[UK] Price cuts

[Drew57]

An easy fix, which would cost Tesla absolutely nothing would be to give all December deliveries, that haven’t had a discount FSD and then maybe November EA. At least this would help with residual value when we sell the car because at the moment it’s looking horrible!

Just my opinion.

Neither seem to add much to the car or to resale value. I've never owned either but have used FSD quite a lot in the USA, the apparent target market & even there it's not worth the cost. Ditto with a two week UK trail of EAP.

In my case I placed the Y order in January 2022 pre price increases & delayed delivery until December 1st (so too early for the December discount or SuC miles let alone the new price drop). Technically I am about £800 down but I managed to sell the 3 for quite a lot more than I expected & still have plenty of SuC miles left from the original scheme so I was perfectly happy at the beginning of last week and feel the same now.

 

[FutureIsEV]

I was due to collect my Model Y LR on Dec 16 2022 (Initial Order in June 2022 ) - However, since I was travelling outside UK at the time, I had to push back the delivery slot to the next shipment in 2023 - Looks like the situation worked brilliantly in my favour, with new (£5k discounted) price reflecting on my Tesla account today.

Thankfully Tesla have also honored the original PCP APR(%) on the new discounted price - Overall my monthly repayment has reduced by £93 from what it was a month ago (which is quite significant over 4 years period). I would have been super annoyed now if I had collected my car back in December.

All said, I am now a bit skeptical on the overall quality of the car (produced here onward), considering Tesla will look at cost cutting measures to equate the large scale price slashing

 

[EVMeister]

All said, I am now a bit skeptical on the overall quality of the car (produced here onward), considering Tesla will look at cost cutting measures to equate the large scale price slashing

That's not how it works and not something you should worry about. Tesla constantly refines and streamlines their production processes - they're always looking at cost cutting measures. The price reductions here are simply overdue corrections based on their production efficiency increases and are something they're able to do to spur demand at the expense of margin.

 

[Utumno]

Just cos Tesla is a US company doesn't mean you have to adopt the US practice of calling anyone who you disagree with a comunist.

I didn’t, though I did hear a distant klaxon indicating a sense of humour failure somewhere. Guess I found the source of the alert.

Bluntly the competition has been coming for years, as has lots of cut price Chinese marques. They’ll continue coming, and I suspect Tesla will still keep eating from its own lunchbox.

 

[FastLaneJB]

I haven’t even taken into account the balloon payment at the end of my PCP which could see me in serious negative equity..

You don't have to pay the balloon payment. You've three choices basically here:

1. Pay off the balloon and keep the car
2. If car is worth more than balloon, use that difference as deposit on new car
3. If car is worth less than balloon you can just hand the car back. You don't have to pay anything more.

I'd suggest if it's a large difference between the value of the car and balloon in negative that you just hand it back even if you planned to own it. You could pick one up second hand with similar miles for less if you did plan to keep.

Also factor in that having a larger final value on the PCP keeps your monthly payments down over the period of the agreement. So assuming you hand the car back if the final value was too high, you've kind of benefited as you've not actually paid enough to cover the depreciation of the car over your ownership period. You've paid what they thought it would be before they dropped the prices.

Of course I've not checked or know if they had higher final values and now have lowered them significantly. You'd think that should be the case but I don't know if it was.

 

[Lord Farquad]

You don't have to pay the balloon payment. You've three choices basically here:

1. Pay off the balloon and keep the car
2. If car is worth more than balloon, use that difference as deposit on new car
3. If car is worth less than balloon you can just hand the car back. You don't have to pay anything more.

I'd suggest if it's a large difference between the value of the car and balloon in negative that you just hand it back even if you planned to own it. You could pick one up second hand with similar miles for less if you did plan to keep.

Also factor in that having a larger final value on the PCP keeps your monthly payments down over the period of the agreement. So assuming you hand the car back if the final value was too high, you've kind of benefited as you've not actually paid enough to cover the depreciation of the car over your ownership period. You've paid what they thought it would be before they dropped the prices.

Of course I've not checked or know if they had higher final values and now have lowered them significantly. You'd think that should be the case but I don't know if it was.

Just had a look at the GFV on a like for like car over the same term as my 2/12/22 purchase and it’s £2k less (MYLR).

