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

[mmd]

The sale of your vehicle as a CPO displaces a new Tesla sale. (stopcrazypp said)

I have to disagree based on this suggestion: for about 90%+ of the new Tesla buyers, there is no searching of CPO or used Tesla market--they go straight to the web page and order a new one. (This is just a hunch based on my personal experiences; feel free to add your insights.) Thus, just as I don't think that many iPhone 7 buyers are potentially looking at iPhone 6's, the same applies to Tesla. The market at this price point tends to be more bifurcated between new and used, but perhaps we'll need a poll?

And the Pre-Owned and Inventory links show up right on the order page. So, I'm not getting your point.
Please do some basic fact checks and research; don't just go by your hunches. I suggest, you give your armchair a break
Did you bother listing on Ebay to see how much your car can fetch? You don't have to sell it; just get a real life idea. Set a very high reserve so it doesn't sell. It'll give you a better data point than your hunches

Model S | Tesla

The comparison with iphone 6/7 is not useful. According to Elon, Tesla cars evolve continuously, and never become obsolete. There is also no model year. So the CPOs and used Teslas are as good as new. I thought, you would know these simple facts.

BTW, did you hear back from Jon McNeil ? I'm quite sure, the grossly overpaid Silicon Valley executives would have figured out the simple solutions you are proposing to juice up Tesla sales. They aren't being paid for their incompetence, I'm sure of that.

 

[Electroman]

I find it easier and logical to follow Tesla Pilot's arguments than the others.. it just makes sense - at this stage of the game, where more 'S & X' on the road is more valuable than another 2% higher profit.

And I don't buy that argument that a CPO sale displaces a new sale. A CPO buyer is your typical new Lexus buyer. There may be a small percentage of overlap, but overall someone looking for new may jump for an Inventory, but rarely a CPO. Even more so a CPO prospect rarely jumps into buying new, just because CPOs are hard to find.

 

[carter_seattle]

it just makes sense - at this stage of the game, where more 'S & X' on the road is more valuable than another 2% higher profit

Riddle me this: if what you say is true, shouldn't Tesla be willing to sell you a brand new car, even if it's for $2k below list?

 

[Electroman]

Riddle me this: if what you say is true, shouldn't Tesla be willing to sell you a brand new car, even if it's for $2k below list?

Problem with that argument is, it becomes a downward spiral where everyone tries to beat Tesla down for a bargain on a new Tesla.

Not in this case where they offer a better deal for a used Tesla only in exchange for a new Tesla at a fixed price.

Of course if they end up having a huge inventory of CPOs sitting at their lots , they have to move it. Which becomes a problem on its own.

 

[FlatSix911]

Thank you!

Finally, an adult, non-grade school response. We needed that after a spate of semi-adults invaded the thread.

You wrote: The sale of your vehicle as a CPO displaces a new Tesla sale.

I have to disagree based on this suggestion: for about 90%+ of the new Tesla buyers, there is no searching of CPO or used Tesla market--they go straight to the web page and order a new one. (This is just a hunch based on my personal experiences; feel free to add your insights.) Thus, just as I don't think that many iPhone 7 buyers are potentially looking at iPhone 6's, the same applies to Tesla. The market at this price point tends to be more bifurcated between new and used, but perhaps we'll need a poll?

You wrote:

In general, the order of value:
1) Conquest sale (car replaces car of a competitor)
2) Completely new sale (does not replace another car)
3) Retention sale (car replaces car of same brand)
a) Upgrade sale (moving to higher end model or trim: for example Model 3 to Model S, or 90D to a P100D)
b) Replacement sale (same/similar model, same/similar trim: for example P90D to P100D)
c) Downgrade sale (moving to lower end model or trim)

I'd concur, but with less of a value delta to Tesla with each step down. For Tesla, it's the raw sales numbers that matter the most given its status a "growth story" stock. Ya' gotta have the growth! As with Amazon, the profit isn't for now, it's for sometime in the distant future . . .

You wrote:

Plus, essentially what you are asking for is a discount on the P100D, except bundled in with the trade-in transaction. The only reason why a discount would make sense is if Tesla has a serious demand problem. However, Tesla had recently raised prices, which indicates they are not having a demand problem. And if demand is a problem, the solution should be directly decreasing prices directly on new vehicles (or introducing improvements at the same price). This would allow them to take even conquest and new sales, which are more valuable to the growth of the company.

First, absent an explanation from Tesla (which was somehow missing from the conference call and the letter?), I don't know what else to call a 10% drop in QoQ deliveries other than "a serious demand problem." (And, unless I also missed this, I am boggled that not one analyst asked about this massive deliveries drop.) Absent an explanation, I think there IS a demand problem, small price increase notwithstanding (based upon our very limited world view outside of Tesla's bubble).

