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Seeking Alpha post calls for Tesla to stop CPO

Discussion in 'TSLA Investor Discussions' started by lklundin, Apr 16, 2016.

  1. lklundin

    lklundin Active Member

    Oct 10, 2014
    I like to read about Tesla Motor's on Seeking Alpha, because some of the posters seem so desperate to hold on to their idea that oil and ICE will prevail and because the posters there in my mind try to give the appearance of great insight into Tesla Motors and its future, when in my opinion they often do not have that. Some of the Tesla articles there are also good, I should add.

    Anyway, a recent post there titled 'Tesla: Time To End The Resale Guarantee Backstop' argues that the CPO program is a liability to Tesla, because of the buy-back guarantee and apparently also because of the problematic accounting involved in the CPO program.

    My understanding of the CPO program is that it was created because margins on used car sales are better than on new car sales and that Tesla Motors thus could earn a good profit a second and even third time on some of the cars they sell. It is also an advantage that a prospective car buyer would need to be less concerned about resell value, but Tesla does not currently seem to have a problem with demand, so I see that as somewhat secondary. Maybe I am mistaken, but that is not the point.

    At this time, the size of Tesla's CPO inventory does not seem to be overly large, so I guess they manage to sell the cars more or less in amounts corresponding to new arrivals.

    So as long as Tesla makes a reasonable profit on the CPO program, I cannot see why it should be retired.

    So does anyone here have any information on how profitable the CPO program actually is and how many cars they actually (re)sell that way?

  2. flankspeed8

    flankspeed8 Member

    Dec 19, 2014
    Vermillion, MN
    Well they really aren't making much if anything on CPO lately because there really are none. Maybe that is the answer to your question? Perhaps CPO really is not as profitable as they had hoped. Supposedly a tsunami of new listings are mere days away....
    • Informative x 1
  3. Hogfighter

    Hogfighter Professional Lurker

    Sep 7, 2012
    Yea, I'm shocked at how few CPOs are available right now. It's gotta be that fewer owners are taking the offers from Tesla.....I mean, their offers are way below market value of the vehicles.
  4. lolachampcar

    lolachampcar Active Member

    Nov 26, 2012
    WPB Florida
    and my take is that Tesla could not tolerate the secondary market mis-representing the product. They feared the used car salesman would do more damage to the Tesla name then heaping a CPO program onto a (human) resource strapped organization while simultaneously giving repeat return customers LESS than existing wholesale value for their MS trade.

    Given what I have seen of what the used market is willing to do and say to sell cars, I really can not argue with Tesla's approach. The secondary market would lie out their rears to move the inventory and Tesla would end up with the bad rap when SuperChargers, warranty and home charging was not as represented by the "salesman".

    As much as I hate that Tesla is ripping off returning customers (as I am one), I do not see another option. They are nowhere near as efficient as the buy here pay here shops thus have to buy the product on the cheap. Overall, my investment in Tesla would likely be worth less if they allowed the secondary market to consume then redistribute the post D influx of trades.
    • Like x 1
  5. JRP3

    JRP3 Hyperactive Member

    Aug 20, 2007
    Central New York
    The Buy Back Guarantee was created to establish a solid floor for resale value of a vehicle with no history, and the CPO program was created to deal with those vehicles. Since CPO volumes are low it's hard for the bears to argue that it can negatively impact Tesla in any meaningful way, if at all, but that never stopped them from grasping at any straw that comes their way.
  6. wdolson

    wdolson Supporting Member

    Jul 24, 2015
    Clark Co, WA
    I believe the CPO program started a few months after the dual drive and autopilot came out. Tesla was probably getting a lot of classic Teslas coming back and needed a way to move them. Demand was kind of soft for the classic cars because so many people wanted the new features, Tesla was probably buying back those cars for about as much or more than the owner could get selling it themselves. Tesla could turn a handy profit on some of those cars by enabling supercharging on the S60s without it, or upgrading the battery in software for the few S40s coming back. They may have added the Tech package features to some cars too.

    I've seen more Teslas on Ebay in the last few months and most of those being sold now are dual motor. People are probably finding the secondary market for the dual motor and autopilot cars is higher than the Tesla guarantee. I have thought if I can find a good deal on a used one close to what I want, I'd go for it, but there are few 85Ds. There are mostly classic Ss and P85Ds. They dual motor cars have kept their value very well.

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