Tesla price cut hurts current owners

[eye.surgeon]

The self-destructive behavior of "putting money on the hood" of new vehicles to move inventory has consistently proven detrimental to the long-term health of car companies. For one, it harms used car values and thus harms current owners. EV values on the used car market are already bad. Tesla may win some new sales with the new pricing, but it's harmful to current owners. I guess we know where Tesla's attention is focused. Meanwhile my Model S is worth in the neighborhood of $2k less than it was yesterday.

 

[EinSV]

The self-destructive behavior of "putting money on the hood" of new vehicles to move inventory has consistently proven detrimental to the long-term health of car companies. For one, it harms used car values and thus harms current owners. EV values on the used car market are already bad. Tesla may win some new sales with the new pricing, but it's harmful to current owners. I guess we know where Tesla's attention is focused.

Super annoying! And they keep making the cars better too!! How dare they improve their cars and reduce prices!!

 

[mongo]

Nothing Tesla does in terms of future sales harms a current customer unless that current customer wants to sell their car. Even so, the EV credit reduction effectively raised used car prices some percentage of $3,750 compared to the (potential) price of new. Tesla knocking $2k off still puts new cars at $1,750 more than pre Jan 1. So used car prices should still move up relative to a week ago.

 

[Big Earl]

I don't feel harmed. Once you factor in the reduction in the tax credit, buying a new Tesla today is still more expensive than when I bought earlier this year.

 

[Dan Detweiler]

The self-destructive behavior of "putting money on the hood" of new vehicles to move inventory has consistently proven detrimental to the long-term health of car companies. For one, it harms used car values and thus harms current owners. EV values on the used car market are already bad. Tesla may win some new sales with the new pricing, but it's harmful to current owners. I guess we know where Tesla's attention is focused. Meanwhile my Model S is worth in the neighborhood of $2k less than it was yesterday.

Understand your theory but I would have to disagree. I see it as an attempt by Tesla to offset the tax credit reduction that we didn't have to deal with, as a token of good faith to the general populace of potential future owners that will further stabalize the company, raise the public perception of the company and increase the desirability of the brand. That will only benefit ALL owners and future owners.

At least that's how I look at it.

Dan

 

[brkaus]

This isn't a price cut when considering the tax credit, at least the way I look at it.

I do feel like prices will continue to decline for a bit though. Much like the pent up demand for the early Hellcats or exotic cars that the dealer adds "additional dealer profit". Probably take a year or two to settle into what I would consider traditional pricing. Even then, as technology advances it will hurt the older cars. No need to put an older computer in the new car when the new computer costs the same.

 

[M3BlueGeorgia]

I always viewed my $55K car as a $47.5K car purchase, but with a 9 month gap between those two numbers.

Nothing that happened on Jan 1st changed my resale price, except that its now 2019 and I have a 2018 car.

If I could buy the car today, it'd be a $53.5K car as a $49.75K purchase, which might actually bump up my resale value.
However since Telsa stopped making the LR-RWD configuration, that's not possible.

 

[eye.surgeon]

Understand your theory but I would have to disagree. I see it as an attempt by Tesla to offset the tax credit reduction that we didn't have to deal with, as a token of good faith to the general populace of potential future owners that will further stabalize the company, raise the public perception of the company and increase the desirability of the brand. That will only benefit ALL owners and future owners.

At least that's how I look at it.

Dan

It's not my theory that discounting new prices drops resale value. It's an industry fact that is based on 5 decades of car sales experience.

I guess I need to up my koolaide dose to see the positive in this for current owners.

 

[brkaus]

It's not my theory that discounting new prices drops resale value. It's an industry fact that is based on 5 decades of car sales experience.

I guess I need to up my koolaide dose to see the positive in this for current owners.

5 decades of sales experience when rebates were in play?

 

[commasign]

It's not my theory that discounting new prices drops resale value. It's an industry fact that is based on 5 decades of car sales experience.

I guess I need to up my koolaide dose to see the positive in this for current owners.

Better take a double dose cause there’s likely gonna be another price drop when the tax credit drops to $1875, and then another when it drops to zero.

 

[mongo]

Better take a double dose cause there’s likely gonna be another price drop when the tax credit drops to $1875, and then another when it drops to zero.

The $1,875 without a price adjustment would mildly produce a resale price increase.

If Tesla drops the price $2k on an $1,875 credit reduction, that would actually potentially hurt resale.

 

[Tessa1]

Who cares? Anyone dumb enough to buy a car as an investment, deserves the losses. The money I'm saving in gas and maintenance, and the likely longer use I'll get out of the vehicle because of less moving parts, more than makes up for any resell concerns.

 

[commasign]

The other point is that a $2000 price swing isn’t unusual for Tesla. Remember in the last few months Model 3 Mid Range increased by $1000, anything-but-black paint increased by $500 to $1500, Model 3 AWD went up and down by as much as $2000, destination and doc fees for Model 3 increased by $200, Model 3 Performance with Upgrade Package dropped $5000, plus all the bundling associated with Model S and X premium upgrades package and premium seats. Bottom line, Tesla has and will continue to tinker with pricing.

 

[mkspeedr]

Yes, the price drop was totally out of the blue...I was not expecting it.

I thought all the discussion about the tax credit going away and reducing the price after it ended was a bunch of fairy tales. Who knew...

 

[jdirik]

I am still satisfied with the price I paid in August for my RWD Model 3. My only regret was not buying the P3D at that time!

 

[TexasEV]

@eye.surgeon, while you’re at it, tell Intel to stop cutting the prices of its chips. It’s reducing the value of my three year old computer.

 

[ewoodrick]

It's not my theory that discounting new prices drops resale value. It's an industry fact that is based on 5 decades of car sales experience.

I guess I need to up my koolaide dose to see the positive in this for current owners.

And this is sales without tax credits involved. The tax credits make a BIG difference in all of this. Yes, the trade rags will probably put a hit on the depreciation of last years cars, but the reality is that there won't be a resale difference.

If your car cost $70k, then the car cost you $70,000 - $7500 = $62,500.
A purchase of the same car this year will cost $68,000 - $3250 = $64,750.

So, when looking at the resale of a car, you indeed come out $2250 better than the person this year.

The Leaf has suffered in the depreciation of the vehicle, as the depreciation is calculated as the sales price - resale price. Since the base sales price was $30,000 and the resale is around $11,000, that made depreciation 63%, terrible. But the reality is that to the owner, the resale was actually 50%, inline with similar cars.

In other words, after you include the rebate, you don't get screwed.

 

[AudubonB]

TSLAQ had better go bankwupt and shut down production forever, and soon.

That's the only way I'll ever have a dream of getting a return on my Models S & X investment.

 

[glide]

If you think your vehicle is a store of value then...well...I don’t know what.

 

[MXWing]

That’s incredibly myopic. For current owners to thrive, Tesla has to SURVIVE.

It’s obvious that Tesla pulled forward a lot of sales in Q4 due to the tax credit being halved.

When you pulled in the majority of what would have been Q1 sales what is your next act? How do you move the 6000+ cars a week now that’s being churned our? You start shipping them out internationally but that only accounts for so much load and transit time cuts what can be counted in the quarterly bookings.

Unless you make eye surgeon money, your demand curve is impacted by price. More expensive the car, the less demand - full stop.

Many saw the price cut coming 6 months ago.
It was going to happen, the only question is how much.

By reducing 2000, it tells us that the price point elasticity of demand is neutral. Loss of subsidy pushes demand to the left. Tesla shares it equally, and the consumer shares it equally.

Now, a $3750 price cut? I'd start being worried about Longville. That means no confidence in demand.