How much more damage will Remarketing do to Tesla sales before they figure it out?!?

[TSLA Pilot]

I have to vent; please forgive the length of this rant but I can't stand it when otherwise smart people do stupid things.

As TSLA stockholders and big time supporters of Tesla's goal of accelerating the transition to sustainable transport, we buy a lot of Teslas. Thus far, we've purchased five or six among the family.

But Tesla's Remarketing team just doesn't get it. They must have missed the class on "The Goal of Tesla," and why Tesla exists--the more Teslas that are sold, the faster Tesla grows, and the quicker we can begin to fix our planet's massive carbon problem. (First Rule of Holes: When in one, STOP DIGGING.)

But this week's Conference Call should give us all pause: vehicle deliveries were down a full 10% QoQ.

NOT GOOD.

I've recently been trying to do my part to help by buying another Model S. Now that ventilated seats are gone (the reason I've rationalized long and hard on for spending big money on a new MS;-), the only choices left to get those magic seats are Inventory cars. Found a couple that work for us, but it's all gone to hell, again, courtesy of Tesla Remarketing.

Are you sitting down? Tesla's Trade-In value on our wrapped, flawless, 2015 P90DL (with EVERY AVAILABLE OPTION, less 3rd Row Seats; MSRP $142,200; 8,800 miles), is an insulting $97,600. (And in late-December the Trade-In value was only $101k; that killed that deal too.)

Here are the pics from a few days ago, which also show the brand new driver's seat also installed a few days ago, courtesy of the Next Gen Seat bushing problem that made it feel like it wasn't bolted to the car anymore:

pylt has shared 49 photos with you!

How about some more salt for the wound? Right now, EV-CPO.com shows a nearly identically equipped 2015 P90DL with similar miles (7,642) for sale at $116,000:

Model S P90D 5YJSA1E40GF126555 | Tesla

**I get it: high-end cars can suffer a pretty hefty resale value hit. What I can't understand is the apparent stupidity of Tesla's Remarketing people.**

Let's recap: What is Tesla's reason for existing?

Accelerate the transition to sustainable transport.​

How does Tesla get there?

SELL A LOT OF CARS--grow like crazy, get more Teslas on the street.

The gross margin on a P100D (or even a loaded 90D) is probably pretty large, as in "deep five-figures large."

So why not offer us a more favorable trade-in value (say $115,000), and maybe even suggest that we upgrade to the P100D instead of the loaded 90D I was looking at? If they break even on my car when they "CPO" it, or even if they lose a few thousand dollars, Tesla STILL comes out way ahead because they sold another new P100D or a 90D. Cash flow is a very good thing, AND now there's another Tesla sold and out in world . . . which is why Tesla exists.

WHY IS THIS SO FRIGGIN' HARD FOR TESLA REMARKETING TO UNDERSTAND?
​

Without naming names, I have been told by several Tesla Owner Advisers that it's much easier on them if someone pulls up in an any other brand of vehicle because working with Tesla HQ on a trade-in Teslas is such a pain in the a__. I never finished my last MBA class (so I wasted a 4.0 GPA--life got in the way darn it!) so maybe I'm missing something, or is just that otherwise intelligent people can get really dumb sometimes?

For purposes of selling new Teslas, the remarketing division needs to be a loss-leader or break-even at best. Otherwise, they just get in the way of Tesla's goal.

Lastly, just to give you an example of why our first deal came apart at the end of December, take a look at their calculations for our P90DL when we had around 7,xxx miles IIRC. As an aside, the "Resale Price" shown was either an honest mistake, or a lie/pure fiction. At that time I checked EV-CPO.com and found several 2015 CPO MS P90DL's bracketing my mileage at $114,500, $115,000 and $126,000. (And how can it possibly cost them $11,300 in "Cost to Resell" a nearly new car that's in showroom condition?!?)

p.s. And get this: having a "wrapped" car like our P90D, which protects the original factory paint from road debris, is a NEGATIVE for Tesla trade in value. Tesla's crack remarketing team pulls the thousands of dollars worth of wrap off the car and throws it away. The labor to do that costs them money, hence another reduction in value. HOW CAN THEY BE SO STUPID?

I am trying to keep my head from exploding.

​

Rant over; thanks for reading.

