The used market for Tesla vehicles has experienced a significant decline in prices, signaling a potential shift in Tesla’s dominance in the electric vehicle (EV) market. The prominent decrease in resale values can be attributed to multiple factors, including price cuts and an influx of vehicles from Hertz.
Longtime Tesla investor Ross Gerber has even struggled to sell his own Tesla at a fair value due to the oversaturation of used Teslas in the market. The value of a used Tesla has dropped considerably in recent years. For example, a used Model Y that could have fetched $70,000 in mid-2022 is now worth less than $40,000 in the used market.
This decline in Tesla’s resale values is primarily driven by the increasing supply of used EVs, with Teslas accounting for approximately 42% of the used market. Hertz’s decision to offload 30,000 Teslas from its fleet further accelerated the decline in resale prices. As a result, owners looking to sell their vehicles have had to lower their listing prices to attract buyers.
Tesla’s dominance in the EV market is also being challenged by the entrance of more competitors. Legacy car companies like Ford, Volkswagen, and GM are introducing more electric offerings, giving EV shoppers a wider range of options beyond Tesla. In fact, Tesla’s share of the new EV market fell below 50% for the first time in the second quarter of this year, according to Cox Automotive.
This decline in resale values and market share can be seen as a natural evolution for Tesla as it transitions from a pioneering disruptor to a more established car company. The exceptionally high residual values on Tesla vehicles were not sustainable in the long term, especially as the company aims to increase production to millions of cars per year. The entrance of more competitors validates Elon Musk’s early bet on the EV segment and affirms the staying power of battery-powered cars.
Furthermore, Tesla’s aggressive pricing strategy in the new car market has further impacted the resale values of its used vehicles. The company has continuously reduced prices, making new Tesla models more affordable. For example, after factoring in a $7,500 federal tax credit, buyers can purchase a new rear-wheel drive Model 3 for around $31,490, while the average price for a used 2018 Model 3 is $29,303.
In summary, the decline in Tesla’s resale values is indicative of the changing dynamics in the EV market. The increased supply, driven by the abundance of used Teslas and the entry of more competitors, has put significant pressure on Tesla’s resale prices. Additionally, Tesla’s own pricing strategy in the new car market has influenced the depreciation of its used vehicles. As Tesla matures into a more conventional car company, it is essential to adapt to the evolving landscape of the EV market and the growing choices available to consumers. Ultimately, the decline in resale values is part of the broader narrative of the industry’s development and the normalization of EVs in the automotive market.