As to the rest, well, yes. In other words, Tesla, if it was smarter in marketing, they would be trying to INDUCE ALL OF US to buy P100D's by effectively offering a bonus for our trade-ins if we purchase one. Why? The margin is massive; the cash flow is wonderful. Conquest sales are harder/more expensive to generate. Why not plant in the soil Tesla has already tilled?

Thank you, again, for an adult, intellectual reply. It was sorely needed.

Seriously ...

 

[carter_seattle]

Not in this case where they offer a better deal for a used Tesla only in exchange for a new Tesla at a fixed price.

Sorry, you're missing what every person in the car sales business knows: you can stand firm on the new car cost and give a little on the trade-in or you can discount the list price and stand firm on the trade-in. It doesn't matter, it's all the same transaction.

 

[carter_seattle]

Btw, if you're curious how this much talk could lead to so little progress in changing people's minds:

Why Facts Don’t Change Our Minds

 

[FlatSix911]

Btw, if you're curious how this much talk could lead to so little progress in changing people's minds:

Why Facts Don’t Change Our Minds

Actual photo of the OP ...

 

[Electroman]

Sorry, you're missing what every person in the car sales business knows: you can stand firm on the new car cost and give a little on the trade-in or you can discount the list price and stand firm on the trade-in. It doesn't matter, it's all the same transaction.

Disagree. The negative impact of the later is disproportionately higher than the former. Discounting on new cars is a slippery slope, that will have a huge impact on the bottom line.

Also you can make the same argument on Tesla's position on 'Service being a no-profit center'. Tesla is doing this, to reduce the cost of ownership, indirectly to spur sales. Tesla could take the same approach with CPO as a either a no-profit center or a marginal loss leader.

At they end of the day if they sell 2500 cars a month, they should think how they can increase this to 2800 with marginal impact to their bottom line. 3000 more cars per year has a multiplier effect on future sales than the marginal temporary reduced profitability,

 

[stopcrazypp]

Thank you!

Finally, an adult, non-grade school response. We needed that after a spate of semi-adults invaded the thread.

You wrote:

The sale of your vehicle as a CPO displaces a new Tesla sale.

I have to disagree based on this suggestion: for about 90%+ of the new Tesla buyers, there is no searching of CPO or used Tesla market--they go straight to the web page and order a new one. (This is just a hunch based on my personal experiences; feel free to add your insights.) Thus, just as I don't think that many iPhone 7 buyers are potentially looking at iPhone 6's, the same applies to Tesla. The market at this price point tends to be more bifurcated between new and used, but perhaps we'll need a poll?

Obviously it would not be a 100% displacement like-for-like, but rather percentages with multiple scenarios. However, from other threads, it definitely happens. Here's an example where CPO displaces an exact equivalent new Tesla (with the new owner pocketing the difference in price):
Help me overanalyze - new or CPO?

There will be examples of where it will only displace sales of the same price (not equivalent trim, so less margin impact) or examples where it doesn't displace (where the CPO buyers are not considering a new vehicle at all). Without a survey of some sort, hard to say how much percentage that is.

But anyways, my main point is that the nature of your sale is going to have some percentage of displacement, so Tesla is not pocketing the entire margin as you suggest, unlike sales that do not involve a Tesla trade-in.

I don't think the iPhone 7/iPhone 6 analogy works given there is no "CPO" equivalent for phones. The life-cycle of smartphones are also drastically different than a car. A car 1 year old is still relatively new, but a smartphone 1 year old is relatively old.

You wrote:

In general, the order of value:
1) Conquest sale (car replaces car of a competitor)
2) Completely new sale (does not replace another car)
3) Retention sale (car replaces car of same brand)
a) Upgrade sale (moving to higher end model or trim: for example Model 3 to Model S, or 90D to a P100D)
b) Replacement sale (same/similar model, same/similar trim: for example P90D to P100D)
c) Downgrade sale (moving to lower end model or trim)

I'd concur, but with less of a value delta to Tesla with each step down. For Tesla, it's the raw sales numbers that matter the most given its status a "growth story" stock. Ya' gotta have the growth! As with Amazon, the profit isn't for now, it's for sometime in the distant future . . .

You wrote:

Plus, essentially what you are asking for is a discount on the P100D, except bundled in with the trade-in transaction. The only reason why a discount would make sense is if Tesla has a serious demand problem. However, Tesla had recently raised prices, which indicates they are not having a demand problem. And if demand is a problem, the solution should be directly decreasing prices directly on new vehicles (or introducing improvements at the same price). This would allow them to take even conquest and new sales, which are more valuable to the growth of the company.