************************************************************************

Resale Price 112,700

% Original Price 79%

(–) Tesla cost to resell (11,300)

(–) Warranty extension cost (1%/yr added) (1,500)

Trade-in Value* 99,900

% Original Configured Price 70%

* Based on normal wear and tear

Trade-in Value (including the $1,000 Ownership Loyalty Incentive) - $100,900.00

 

[FlatSix911]

Your depreciation value of 70% is not bad for a 2 year old high end vehicle...with no AP2. YMMV

 

[HankLloydRight]

I agree that they could do better to support the mission, but I also think there are many more factors influencing their strategy.

Like for instance, funding R&D for the Model 3 and Y. Building out the new production lines. Funding sales and service center and supercharger expansions.

I'd guess they are offering these values on trade-in because most people are taking them to trade up. They know there is a basically fixed customer contingent who will *always* upgrade to the new next thing. And they probably book that revenue in new car sales and trade-in margins every six months when they announce something new.

Maybe you're on the cusp of that population and won't accept their trade-in value. So sell it privately and make more money, and then buy the new car.

 

[EV-lutioin]

Numbers seem about right to me. New cars depreciate when they leave the lot and the more expensive the car the bigger the hit. 30% depreciation of a loaded Honda Civic = $7,800. 30% depreciation of a loaded MS = $43,000. Generally trade-ins are a rip off, better to sell privately, if possible. The ventilated seats had quality issues so they removed them, which seems reasonable. I would expect them to come back in the future when they find a suitable solution. I agree that sometimes Tesla pushes out half-baked ideas and then has to remove them later, and I appreciate how responsive they are to issues when they arise.

 

[TSLA Pilot]

Your depreciation value of 70% is not bad for a 2 year old high end vehicle...with no AP2. YMMV

View attachment 216342

I'm afraid you've missed the point.

Trade in value loss is not the issue, per se. Think of the net goal, the reason Tesla exists.

**Deliveries are DOWN 10% QoQ.**

I'm trying to help by buying yet another MS.

They're offering me $98k for a car they're selling as a nearly identical CPO for $116k (and I would posit that mine is better as it has new driver's seat and is fully wrapped; the car on CPO? Doubtful to unlikely.).

So they plan to make about $18k on my trade in, plus another several tens of thousands on the new 2017 MS, IF I BUY ONE.

On that crazy stupid transaction I'm not buying one, so no sale.

**Let me repeat: Deliveries are DOWN 10% QonQ.**

When sales go down, this is what the market considers death for a "growth story" company. Sales MUST NOT GO DOWN absent some really good story. Tesla doesn't have a good explanation. (Other than, "Our remarketing team is dumb.")

Would it not be far better for Tesla to sell another MS and break even on my trade-in when they convert it into a CPO? A sale with some profit is better than no sale . . . .

And there's another SOLD Tesla in the world, and that's Tesla's reason to exist.

 

[FlatSix911]

You are missing the larger point here ... the Free Market always wins.
Tesla is not going to pay you above market value just because you think so ... shareholders agree with me.

 

[NSX1992]

I was invited to test drive a new P100D, so I did. My P85DL with 28,000 miles was given a trade-in value of $70,000 a reduction of $3,000 because I had a beautiful $1,200 chrome aftermarket grill and original 19" wheels chrome plated. Of course, I could remove the grill and restore to stock. I paid $125,000 originally. A new P100D is $150,000 so I can not justify $80,000 more to gain 0.5 seconds from 0-60.

 

[TSLA Pilot]

I agree that they could do better to support the mission, but I also think there are many more factors influencing their strategy.

Like for instance, funding R&D for the Model 3 and Y. Building out the new production lines. Funding sales and service center and supercharger expansions.

I'd guess they are offering these values on trade-in because most people are taking them to trade up. They know there is a basically fixed customer contingent who will *always* upgrade to the new next thing. And they probably book that revenue in new car sales and trade-in margins every six months when they announce something new.

Maybe you're on the cusp of that population and won't accept their trade-in value. So sell it privately and make more money, and then buy the new car.

Not quite a logical response.

If Tesla sells another NEW MS and makes $10,000, that is far better than not selling a new MS and making nothing. Again, it's about cash flow. Some profit, any profit, helps pay for the list of things you noted above.

Their situation now encourages NO SALE, and it's dumb.

You also wrote:

I'd guess they are offering these values on trade-in because most people are taking them to trade up. They know there is a basically fixed customer contingent who will *always* upgrade to the new next thing. And they probably book that revenue in new car sales and trade-in margins every six months when they announce something new.

If demand were as such then we would not have seen a 10% drop in deliveries QonQ . . . and Tesla being stupid on trade-in value does not help sales or their mission.

As for selling privately, it is only a partial option, and flat out insane of Tesla to encourage that as it makes more work for the customer. More work for the customer means less customers . . . not rocket science!

