Tesla owners lose resale value as Elon Musk slashes prices in US after China

Marianne Simmons, a self-professed “Tesla fan girl," bought her second electric vehicle from the company in September: a white, high-performance Model Y ringing in at more than $77,000. Then the company slashed prices on Thursday and she realized she could have bought the same car today at $13,000 less.

By: Bloomberg
| Updated on: 14 Jan 2023, 08:43 AM
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A Tesla Model Y at a Tesla delivery center in California, US. Tesla cut prices across its lineup in the US and major European markets in the carmakers latest effort to stoke demand after several quarters of disappointing deliveries. (Bloomberg)
A Tesla Model Y at a Tesla delivery center in California, US. Tesla cut prices across its lineup in the US and major European markets in the carmakers latest effort to stoke demand after several quarters of disappointing deliveries. (Bloomberg)
A Tesla Model Y at a Tesla delivery center in California, US. Tesla cut prices across its lineup in the US and major European markets in the carmakers latest effort to stoke demand after several quarters of disappointing deliveries. (Bloomberg)
A Tesla Model Y at a Tesla delivery center in California, US. Tesla cut prices across its lineup in the US and major European markets in the carmakers latest effort to stoke demand after several quarters of disappointing deliveries.

“I feel like I got duped. I feel like a got taken advantage of as a consumer," said Simmons, 32, a web designer in Naples, Florida. “Right off the bat, I’m out $13,306. It’s such a large reduction that it’s going to affect a lot of people who just bought a vehicle."

That’s the reality facing owners of Tesla Inc. vehicles after the company cut the price of its cars as much as 20%, part of a push from Chief Executive Officer Elon Musk to increase sales volume in the face of weakening demand. For existing customers, the resale value of the cars they own will take a hit along with the drop in prices of new models.

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“For any existing owner it’s a kick to the teeth," said Ivan Drury, director of insights for research website Edmunds.com. “Anyone who bought a Tesla recently will feel an immediate impact wish they leased it."

Drury said the new-vehicle price cuts will hit used cars immediately and could lower values even further. New-car buyers want new-car smell, he said, so pre-owned prices could fall more.

This is an age-old problem in the car business: Consumers buy a vehicle only to see a rebate advertised days later that would have saved them a few thousand dollars. This time it’s different because dealer discounts are often limited-time sales and Tesla’s cuts are larger than the typical rebate.

In fairness, Simmons and other Tesla fans aren’t the only car buyers who will see their resale values fall. Used-model pricing fell 15% in December, while new ones hit a record average of nearly $50,000, according to researcher Cox Automotive.

Tesla’s price cuts have been the biggest among new-car sellers. Its more expensive models took the biggest hit. Model Y base prices are down 20% to start a $53,000, the performance edition of the car that Simmons bought is down 19%. The larger Model S sedan’s Plaid edition was cut 14%.

Austin Flack, a television producer in Los Angeles, said he listed his 2018 Model 3 with the Full Self-Driving Beta software package for around $51,000 in December, but slashed that price to $36,000 as Tesla unloaded incentives near the end of the year. He said he’ll likely have to cut the price again to $30,000.

Jack Bradham, a cloud services developer in Charlotte, North Carolina, said he’s miffed that the black Model Y long-range edition vehicle he bought in December has been devalued.

Bradham, 46, said in a phone interview that he ordered the car late last year and said he was told he’d have to wait until January to get it. Then he got a call on Dec. 10 from Tesla sales saying he could get a car around Christmas. He said he was excited for the early delivery and agreed to buy the $69,000 EV.

Now, he said, he should have waited because he may have gotten the discount if he took delivery in January; the same car now costs $12,000 less.

Bradham said he gets that sometimes people miss a sale, but it’s the size of the price cut that bothered him, along with the lack of communication from the company.

“There’s no one to contact. I called and tweeted to them, no response."

Andrew Checketts, from Santa Barbara, California, said he took delivery of a seven-seater Model Y in early December after Tesla was “hounding" him with text messages promoting a $3,750 discount at the time. If he had waited one month, he could have bought the car for much less.

“I have solar scheduled to be installed soon. Really having a hard time giving Tesla any more of my money and can’t even look at the car this morning," Checketts said in an email. He said he instead drove a Prius today.

Tesla’s pricing has had ups and downs last year. The company raised prices by 3% to 5% in March when semiconductor shortages were causing production cuts across the auto industry and automakers and dealers both were getting top dollar on all vehicles.

The company then cut prices in December by $7,500 in the US, which led analysts to believe that demand for its EVs was softening and added to a rout in the shares that went on most of last year. Shares of Tesla fell 69% throughout 2022.

Tesla also cut prices in the US and China late last year. In an audio chat on Twitter on Dec. 22, Musk again hinted that he would lower prices further to stave off economic headwinds. “Do you want to grow unit volume, in which case you have to adjust prices downward," he said.

Bradham, the cloud services developer, said he hopes Tesla will give recent buyers some kind of a break, like free charging. Simmons said the company should offer the Full Self Driving feature for free.

Still, Tesla owners have little recourse.

“I would not buy a Tesla again," Simmons said. “That’s saying a lot for me. I was a huge Tesla fan girl. I’d go with a competitor like Lucid or Rivian."

First Published Date: 14 Jan 2023, 08:43 AM IST
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