First, absent an explanation from Tesla (which was somehow missing from the conference call and the letter?), I don't know what else to call a 10% drop in QoQ deliveries other than "a serious demand problem." (And, unless I also missed this, I am boggled that not one analyst asked about this massive deliveries drop.) Absent an explanation, I think there IS a demand problem, small price increase notwithstanding (based upon our very limited world view outside of Tesla's bubble).

As to the rest, well, yes. In other words, Tesla, if it was smarter in marketing, they would be trying to INDUCE ALL OF US to buy P100D's by effectively offering a bonus for our trade-ins if we purchase one. Why? The margin is massive; the cash flow is wonderful. Conquest sales are harder/more expensive to generate. Why not plant in the soil Tesla has already tilled?

Thank you, again, for an adult, intellectual reply. It was sorely needed.

I'm not sure if you get my last point completely. But I am not suggesting to do the bonus incentive on trade-ins, but rather to directly do incentives on new vehicles if there is a demand problem. There is no reason to target trade-ins specifically unless the market conditions call for it (which as I explained does not at the moment, given Tesla and the EV market is in a growth stage).

 

[stopcrazypp]

Disagree. The negative impact of the later is disproportionately higher than the former. Discounting on new cars is a slippery slope, that will have a huge impact on the bottom line.

Also you can make the same argument on Tesla's position on 'Service being a no-profit center'. Tesla is doing this, to reduce the cost of ownership, indirectly to spur sales. Tesla could take the same approach with CPO as a either a no-profit center or a marginal loss leader.

At they end of the day if they sell 2500 cars a month, they should think how they can increase this to 2800 with marginal impact to their bottom line. 3000 more cars per year has a multiplier effect on future sales than the marginal temporary reduced profitability,

I'm not seeing this. Let's say they sacrifice $X million on Tesla trade-ins for CPOs to be a loss leader. How is spending that same $X million on new car incentives (which do not have to be price decreases, but can also be feature improvements at same price) going to have a larger negative impact? And the latter would also help them get conquest sales, which is critical for Tesla's growth.

The service center profitability issue is a different one. Getting unsubsidized trade-ins are not an impediment for new Tesla sales because the owners have an alternative of selling private party or to a third-party dealer. However, having expensive service directly impacts new Tesla sales (people are scared off by service costs) and there are little third party service options that can fill the gap.

 

[AnxietyRanger]

"Perhaps global temperatures are rising for reasons other than a greenhouse effect? Perhaps it's just a natural cycle that has nothing to do with human influence. Perhaps we don't need to change our behavior at all!

Anyway... just a theory. Not me advocating this."

What a terrible fallacy of an argument. I am disappointed. We could have just agreed to disagree, and that would have been the gracious end of it, instead I get kittens and strawmen.

As Aristotles once is claimed to have said, "It is the mark of an educated mind to be able to entertain a thought without accepting it."

Overvaluing trade-ins to gain more new car sales is certainly not a preposterous sales theory suggestion. It is a form of conditional discounting of new cars. Discounts, of course, can drive sales.

One can definitely entertain @TSLA Pilot 's sales theory without saying that is necessarily the way to go for Tesla. Theory is one thing, practice and specific context another.

I have no opinion on what is the best way for Tesla to go forward on this. I do not claim to know. I am merely doing my best to understand and entertain the suggestion by TSLA Pilot.

 

[AnxietyRanger]

The service center profitability issue is a different one. Getting unsubsidized trade-ins are not an impediment for new Tesla sales because the owners have an alternative of selling private party or to a third-party dealer. However, having expensive service directly impacts new Tesla sales (people are scared off by service costs) and there are little third party service options that can fill the gap.

I acknowledge you don't necessarily agree, and that's fine as I agree the whole thing is balancing act with many reasons for and against various tactics, but just to point out:

Third-party sales are by far not the preferred method of tradining in your used car in high-end sales, where customers prefer convenience and may also find moving such high-value cars demanding (it is quite different from selling your old beater, for example). In the case of Tesla, some may also find it harder to move the car through a third-party seller, due to the special nature of the car (though of course e.g. in California that does not apply).

Thus making more lucrative trade-in offers certainly could be a significant positive factor in new car sales.

As for reasons why prioritize upgrades over new car discounts in general, one could be, in Elon's own words "loyalty begets loyalty".

 

[TSLA Pilot]

Let's say they sacrifice $X million on Tesla trade-ins for CPOs to be a loss leader.