Then there's the huge financial aspect of private sale: In my state we get 100% credit on our trade-in for tax purposes. I already wrote a huge check for taxes on this car (6.25%) and have no desire to write another for "wasted" taxes on the next. This encourages the status quo, which is NO SALE of a new Tesla. Tesla should capitalize on that in every state that gives credit for trade-in on taxes by giving us a high trade-in value to encourage the sale of new Teslas, and DISCOURAGING the private sales and the "wasting" of tax dollars.

Remember, why does Tesla exist . . . to sell more Teslas and save our only planet.

(LOVE your site BTW!)

 

[TSLA Pilot]

I was invited to test drive a new P100D, so I did. My P85DL with 28,000 miles was given a trade-in value of $70,000 a reduction of $3,000 because I had a beautiful $1,200 chrome aftermarket grill and original 19" wheels chrome plated. Of course, I could remove the grill and restore to stock. I paid $125,000 originally. A new P100D is $150,000 so I can not justify $80,000 more to gain 0.5 seconds from 0-60.

Your case is more difficult because of the modifications, but same principle applies.

The best, lowest-cost source for new wheels would have been Tesla itself--so they should ding you for the wheel swap and then they turn it into a CPO, IF they'd given you more for your trade-in.

Selling the P100D would have been a good thing for Tesla; another NO SALE.

Deliveries are down 10% QonQ.

Someone's head should have rolled.

 

[TSLA Pilot]

You are missing the larger point here ... the Free Market always wins.
Tesla is not going to pay you above market value just because you think so ... shareholders agree with me.

Another "missing the big picture" reply.

Why is this so hard to understand?

Tesla thinks market value for my car is about $116k because that's what they're selling a similar CPO MS for. Maybe it is, or maybe it's a bit less. IT DOESN'T MATTER because they're offering me $98k.

That's a "no sale" and one less Tesla sold and that's a bad news story for a stock/company that HAS to be a growth story.

And, BTW, I'm a shareholder too, probably at the cusp of seven-figures worth of TSLA. Shares are down 6% after conference call, mostly because of the Deliveries drop of 10% without any explanation . . . . Tesla Remarketing being stupid is NOT helping things as I thought I laid out in a cogent and illustrative manner.

As a shareholder you should be screaming at how stupid Tesla Remarketing is being, or do you think your support of their remarkably short-sighted thinking, which results in No Sale, is better?

 

[HankLloydRight]

Obviously you're pretty emotional about this... so I don't think you're seeing the "big picture".

You're upset because Tesla didn't make *ONE* (1) sale of a new car.

But there are plenty of people who are accepting their trade-in values and Tesla is making money on the trade-in margin and the new car. They're not crying over your one lost sale.

There are substantial costs associated with trade-ins, namely the CPO process and having $25million of US CPO inventory just sitting on their lots depreciating every day --- that's a cost that you wouldn't be bearing once you trade in the car. Some CPOs have been listed for months, and I see big "across the board" price cuts weekly.

The car you own has a set market value, either trade-in or private sale. It's not Tesla's job to make everyone happy by "breaking even" on trade-ins. Also as a stockholder, I would not want that policy in place. Tesla is in business to maximize shareholder value. Their mission is the accelerating the transition to sustainable transport. Those things are sometimes in conflict with each other. But as a publicly traded company, their fiduciary duty is to maximize shareholder value. And they've done the math on trade-ins to do that. So take it or leave it. Or sell it privately.

 

[johnnyS]

I get what you are saying, making something on a deal is better than not making a deal everyday. It seems like they need a local manager that they trust to make deals. Despite reading about it here, I was surprised how low a trade in offer they made for my model S. I took that as the worst case scenario and sold it myself for more. I figured I did not have to get top dollar just more than what Tesla was offering.

 

[TexLaw]

It sounds more like you are interested in having TSLA subsidize your next MS purchase than helping out "the cause," and that you are taking it personally because they haven't. I hate to be the one to say it, but you sound like the guy in the bar or the store yelling out "do you know how much money I spend in here?!" At the very least, you sound like the guy trying to get a free or discounted product so that he can show it off as "free advertising." I think you overestimate the value of your kindness in just trying "to do [your] part to help."

