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Bubble Surrounding Tesla Used Car Price Bursts, Weighing On Demand For New Vehicles

Bubble Surrounding Tesla Used Car Price Bursts, Weighing On Demand For New Vehicles
For much of the past two years, Tesla customers who waited months for their new car have had an unusual option: keep the new electric car or sell it at a profit to someone who has less patience.
However, the days of the Tesla flip are coming to an end, which could endanger the already declining prices of new cars.
According to industry data provided to Reuters, used Tesla prices are dropping more quickly than those of other automakers, and the clean-energy status symbols are remaining on dealer lots for a longer period of time.
The typical cost of a used Tesla in November was $55,754, which is a 17% decrease from the peak price of $67,297 in July. According to Edmunds data, the used car market as a whole experienced a 4% decline during that time.
In November, used Teslas stayed in dealer inventory for an average of 50 days as opposed to 38 days for all used cars.
The Ukraine war's impact on rising gas prices increased demand for Teslas, one of the market's few long-range electric vehicles. Tesla Inc. (TSLA.O) increased its own prices more quickly than those for competing vehicles, increasing its profit margins. Additionally, some new Tesla owners profited from the booming market by reselling their relatively new vehicles for a profit before placing orders for new ones, which increased demand for Tesla's newest models.
Now that fuel prices are declining, interest rates are rising, Tesla production is rising, and EV competition is expanding, used Tesla prices are falling faster than the market, which has a trickle-down effect on the cost of new Teslas.
In response to investor concerns about waning demand, Tesla last week doubled a U.S. new-car price cut to $7,500 for Model Ys and Model 3s delivered this year.
Analysts noted that the fact that nearly a third of used Teslas for sale in August were 2022 models up for resale indicated that the original purchasers intended to flip the cars. According to research company Edmunds, that contrasts with about 5% of other brands on the used market.
"You can't sell your current Tesla for more money than you paid for it, which was true for a lot of the past two years," said Karl Brauer, executive analyst at car sales website "That would reduce demand for new Teslas."
On Thursday, Musk claimed that "radical interest rate changes" had driven up the cost of all automobiles, both new and used, and that Tesla might lower prices to maintain volume growth, though doing so would reduce profits.
There was no comment from Tesla on the issue.
In fact, Tesla is far from alone: after used car seller CarMax last week reported an 86% drop in third-quarter profit, one analyst claimed that the U.S. used car market is now experiencing a "used vehicle recession."
But Tesla is leading the retreat: According to Ivan Drury, director of Insights at, Teslas were "basically for a long time really the only viable product when it came to used EVs," which caused the factors driving up the prices of its vehicles to be exaggerated compared to other brands.
According to Liz Najman, content marketing manager at EV researcher Recurrent, EVs are entering the market with a lot of buzz, including the Ford F-150 Lightning and the Hyundai Ioniq 5.
Greg Profitt, a software engineer, paid $49,000 for a brand-new Model Y last year, then sold it for $12,000 more three months later. He had a new one ordered, but he recently purchased a used Tesla at a discount.
"The economy kind of scares me to buy new " he said, adding that the new $7,500 discount would be too little to sustain demand.

Christopher J. Mitchell

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