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Automotive News Article: Tesla's trump card: Used (Tesla) cars

Discussion in 'TSLA Investor Discussions' started by RobStark, Oct 6, 2014.

  1. RobStark

    RobStark Active Member

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    CPO sales could prove value of factory-owned stores


    Gabe Nelson

    Automotive News

    October 6, 2014 - 12:01 am ET


    SAN FRANCISCO --
    Elon Musk, in his quest to transform Tesla Motors from a scrappy electric-vehicle startup into a mature, profitable automaker, may have an ace up his sleeve: used cars.


    Tesla is developing a program to sell the Model S secondhand, Automotive News has learned, in a bid to lower the cost of entry for the $71,070 sedan and unlock the earnings potential of Tesla's factory-owned retail network.


    Tesla's vice president of communications, Simon Sproule, confirmed that the company is developing a certified pre-owned program to compete with those offered by luxury brands such as BMW and Mercedes-Benz.
    "With the Model S fleet now heading toward the first cars hitting three years old," he wrote in an email, "we are looking at CPO and how best to structure."

    Tesla is racing against a clock that started ticking in April 2013, when Musk -- determined to reassure customers about buying an unproven electric car from a brand-new automaker -- personally guaranteed the resale value of the Model S.

    If owners take up the offer, it would bring Tesla a steady stream of used Model S sedans starting in the spring of 2016, with many more to follow in 2017: Tesla, which has offered business leases since April, quietly started offering 36-month Model S leases to retail customers on Oct. 1, with offers starting at $5,000 down and $932 a month. The offer is available in 37 states.


    In an email, Sproule wrote that the new lease offer, combined with traditional loans and the resale value guarantee, "completes a suite of products ... that covers a comprehensive range of financing needs for Model S customers."


    Although records of private Model S sales are spotty, early signs indicate that the Model S sedans returning in 2016 will be worth more than what Tesla has promised to pay under the buyback program.


    The influx of trade-ins could start even earlier, when the Model X crossover arrives next year, giving early buyers of the Model S a chance to choose something different from the Tesla stable.


    Carmax Inc., the nation's largest used-car retailer, earned $2,220 per used vehicle in its fiscal first quarter ended May 31, an 11 percent margin. Krafcik, citing analysis by TrueCar affiliate ALG, said it is possible that Tesla will earn more profit on a second purchase than the first, making $6,000 to $10,000 for each used Model S that it sells



    Tesla's trump card: Used cars
     
  2. JRP3

    JRP3 Hyperactive Member

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    Which could mean the few people will take the buyback.
     
  3. Vger

    Vger Active Member

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    Indeed, but probably more to the point-- they are improving the hardware of the car so fast, that there will probably be a lot of people motivated to trade-up in the next year or two.
     
  4. Rifleman

    Rifleman Now owns 2 Model S's!!!

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    At this point, buying a trade in car from Tesla is my primary plan to finally put a Model S in my Garage. I imagine that there are many others in my situation, and they will have no problem selling any trade in cars (with a nice profit margin as well).
     
  5. lolachampcar

    lolachampcar Active Member

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    and the added exposure for Tesla for "CPO'n" the cars is so very little given the battery and power train are the big ticket items and they are already covered for 8 years.
     
  6. ElSupreme

    ElSupreme Model S 03182

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    Yes and having the factory CPO the car takes away a lot of the battery degradation apprehension as well. I would assume Tesla would offer some guarantees about this.
     
  7. hockeythug

    hockeythug Active Member

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    Do you think Tesla would do cerfitied pre owned leases? With the depreciation and the timely 36 month term period (Model 3 timeframe) that would be a pretty good deal for me.
     
  8. Cosmacelf

    Cosmacelf Active Member

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    This makes sense - they already have this, but on a much smaller scale, for the Roadster. If the automated freeway driving technology is any good, I'll be lining up to trade up...
     
