks have warned of a price war between electric models, but executives at rival automakers have so far said they will not cut retail prices for new models out of concern that it could lead to more depreciation in the used market.

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“I hope they are [Tesla] will continue to drop to zero, but we will continue to protect the value of our electric vehicles,” Renault CEO Luca de Meo said earlier this year. “It certainly destroys value for the customer when you do that.”

Only Ford reduced the price of its electric Mustang in Europe, while Mercedes initially priced its electric E-class too steeply in China.

Tesla declined to comment on resale figures.

Source: https://www.ft.com/content/27ce84f8-915f-48f0-b4a6-28242357ea68