I'm a committed Model 3 reservation holder, Tesla investor and Elon Musk acolyte and mission believer.
However, I'm just a little concerned by three technological and market forces that may influence my purchase (not a lease) in light of future resale value:
1. Rapidly improving battery capacity and density.
2. Confluence of new EV market entrants.
3. Transition to a shared autonomous transportation economy.
Expanding on each of these:
1. While we know Elon has clearly stated Model 3 has a 75 kWh max battery capacity limit due to physical space constraints, that's obviously based on present battery technology/density. The time will come when battery form and chemistry will improve on that density and a larger capacity (not physical size) will inevitably be available in a future Model 3 (just look at the evolution of the Model S). Tesla obviously wouldn't highlight this as they are already highly sensitive to the Osborne Effect. When such an improvement will be achieved is anyone's guess, but I would propose it will have a negative impact on early Model 3 resale value since I would argue that range will remain a top-tier consideration for shoppers. Should they see a 300+ mile capacity in a base Model 3 in 2021, for example, would they not think twice about a 215 mile capacity used model? Especially in light of...
2. A confluence of new EV market entrants will soon attempt to undercut Tesla's model for the masses, by offering models for sale in the $25k - $30k before incentives (and probably with greater than 215 mile range -- see Chevy Bolt for example). This has two effects. By the time these entrants enter the market, Tesla buyers will no longer be eligible for any federal tax incentives, likely prompting Tesla to eventually price compete against automakers who are still eligible for the tax credit. At the same time, potential buyers for these newer entrants will remain eligible for the tax credit for a significant amount of time. Both conditions put downward pressure on the purchase price of a new, comparable EV, therefore putting downward pressure on the value of used models. This may be a time-constrained bubble, but one that may impact at the time in which I might look to sell my Model 3.
3. With the continued growth of a shared transportation economy (Lyft, Uber, etc.) intersecting with autonomous technology, the economic and social viability of private ownership will decline. I put this last as this will likely take the longest to have a material impact on the used value of a 2017/18 Model 3, but the prospect is still there and liable to accelerate faster than any of us anticipate. The upshot remains: fewer private buyers -> softer resale market, lower prices.
In light of the above, I'm grappling with which Model 3 configuration to buy. Do I economize and go with a decently equipped, but base configuration 55 kWh single motor, minimizing my "investment" and therefore minimizing my losses (and get mine sooner)?
Or do I stretch a little for perhaps a less highly equipped but more capable 75 kWh dual motor with the hope it remains more competitive with later Model 3s and late market entrants, thus maximizing its resale value?
I expect to own this Model 3 for about 5 years, but would not rule out being enticed by the Model Y some 3 years from now.
Some forces from the opposite direction, sustaining used Model 3 prices:
1. Demand for EVs is only just ramping up. We'll soon reach the tipping point where millions of buyers will be excited to join this glorious revolution, eager to start their journey in a modern classic, the Tesla Model 3. Since I'm an early reservation holder, I'll have some supreme bonus feature that will make my car an instant collector's item (ok, yes, optimistic, but you get my point).
2. Current high resale value of Model S demonstrates strong demand for Teslas in the secondary market, even though Tesla rapidly improves their models/features/capabilities. It's not all about the EV, but the Tesla name and build quality (ahem) that will help maintain a high resale value.
3. Supplement income/payment in shared economy. My Model 3 will (hopefully) be capable of autonomously participating in the shared transportation economy. Maybe after 3 years the newness of the car will wear off enough I'll be comfortable sharing it with higher quality riders and by then I won't want to sell it, driving up the value of all of your Model 3s on the market.
4. EVs *should* have a longer life-span, greater long-term reliability, fewer moving parts, less friction, no microexplosions and heat dispersion concerns, yada yada, which should sustain higher value over the still-present ICE cars on the market.
