Tesla’s used car price bubble bursts, weighing on demand for new cars

SAN FRANCISCO, Dec 27 (Reuters) – Tesla buyers who waited months for their new car have had an unusual choice for much of the past two years: keep the new electric vehicle or sell it at a profit to someone with less patience.

But the days of Tesla’s switch are numbered: a potential threat to already declining new car prices.

Used Tesla prices are falling faster than other automakers and clean energy status symbols are languishing on dealer lots longer, industry data provided to Reuters showed.

The average price of a used Tesla in November was $55,754, down 17% from the July high of $67,297. The overall used car market posted a 4% drop during that period, according to Edmunds data. Used Teslas were in dealer inventory for 50 days on average in November, compared to 38 days for all used cars.

Rising gasoline prices, an effect of the Ukraine war, boosted demand for Tesla, one of the few long-range electric vehicles on the market. tesla inc (TSLA.O) itself increased prices faster than the prices of other cars, building its profit margins. And buyers of some new Tesla took advantage of the market boom to sell their relatively new cars for a profit and 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 growing, causing used Tesla prices to fall faster than the market and creates a cascading effect on the prices of new Tesla.

Last week, Tesla doubled the US new car price cut to $7,500 for Model Y and Model 3 delivered this year, adding to investor jitters about declining demand.

Nearly a third of used Teslas for sale in August were 2022 models for resale, a sign that the original buyers intended to turn around, analysts said. That compares with about 5% 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 Tuesday. They are down over 65% this year.

Reuters charts
Reuters charts
Reuters charts

“You can’t sell your current Tesla for more money than you paid for, which has been true for much of the last two years,” said Karl Brauer, executive analyst at auto sales website iSeeCars.com. “That would reduce demand for new Tesla.”

On Thursday, Musk said that “sweeping interest rate swings” have increased the prices of all cars, new and used, and that Tesla could cut prices to support volume growth, resulting in lower profit. .

Tesla, which has dissolved its media relations department, did not respond to emailed questions from Reuters.

Indeed, Tesla isn’t alone: ​​The US used-car market prospered as global vehicle manufacturing hit headwinds, but now faces a “used-car recession,” an analyst said, after that used car dealer CarMax last week reported an 86% drop in third place. -quarterly profit.

But Tesla is leading the pull: The factors that pushed up the prices of its vehicles were overstated compared to other brands because Teslas were “for a long time basically the only viable product when it came to used electric vehicles,” said Ivan Drury, Chief Information Officer at Edmunds.com.

Electric vehicles like the Ford F-150 Lightning and Hyundai Ioniq 5 are coming to market with a lot of excitement, said Liz Najman, content marketing manager at EV researcher Recurrent.

Software engineer Greg Profitt bought a new Model Y last year for $49,000 and sold it three months later for an additional $12,000. He ordered a new one, but he just bought a used Tesla at a discount.

“The economy scares me a little bit to buy new,” he said, adding that the new $7,500 discount would be too small to sustain demand.

Reporting by Hyunjoo Jin in San Francisco and Nivedita Balu in Bengaluru; additional reporting by Akash Sriram; Edited by Peter Henderson, Anna Driver and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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