  9. FANGO

    FANGO Active Member

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    I've long said that the buyback program won't cost Tesla a penny. It will be a revenue stream, a small one, but one nonetheless.
     
  10. Canuck

    Canuck Active Member

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    I don't know about that. The difference in price is probably not worth the hassle of selling a higher end vehicle privately to many people, especially when it comes to test drives.
     
  11. Vger

    Vger Active Member

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    Rifleman, glad to see the dream is still alive for you! Just curious as a data point, what price range and config/mileage, etc. do you think might move you?
     
  12. RobStark

    RobStark Active Member

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    quote_icon.png Originally Posted by JRP3 viewpost-right.png
    Which could mean the few people will take the buyback.

    The problem with selling a used Model S or similarly priced car private party is financing.


    Most people don't have the cash to write a check for a used Model S.
     
  13. jhm

    jhm Active Member

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    So does this mean that Tesla can sell the Model S directly in Texas and anywhere else? I think the franchise laws only apply to new vehicles, not used. Anybody know?
     
  14. JRP3

    JRP3 Hyperactive Member

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    Good points.
     
  15. JST

    JST Active Member

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    You have potentially said the magic words that will draw Kevin Sharpe.

    The other interesting data point in the stories on this is that Tesla has apparently started offering retail leases (though the terms don't sound terribly favorable).
     
  16. gym7rjm

    gym7rjm Member

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    @jhm here are the discounted Model S's you have been talking about. No need to lower the base price of the Model S if they are hitting that lower price point segment with used S's.
     
  17. jhm

    jhm Active Member

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    Yeah, I see that. Wondering why I hadn't thought of it sooner. It is one good way to tap into demand in waiting. It also helps set aside some of the worries about decline in residual value. But longer term, I think we really do want to increase the number of Model S in circulation. A car that nice, it would be a pity to see it max out at just 100,000 per year.
     
  18. Rifleman

    Rifleman Now owns 2 Model S's!!!

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    My goal is to get into a 60kWh Model S for $55k. I am honestly pretty flexible on mileage and options, the price the point is the biggest factor for me. I would buy a bone stripped Model S with under 10k miles at that price point, or one with 25-30k miles with tech, leather and supercharging at that price point. If I was to spec out a brand new Model S, I would go with a 60 with with black paint, black leather and paino black trim, 19 inch wheels, tech, supercharging, and parking sensors (in a perfect world I would go with an S85, but thats obviously out of my price range), but since I know that there are simply not many low end Model S's out there, I am not going to be picky. Hopefully one of these days I will be able to bring a Model S home :)
     
  19. jhm

    jhm Active Member

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    So basically, if Tesla dropped the price of the S60 to $62,500 as I have argued on the short term thread, with the $7500 federal tax break you'd be right there. Nice to know there are buyers at that price point. If you were buying new at that price, do you think you would add a few options as well?

    I'm all in favor of Tesla selling used cars, but the supply of used cars is even more limited than new. It takes a long time to make a three-year-old car. ;)
     
  20. roblab

    roblab Active Member

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    Interesting to me that a certain mileage is a must have, when all we have heard from Tesla is that AGE is the limiting factor. Why did you not say "one year old", I wonder? Ten thousand miles is nothing. 25-30 K miles is a drop in the bucket. At two years, I have 55,000 miles. Cars coming off the line today have better fit and finish, more colors than when I was buying, and folding mirrors. I started paying for my car over 5 years ago when you could have bought your base car for around $55K new, plus tax, license, delivery, maintenance, etc.

    So your goal should have been to buy the car before the price went up.

    Or, figure that it will be more expensive in another couple years and pay more now. Most people are surprised that what they think is absolute upper limit, isn't. Ask any realtor. You tell them your absolute top price is $200K for a house, and they will start showing you the ones on the market that start at $250K. By the time you're through, you got more than you thought you needed.

    I'm just saying, the price point is usually NOT the limiting factor.
     

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