As a reminder, one reason Tesla likely loses so much on their CPO program is their atrocious marketing of these cars--no real search engine, zero pictures while trying to sell six-figure cars, and no "outreach" marketing where they could place these cars with reduced losses, as compared to the wholesale auction market where Tesla appears to "flush" their trade ins on a regular basis.

Then they end up at places like this (with pictures even!):

https://www.texasdirectauto.com/for-sale/Tesla/?sort=p-d

In the end, this became a half lose-lose proposition for both Tesla and us. After so much disgust with Countergate I and II, we ended up buying an inventory 90D (instead of a P100D), and getting royally screwed with our trade in late-2015 P90DL. It was the same thing we encounter with every trip into Tesla Trade-In Hell: 20 questions from their remarketing idiots on the thousands of dollars we spent for clear PPF (Paint Protection Film) on the hood, fenders and front and rear bumpers--all likely to be removed because of some remarkably stupid rule from Tesla HQ.

I made the same analogy with the rep at our local gallery when he took the latest pictures: The car has floor mats. The floor mats exist to protect the carpet which is both expensive and difficult to replace, whereas the floor mats can absorb damage/wear and be replaced easily and at relatively low cost as compared to carpet.

Now replace "floor mats" with "PPF," and "carpet" with "paint."

The stock answer is always the same: "Well, the factory can't be responsible for work installed by others."

Yes, I get it. It remains the typical village idiot response.

I would posit that 99.99% of CPO buyers would gladly sign a waiver/release which states, "This CPO Tesla appears to have been professionally wrapped with a clear PPF. The PPF installation likely cost the previous owner thousands of dollars and serves to help protect the paint finish from rock and debris damage. Subjectively, the PPF appears to be in (Excellent, Satisfactory, or Poor) condition. Tesla did not install this product and cannot warrant the PPF in any way. We will remove it at a cost of $______ prior to delivery, if you choose to not sign this release."

"Problem" solved.

Why is this so hard?

Instead, they ding us for our "modification" and piss off some of their best customers, those that buy a lot of Teslas, care for them well, and even wrap them in PPF . . . . (And these same Tesla people will likely wonder why Tesla sales drop when competent competitors show up with decent BEVs.)

Even though we are obviously strong Tesla fans (and investors), this is sooo frustrating, mostly because it is so stupid and "lose/lose." We cannot understand how/why otherwise smart people make such remarkably stupid decisions.

Tip to Tesla: Giving customers a bad experience simply primes the pump for them to jump ship when competitors arrive with similar BEVs. Please, fix this, and the other examples of just how broken the CPO program remains.

 

[Electroman]

Spending money to remove the wrap is idiocy.. I can only think of one reason where they would need to do that - if the work was done shoddily

 

[AnxietyRanger]

Spending money to remove the wrap is idiocy.. I can only think of one reason where they would need to do that - if the work was done shoddily

Or a non-agile corporate policy of selling OEM cars only? I think that is the reason. I agree, it is silly.

And buying used cars from an online site with configurator renders as if they were new cars? And then only being able to inspect the used car upon delivery? That is a kind of surreal for selling and buying used cars. Used cars are unique and benefit from being presented as such, both for the buyer and for the seller. Good ones can fetch extra price and poor ones can still better meet the buyer's expectations...

Clearly an area where Tesla may have to rethink their strategy in some ways.

 

[TSLA Pilot]

Spending money to remove the wrap is idiocy.. I can only think of one reason where they would need to do that - if the work was done shoddily

Trust me, it was done quite professionally--invisible to the eye.

Given what it cost to install, it was certainly done quite well.

 

[allanfridstrom]

For arguments sake, let's speculate/assume the GM on a loaded P100D is $40,000. If they give me a $105,000 for our 18-month old P90DL, and then Tesla sells it (very incompetently, as can be seen on Tesla.com) for $100,000, they still net $35,000. Let's step down to a heavily optioned 90D with a "guestimate" GM of half of a P100D, or $20,000. They still come out $15,000 ahead, AND in either case, there is another new, sold Model S in the world.

 

[FlatSix911]

Please do not feed the troll ... let it go

 

[TSLA Pilot]

Please do not feed the troll ... let it go

Ah, so discussing ways to sell more Teslas, reward customer loyalty, and change some of the remarkably stupid choices that Tesla is making, is "feeding the troll?"

Really?

Please: How about if you try to find some logic in Tesla's thinking here because I'm sure as heck not seeing it. On the contrary, the current plan results in "lose/lose" outcomes which is about as dumb as it gets . . . .