Resale Values Tumble as Competition Heats Up
Despite Elon Musk’s bold claims that Tesla vehicles would rapidly appreciate, the opposite has occurred – used Teslas are steeply depreciating in value. Four years ago, the Tesla CEO audaciously predicted Tesla prices could rocket fivefold if the company achieved full self-driving capability. But regulatory approval remains elusive while competition has intensified.
As a result, the average used 2021 Tesla Model 3 has plunged 29% in the past year to around $28,700, significantly more than comparable non-Tesla models. A Colorado owner reported being offered just $22,000 as a trade-in for his used 2020 Model 3 purchased for over $50,000 months earlier.
Deep Price Cuts Weigh on Resale Value
To defend its slipping EV market share amidst fresh competition, Tesla has slashed prices over 20% on new models. This aggressive discounting significantly undercuts used Tesla values, with buyers naturally opting for cheaper new editions over used versions.
The ripple effects have dragged down resale prices across the used EV market as a whole. Ford’s Mustang Mach-E direct Tesla rival has hemorrhaged 37% of its used value over the past year. Though less dominant, Tesla’s sheer size means its pricing moves send shockwaves through the industry.
Battered Residuals Challenge Business Model
The rapid cratering of used Tesla residual values is problematic for the automaker’s business model. The company had long touted robotaxi ride-sharing as an ancillary income stream that would enhance the long-term value proposition for owners.
With that premise now obliterated, Tesla’s poor residuals have forced rental giants like Hertz to offload Tesla fleets early at major losses. Sinking used car prices undermine a key pillar of Tesla’s strategy as the realities of rising competition sink in.
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