First of all, Tesla is not going to make $18k on your trade-in, even if they sold it at $116k. In the end, they probably make little or nothing on it at all in the first place. That trade-in will start costing them money from the very moment they take it off your hands until the CPO warranty runs out. They will have to move the thing around, recondition it, store it, market it (not much in that, I know), pay some folks to deal with it, and likely lose a new car sale in the end. To then ask TSLA to intentionally take a loss on that just so that you can get into a new MS for a few thousand dollars less is a bridge too far. It's not like the factory is lying fallow.

Second, the price they offered hardly is insulting. As already pointed out 70% depreciation on a two year old $100+ car. TSLA already tried offering overmarket prices on trade-ins (i.e., the guaranteed buy back). It doesn't seem that was working to well for them.

As far as valuing the after-market products you've added, well, they need to remove them. They don't sell anything other than CPO cars, so after market products really are a liability. How are they supposed to market and value cars that way?

Third, yes, deliveries were down QoQ, but they are looking forward on that, as am I. One quarter does not kill a growth story when something like the Model 3 is coming, along with volume numbers ramping up such that TSLA could very well make more cars in 2018 than the rest of its history combined. They would love to sell you another Model S, of course, but they aren't going to pay you to buy one just to ring the bell one more time. Yes, The MS and MX might be TSLA's flagship for years to come, but the Model 3 and its kin are the real future. Toyota butters its bread via the Accord and Camry, not the Lexus LS. We're still in act one of the play.

Lastly, TSLA really doesn't want to be in the used car business at all. They really, really, really, don't. Frankly, I don't want them in that business, either. It's a pain--far more risk and labor than what they make off it (if anything). It's heavy on logistics and light on margin--a nasty business to be in. The only reason they do it at all is for the same reason you want them to bend even further backwards: to get more Teslas on the road. It's an albatross of a business. As a TSLA stockholder, myself, I shudder at the idea of TSLA turning the CPO part of the business into a cost center (or more of one).

If you really want to help TSLA out, then get in your beloved, wrapped, flawless, 2015 P90DL (with EVERY AVAILABLE OPTION, less 3rd Row Seat) that's worth so much more than what TSLA says it is and drive it over to CarMax or sell it privately when you take delivery on the Model S you'll order sooner than later.

 

[MrAustraliaTax]

TL;DR version:

I think my used car is worth a lot more than Tesla thinks it is.

 

[S4WRXTTCS]

I don't really understand your rational for wanting to trade in your 2015 P90DL at this time.

What does a 2017 Model really give you over a 2015? What justifies spending that much money on a car when you barely even drive the one you have? You're like a used car buyers fantasy. Someone willing to keep there car in immaculate condition including a full wrap only to turn around and sell it to get the next shiny thing.

You turned a Tesla into a garage queen. You could have been just as environmentally friendly buying a Ferrari. Plus it's makes for a better piece of artwork than a Tesla.

Yes, this post is about Tesla and their business practices with CPO cars. But, so many times I'm more confounded by the actions of some rich Tesla buyers to be at all empathic to them.

They're more damaging to the resell value of Tesla than Tesla themselves. With that and the $7500 tax rebate it decimates the resell value. I can't wait for the Model 3 to be away from both of you and the tax rebate.

 

[TSLA Pilot]

Obviously you're pretty emotional about this... so I don't think you're seeing the "big picture".

You're upset because Tesla didn't make *ONE* (1) sale of a new car.

But there are plenty of people who are accepting their trade-in values and Tesla is making money on the trade-in margin and the new car. They're not crying over your one lost sale.

There are substantial costs associated with trade-ins, namely the CPO process and having $25million of US CPO inventory just sitting on their lots depreciating every day --- that's a cost that you wouldn't be bearing once you trade in the car. Some CPOs have been listed for months, and I see big "across the board" price cuts weekly.

The car you own has a set market value, either trade-in or private sale. It's not Tesla's job to make everyone happy by "breaking even" on trade-ins. Also as a stockholder, I would not want that policy in place. Tesla is in business to maximize shareholder value. Their mission is the accelerating the transition to sustainable transport. Those things are sometimes in conflict with each other. But as a publicly traded company, their fiduciary duty is to maximize shareholder value. And they've done the math on trade-ins to do that. So take it or leave it. Or sell it privately.

We'll probably have to agree to disagree as I've not communicated the big picture well enough. Everything I've suggested MAXIMIZES shareholder value . . . but it's somehow not connecting so I'll let it drop.

Thank you for your insights, especially re: how poorly Tesla is doing selling CPO cars. Teslas marketing of them is non-existent. Their website is beyond atrocious, has no decent search function, and if one were to ask 100 EV prospects where they might find a good value on a Tesla, perhaps 1 or 2 would suggest Tesla's website.