So certainly not the full £5k price drop and still reasonable.

 

[McManus1806]

You don't have to pay the balloon payment. You've three choices basically here:

1. Pay off the balloon and keep the car
2. If car is worth more than balloon, use that difference as deposit on new car
3. If car is worth less than balloon you can just hand the car back. You don't have to pay anything more.

I'd suggest if it's a large difference between the value of the car and balloon in negative that you just hand it back even if you planned to own it. You could pick one up second hand with similar miles for less if you did plan to keep.

Also factor in that having a larger final value on the PCP keeps your monthly payments down over the period of the agreement. So assuming you hand the car back if the final value was too high, you've kind of benefited as you've not actually paid enough to cover the depreciation of the car over your ownership period. You've paid what they thought it would be before they dropped the prices.

Of course I've not checked or know if they had higher final values and now have lowered them significantly. You'd think that should be the case but I don't know if it was.

That’s good to know, I have never done PCP before. Usually always leased and to some extent I made the right choice and the salesman was correct when he gave me the figures, but sadly feel like had I know that the remaining residual is going to be far lower due to price cuts I would have stuck with leasing at just £600 per month as supposed to paying out £805 per month to have the nice residual at the end to pay towards my next Tesla (like to have been a model X) if they are out by then! I guess time will only really tell. If prices go up across the 3 years and the residual is there to buy one the I will, but if I have zero residual then I’m absolutely not purchasing another Tesla sadly

 

[GeorgeSymonds]

That’s good to know, I have never done PCP before. Usually always leased and to some extent I made the right choice and the salesman was correct when he gave me the figures, but sadly feel like had I know that the remaining residual is going to be far lower due to price cuts I would have stuck with leasing at just £600 per month as supposed to paying out £805 per month to have the nice residual at the end to pay towards my next Tesla (like to have been a model X) if they are out by then! I guess time will only really tell. If prices go up across the 3 years and the residual is there to buy one the I will, but if I have zero residual then I’m absolutely not purchasing another Tesla sadly

The thing with PCP is they tend to assume the balloon amount will be at the lower end of expectations (it's a guess after all), if the car falls below it, then they take the hit, if its much above it, then you'd cash in so there is no upside for them, As a result they prefer to price it such that they'd never take the hit. With a lease, they're more in the middle as they take the good and the bad which balances out and can be more competitive. All things being equal (interest rates etc), the difference you pay on a PCP, as they're usually higher, is the difference between a pessimistic future value, and a more realistic future value. At the end of the day, your payments cover the cost of money plus the expected depreciation.

 

[Jason71]

The thing with PCP is they tend to assume the balloon amount will be at the lower end of expectations (it's a guess after all), if the car falls below it, then they take the hit, if its much above it, then you'd cash in so there is no upside for them, As a result they prefer to price it such that they'd never take the hit. With a lease, they're more in the middle as they take the good and the bad which balances out and can be more competitive. All things being equal (interest rates etc), the difference you pay on a PCP, as they're usually higher, is the difference between a pessimistic future value, and a more realistic future value. At the end of the day, your payments cover the cost of money plus the expected depreciation.

The companies offering PCP got into trouble with HMRC a few years back for offering balloon payments that were too high. It was something like the payments you make on a PCP are effectively split, part is considered a loan payment and part is considered a lease payment. The lease part attracts VAT the loan part does not. The problem is companies were offering PCP with final values and thus balloon payments so large that the chances of anyone ever paying it at the end was considered negligible. Thus the whole thing was effectively a lease but without paying all the VAT.
I may have got some of the details wrong. I don't really know why I am mentioning it TBH. Its just interesting and shows there are (now) rules around how they determine the final value.

 

[Mrklaw]

That’s good to know, I have never done PCP before. Usually always leased and to some extent I made the right choice and the salesman was correct when he gave me the figures, but sadly feel like had I know that the remaining residual is going to be far lower due to price cuts I would have stuck with leasing at just £600 per month as supposed to paying out £805 per month to have the nice residual at the end to pay towards my next Tesla (like to have been a model X) if they are out by then! I guess time will only really tell. If prices go up across the 3 years and the residual is there to buy one the I will, but if I have zero residual then I’m absolutely not purchasing another Tesla sadly

both will have been similar at the time - lease and PCP the dealer is hedging the future value of the car. In a lease thats what they think they can sell it for. In PCP its that plus what you might also buy it for. A high balloon is good for you as it will have offset some of the monthly cost and if prices have since fallen significantly you can just walk away. Heck in some situations you can probably walk away, come back the next day adn buy the exact same car for less than the settlement figure - the dealer will have to absorb that if reality of resale values means they won't sell it otherwise.