I'm no economist or battery engineer, but these are the thoughts that cross my mind as I enter into this fascinating, unpredictable new world of EV ownership. Are you concerned about future resale value, or does your enthusiasm override future considerations? (also guilty)
However, I'm just a little concerned by three technological and market forces that may influence my purchase (not a lease) in light of future resale value:
1. Rapidly improving battery capacity and density.
2. Confluence of new EV market entrants.
3. Transition to a shared autonomous transportation economy.
Expanding on each of these:
1. While we know Elon has clearly stated Model 3 has a 75 kWh max battery capacity limit due to physical space constraints, that's obviously based on present battery technology/density. The time will come when battery form and chemistry will improve on that density and a larger capacity (not physical size) will inevitably be available in a future Model 3 (just look at the evolution of the Model S). Tesla obviously wouldn't highlight this as they are already highly sensitive to the Osborne Effect. When such an improvement will be achieved is anyone's guess, but I would propose it will have a negative impact on early Model 3 resale value since I would argue that range will remain a top-tier consideration for shoppers. Should they see a 300+ mile capacity in a base Model 3 in 2021, for example, would they not think twice about a 215 mile capacity used model? Especially in light of...
2. A confluence of new EV market entrants will soon attempt to undercut Tesla's model for the masses, by offering models for sale in the $25k - $30k before incentives (and probably with greater than 215 mile range -- see Chevy Bolt for example). This has two effects. By the time these entrants enter the market, Tesla buyers will no longer be eligible for any federal tax incentives, likely prompting Tesla to eventually price compete against automakers who are still eligible for the tax credit. At the same time, potential buyers for these newer entrants will remain eligible for the tax credit for a significant amount of time. Both conditions put downward pressure on the purchase price of a new, comparable EV, therefore putting downward pressure on the value of used models. This may be a time-constrained bubble, but one that may impact at the time in which I might look to sell my Model 3.
3. With the continued growth of a shared transportation economy (Lyft, Uber, etc.) intersecting with autonomous technology, the economic and social viability of private ownership will decline. I put this last as this will likely take the longest to have a material impact on the used value of a 2017/18 Model 3, but the prospect is still there and liable to accelerate faster than any of us anticipate. The upshot remains: fewer private buyers -> softer resale market, lower prices.
In light of the above, I'm grappling with which Model 3 configuration to buy. Do I economize and go with a decently equipped, but base configuration 55 kWh single motor, minimizing my "investment" and therefore minimizing my losses (and get mine sooner)?
Or do I stretch a little for perhaps a less highly equipped but more capable 75 kWh dual motor with the hope it remains more competitive with later Model 3s and late market entrants, thus maximizing its resale value?
I expect to own this Model 3 for about 5 years, but would not rule out being enticed by the Model Y some 3 years from now.
Some forces from the opposite direction, sustaining used Model 3 prices:
1. Demand for EVs is only just ramping up. We'll soon reach the tipping point where millions of buyers will be excited to join this glorious revolution, eager to start their journey in a modern classic, the Tesla Model 3. Since I'm an early reservation holder, I'll have some supreme bonus feature that will make my car an instant collector's item (ok, yes, optimistic, but you get my point).
2. Current high resale value of Model S demonstrates strong demand for Teslas in the secondary market, even though Tesla rapidly improves their models/features/capabilities. It's not all about the EV, but the Tesla name and build quality (ahem) that will help maintain a high resale value.
3. Supplement income/payment in shared economy. My Model 3 will (hopefully) be capable of autonomously participating in the shared transportation economy. Maybe after 3 years the newness of the car will wear off enough I'll be comfortable sharing it with higher quality riders and by then I won't want to sell it, driving up the value of all of your Model 3s on the market.
4. EVs *should* have a longer life-span, greater long-term reliability, fewer moving parts, less friction, no microexplosions and heat dispersion concerns, yada yada, which should sustain higher value over the still-present ICE cars on the market.
I'm no economist or battery engineer, but these are the thoughts that cross my mind as I enter into this fascinating, unpredictable new world of EV ownership. Are you concerned about future resale value, or does your enthusiasm override future considerations? (also guilty)
