Tesla buyers who waited months for their new vehicles have had an unusual choice for much of the past two years: hold on to the new electric vehicle, or sell it at a profit to someone with less patience.
But the days of the Tesla flip are numbered – a possible threat to new car prices that are already getting slashed.
Prices of used Teslas are dropping faster as opposed to those of other carmakers and the clean-energy status symbols are languishing in dealer lots longer, according to industry data provided to Reuters.
The average price for a used Tesla last month was $55,754, a 17% drop from a July peak of $67,297. The overall used car market recorded a 4% fall during that period, according to Edmunds data. The used Teslas were in dealer inventory for 50 days on average last month, in contrast to 38 days for all used cars.
Surging gasoline prices, an effect of the conflict in Ukraine, jacked up demand for Teslas, one of few long-range electric vehicles in the market. Tesla Inc (TSLA.O) itself hiked prices faster than prices for other vehicles, building its profit margins. And buyers of some new Teslas took advantage of the booming market to sell their relatively new vehicles for a profit, then place orders for new ones, driving demand for Tesla’s new cars.
Now fuel prices are falling, interest rates are soaring, Tesla output is increasing, and EV competition is rising, causing used Tesla prices to drop faster than the market, and creating a domino effect on prices of new Teslas.
Tesla last week doubled a U.S. new-car price discount to $7,500 for Model 3s and Model Ys delivered in 2022, adding to investor jitters about weakening demand.
Nearly a third of used Teslas for sale in August were 2022 models up for resale, a sign that initial buyers were seeking to flip, analysts said. That contrasts with about 5% of other brands on the used market, research firm Edmunds said.
Tesla shares slid 7.3% to a more than two-year low of $114.12 in early trading on Tuesday. They have dropped more than 65% in 2022.
“You can’t sell your current Tesla for more money than you paid for it, which was true for a lot of the past two years,” said Karl Brauer, executive analyst at car sales website iSeeCars.com. “That would reduce demand for new Teslas.”
On Thursday, Musk said that the “radical interest rate changes” have raised the prices of all cars, new and used, and that Tesla potentially could lower pricing to sustain volume growth, which would lead to lower profit.
Tesla, which has axed its media relations department, would not reply to Reuters’ emailed questions.
Indeed, Tesla is barely alone: the U.S. used car market boomed as global vehicle manufacturing hit snags, but it now is experiencing a “used vehicle recession,” one analyst said, after used car seller CarMax last week posted an 86% fall in third-quarter profit.
But Tesla is ahead in the retreat: the factors that jacked up prices of its vehicles were exaggerated as opposed to other brands because Teslas were “for a long time really the only viable product when it came to used EVs,” said Ivan Drury, director of Insights at Edmunds.com.
EVs such as the Hyundai Ioniq 5 and the Ford F-150 Lightning are entering the market with a lot of buzz, said Liz Najman, content marketing manager at EV researcher Recurrent.
Software engineer Greg Profitt purchased a new Model Y in 2021 for $49,000 and sold it three months later at a profit of $12,000. He put in an order for a new one – but has just purchased a used Tesla at a discount.
“The economy kind of scares me to buy new ” he said, adding that the new $7,500 discount would be too little to buoy demand.