Unsat.

As for TSLA stock price, I own shares with far more value than all of the Teslas we've purchased combined. I posted my rant because what Tesla is doing on both ends of the remarketing, the purchase and sales, is stupid. AND it hurts shareholder value, big time.

The results speak for themselves with deliveries down 10%, and no one but me here appears to acknowledge the problem, but it's straight from Page 1 of their recent release three days ago:

Introduction | Tesla Motors

Since we're both stockholders, what would you recommend they do?

My suggestions are simple:

1. Reach out to EVERY MS/MX owner (rack and stack with demographics and earlier Model Year cars, of course) and pull the demand lever hard by showing the AP2 video, STARTING with states where there is sales tax credit on trade-ins.

2. Drop off Inventory cars to the prospects that are a good "fit" for them to test drive for a week; early VIN owners will gasp and open their checkbooks after seeing how much progress Tesla has made.

3. Offer premium valuation on their Tesla Trade-Ins.

4. Completely revamp their CPO marketing; there is none at the moment. That means: a new, specific website.

5. Get serious about having great looking CPO cars. It's dumb not to since the cost of the trim parts is mere dollars, and the labor is easy/fast.

6. Get CPO Test drive/loaner offers out to everyone on the M3 reservations list. Those customers are all potential buyers of CPO MS's TODAY. There is no excuse for not trying some test marketing there given that these customers have already given Tesla $1k. These are serious prospects and appear to be 100% untapped. Crazy stupid.

I closing, while I do appreciate your comments, I cannot accept your conclusion that somehow selling me a P100D or a loaded 90D by giving me something close to what they'll try to sell it for as a CPO hurts Tesla, or our TSLA shares, in any way. On the contrary, if Tesla were to spend some time thinking about better ways to sell more cars and achieve Tesla's goal, we would not have seen that 10% drop. Heck, I might have even replaced both of our 2015 MS's with new 2016 or 17 MS's within the last few months given the still-low interest rates . . . instead, Tesla has two more "no sales" to add to that 10% drop.

Multiply by thousands around the world and dumb moves by Tesla start to have an impact.

Thanks for writing.

 

[TSLA Pilot]

I get what you are saying, making something on a deal is better than not making a deal everyday. It seems like they need a local manager that they trust to make deals. Despite reading about it here, I was surprised how low a trade in offer they made for my model S. I took that as the worst case scenario and sold it myself for more. I figured I did not have to get top dollar just more than what Tesla was offering.

And another "no sale" or "almost no sale" because a Tesla owner had to private party sale his Tesla.

A lot of people won't bother with the hassle and will just go somewhere else because selling a car privately can be a pain. Tesla must understand this basic business concept: MAKE IT EASY FOR YOUR CUSTOMERS TO BUY YOUR PRODUCT. Jerking people around on trade-ins is both short-term and long-term stupid.

You don't need an MBA to know this.

Someone at Tesla Remarketing needs retraining, or to work somewhere else.

 

[DriverOne]

Sales (orders) are not down. Production & delivery are, due to issues/delays transitioning to AP2 back in October. That is now fixed, and production should be back to normal this Q, along with deliveries.

Let me repeat, orders are not down.

 

[Az_Rael]

4. Completely revamp their CPO marketing; there is none at the moment. That means: a new, specific website.

5. Get serious about having great looking CPO cars. It's dumb not to since the cost of the trim parts is mere dollars, and the labor is easy/fast.

I agree the CPO program is run terribly. CPO cars are currently out in the service loaner fleet and listed for sale in unknown conditions. My first CPO was found damaged when it was retrieved. The 2nd took 6 weeks to ship, recondition and be ready for delivery - that's new factory build time-frames there. Another forum member had TWO CPO cars that were in accidents before Tesla could retrieve them from the loaner fleet to refurbish them - he waited months for his car. I think many of us CPO buyers only make it though the process because we are dedicated and REALLY want a Tesla.

I think Tesla uses the CPO program as a handy way to increase the service loaner fleets and make a few extra sales while they are at it. Occasionally they wipe the CPO website clean of cars and they all show up at auctions. I doubt they are making lots money off the endeavor.

Sure, they could offer a trade-up bonus or loyalty program for new car sales from current owners, but I doubt it would ever be a significant bonus amount mostly based on Elon's "no discounts" mentality.

 

[S4WRXTTCS]

As to your list I would highly advise that Tesla waits until AP2 is more fully baked before dropping off inventory cars to prospects.

I do like the list overall because it's less about one persons situation, and more about ways to improve orders.