 

[PaddyB]

The fact that I could guarantee if Tesla ‘temporarily’ sold cars at a ‘discounted’ rate it would have had absolutely zero impact on the resale values of all Tesla’s like it has done now. But this isn’t a discount, it’s a new permanent price, causing Tesla madness right now.

The cut isn't necessarily permanent. I wouldn't be surprised if they increase prices again -
* The price cuts have sparked huge demand that they might not be able to cope with;
* Demand is typically weak at this time of the year, picks up in the Spring / Summer;
* Economy may well improve, or at least inflation pressures ease, lower interest rates, improved consumer finances = demand.

Price adjustments will always be necessary to manage short / medium term supply and demand. There is a huge supply increase with Berlin and Austin coming online, but also huge growth in demand with EV adoption trends. Albeit the trends can be 'lumpy' with changes in incentive regimes affecting demand. Plus production bottlenecks affecting supply.

 

[Johnax]

I got my MY LR on PCP in late Dec with 6k down for 890 p/m, final payment 18.7k. Today same car with same deposit and increased 1% APR is £850 p/m and 17.6k final payment. That’s an additional 3k for the 4 year deal, not small change for the sake of missing out by a couple of weeks. Slightly frustrating but then that’s sales of any product, you buy at a price you’re happy with at that time, if it goes up in the future great for you, if it goes down hard luck. I guess.

Just realised I hadn’t taken the tow bar off the new builds in the website which actually means I’m paying £69 a month more for the same car, and an additional 1.7k on the balloon payment. That’s a hit of about £4.5k which makes sense. That does sting a bit more considering the massive sales drive for me to take delivery in December, when I actually I didn’t really need to. The free supercharger miles don’t really make up for it. You live and learn I guess.

There’s also nothing I can do about it, however I did tell Tesla customers service I wasn’t impressed with the way it has played out but they were just very abrupt with me, along the lines of ‘we’ve got your cash, now go complain elsewhere’. Nice.

 

[MrT3]

The cut isn't necessarily permanent. I wouldn't be surprised if they increase prices again

I don't see that happening in the short term. All Tesla has done is bring pricing back to nearly where it historically has been.

At the end of 2021 and into 2022, Tesla has supply chain and production issues leading to long EDDs in an inflationary environment. This led to too much risk for the business at current prices and therefore they raised them. Those headwinds have stabilised, backlog cleared and EDDs have dramatically reduced which allows Tesla to easily forecast their margins as there is now only 1 to 3 months between agreeing a sale price and incurring the cost of manufacturing the vehicle.

I imagine the large single price drop was to reassure potential customers that this is all there is - if they had done a number of smaller drops over a couple of months people may just hold off and wait for the next drop. However with the current economic backdrop I'd not rule out a further decrease if demand doesn't pick up quickly.

 

[2020M3SR]

The cut isn't necessarily permanent. I wouldn't be surprised if they increase prices again -
* The price cuts have sparked huge demand that they might not be able to cope with;
* Demand is typically weak at this time of the year, picks up in the Spring / Summer;
* Economy may well improve, or at least inflation pressures ease, lower interest rates, improved consumer finances = demand.

Price adjustments will always be necessary to manage short / medium term supply and demand. There is a huge supply increase with Berlin and Austin coming online, but also huge growth in demand with EV adoption trends. Albeit the trends can be 'lumpy' with changes in incentive regimes affecting demand. Plus production bottlenecks affecting supply.

Yes, Tesla are known for 'dynamic pricing' and nobody will know which direction it will go next

I'm not sure about your 1st point around demand, unless you are talking about China, where sales figures come out weekly? I'm not sure how much China demand would impact UK prices, unless of course China demand was red hot and the requirement to ship excess to Europe diminished significantly.

As far as I know, we've no real way of getting UK demand figures that shows demand is going to exceed supply here. Maybe that's just your 'gut feel'

Looking at inventory of new/used Teslas here in the UK, they aren't exactly flying out the door, so that's a little bit of an indicator of how the price cut has been received here in the UK. Plus, the various threads on this forum, we're not seeing a huge activity increase from new people buying. These are only anecdotal indicators of course

 

[GeorgeSymonds]

As far as I know, we've no real way of getting UK demand figures that shows demand is going to exceed supply here. Maybe that's just your 'gut feel'

I think the lead time on orders, and which way its shifting is the best guide to demand v supply. A year ago you were waiting 6 months plus, today its 6 weeks.

Looking at inventory of new/used Teslas here in the UK, they aren't exactly flying out the door, so that's a little bit of an indicator of how the price cut has been received here in the UK. Plus, the various threads on this forum, we're not seeing a huge activity increase from new people buying. These are only anecdotal indicators of course

Quite, and the used prices have been falling since October. These aren't cars without parking sensors, these are cars that have all the bits. There was a major inflection point around the late summer and everything has headed south since, the price cuts just an ellement on that curve.

 

[PaddyB]

As far as I know, we've no real way of getting UK demand figures that shows demand is going to exceed supply here. Maybe that's just your 'gut feel'

Yes, it is just the sense I have. I'm in Northern Ireland which certainly wouldn't be early adoption territory, and there aren’t huge numbers of Teslas here.

But I'm always being asked about my Model Y, and various family members and friends would be now considering getting one for their next car. And would be more likely to get one now the price is lower (and may even be happy knowing they're paying less than me !)

The 'viral' way of Tesla growing sales is definitely a thing, I don't see it stopping any time soon.

 

[Jackstini]

Looking at buying my first Tesla and will do it through the company so I can claim the 100% First year allowance. Would be happy to order today - but I really need delivery to be after 1st April and not sure how likely that will be; although I understand I can decline and go to the back of the queue
Could wait and order in March - but who knows how long these prices will stay for
Any crystal balls out there..?!
MY RWD with 20" alloys and white interior if that makes a difference

 

[UrbanSplash]

Tesla aren’t like any other car manufacturer. They tend to be more reactionary to meet immediate needs. Such as these huge price cuts. ‘Usual’ way, like buying an ID, pay a deposit, get an actual manufacturing slot, take delivery in a year. It makes sense, VW can manage this properly. Tesla keep churning out cars from the factory regardless. Get them out ‘they will all sell’! I’m not sure where this leaves them during a major downturn/lack of demand. I presume they churn them out of the factory and drive them straight into the sea. Or of course, reduce prices dramatically, breaking the entire market dynamic.

 

[Durzel]

It leaves owners in a pretty discomforting position though, whatever the reason.

The problem with wild price swings - besides the impact to those directly affected - is that it has shockwave like effects. If people can't trust that their car isn't going to be worth less than their balloon/GFV they might think twice about buying one. Finance companies might err on the side of caution and increase their premiums to hedge the risk. The brand might develop a reputation of unreliable pricing, leading people to wait for anticipated incentives (e.g. end of quarter deals).

Other companies like VW realise the need to maintain stability for new and existing customers alike. Simply churning stuff out as fast as you can make it, which seems to be the way Tesla (Elon?) wants it to do, is a pretty blunt way of operating. It worked fine I'm sure back in the glory days of zero percent interest, etc, but it remains to be seen how well it works in the new world order of inflation and recession.

 

[Jason71]

Looking at buying my first Tesla and will do it through the company so I can claim the 100% First year allowance. Would be happy to order today - but I really need delivery to be after 1st April and not sure how likely that will be; although I understand I can decline and go to the back of the queue
Could wait and order in March - but who knows how long these prices will stay for
Any crystal balls out there..?!
MY RWD with 20" alloys and white interior if that makes a difference

I would be surprised is the prices go up significantly if at all before April. But you could order now then when Tesla tell you they have a car for you in about 6 1/2 minutes on current form tell them you don't want it till April. They are usually OK with that ( though there may not be cars in April since its Q2 month1) . If you did have to cancel for some reason its only a loss of £200 which in the great scheme of new car buying is not a lot)
( and before anyone says "you can get the deposit back anyway due to distance selling regs" those do not apply to company purchases so its unlikely)