Tesla Slashes Prices

[redranger04g]

Anyone buying the MME select a few months ago only paid low $40s net after tax credit. New cars have always lost 20% the second you drive them off the dealers lot. You actually did very well on your MME.

Agreed. I find it interesting everyone is so worried about these discounts diminishing the EV resale market. We’ve been living in fairy tale land the last couple years, resale value is normalizing. 20% loss when you drive a car off the lot was the known rule pre-Covid.

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[nvabill]

Sounds like a lot of speculation. Have profit margins been published? Why did they raise prices only to later slash them? That makes previous buyers upset and isn't very smart...

Yeah, let's stay on point and be in the 5%, not the 95% of those on this forum giving speculation and opinion.

 

[mjs020294]

Agreed. I find it interesting everyone is so worried about these discounts diminishing the EV resale market. We’ve been living in fairy tale land the last couple years, resale value is normalizing. 20% loss when you drive a car off the lot was the known rule pre-Covid.

Exactly!

Deprecation scales are pretty well known. Leasing companies use them extensively when calculating contracts.

Day One - 20% depreciation
Year One - 30-35%
Year Two - 40-50%
Year Three - to 60%

When you start paying over $60k for vehicles that translates into pretty large dollar amounts.

 

[nvabill]

Maybe not your intention, but see a lot of ppl in the thread always refer to "paying Elon" for things and I find that a bizarre way of looking at it. Tesla is a public company, that he only owns 13% of.

It's also the highest owned stock by retail investors in the S&P 500 at like 48%. When you give Tesla money you are overwhelming really just paying for their American workers and largely some older person's retirement account.

Lot's of Tesla/Elon hatred on this forum.

 

[4sallypat]

Agreed. I find it interesting everyone is so worried about these discounts diminishing the EV resale market. We’ve been living in fairy tale land the last couple years, resale value is normalizing. 20% loss when you drive a car off the lot was the known rule pre-Covid.

Um not my Lightning - it still commands a very high rate of resale for an EV.
My '22 Lightning SR Lariat is going to be sold (incoming MME will be replacing it).
So far, Autonation and Driveway have made the highest offers if I sell to a wholesaler: $69K.
MSRP is $69K.
Probably going to sell it privately for what I paid for it ($75K).
Should sell since a '23 new Lariat SR MSRP is $76K.
My auto broker is taking on the listing and handling the sale for 1% commission!

 

[mateo]

Tesla’s price cuts are not so dramatic if you view it in line with dealer markups becoming rarer over the last several months - new car prices are effectively dropping across the board.

Yeah, that's a good perspective. In competitive EV markets, the Tesla price cuts could simply be considered a response to the $15k Ford dealer markups going away. People were still lining up to buy the MME with those markups. They probably still will buy at MSRP after the Tesla price cuts.

Of course Tesla will sell more cars at a lower price. The question is whether or not Ford will sell fewer. Just because 100 people say they are ditching their Ford orders for Teslas, doesn't mean those 100 Fords won't get purchased.

20% loss when you drive a car off the lot was the known rule pre-Covid.

We'll assume that's true, but that has nothing to do with the value of the same brand new car dropping 20% in one day. You're now looking at 20% on top of 20% if we've returned to the pre-covid depreciation rules.

Example: You buy your car at $50k. Someone else buys the same model (brand new) at $40k the next day. One year later you both try to sell your car to the same person. The 40k person is willing to sell at 70% of value, or 28k. If you try to match that, you are selling it less than 56% of your purchase value.

So yeah, it's a big deal to people trying to trade-in/sell their car every X years. With that drastic of an immediate price cut, you are likely going to owe more money than the car is worth given how you most likely set up your loan.

And again, I'm not arguing whether this part of capitalism is good or bad - only pointing out that the reaction of many buyers of the old price will be very negative. Perhaps they'll forget about it the next time they are purchasing a car, but maybe not.

 

[hotfartz]

Exactly!

Deprecation scales are pretty well known. Leasing companies use them extensively when calculating contracts.

Day One - 20% depreciation
Year One - 30-35%
Year Two - 40-50%
Year Three - to 60%

When you start paying over $60k for vehicles that translates into pretty large dollar amounts.

That's not exactly the case.

The $40k offer was from the dealer who sold me the car. I got 4 offers, the highest was for $44k. Tesla offered $42.4.

For the moment, the MME is staying with me. It just feels weird that I paid $50k for what amounts to a backup car, while I'm getting another car with more range / features for around the same price.

But I have to wonder what will happen with this Tesla price drop. The MYLR is roughly equivalent to a MME Premium LR, it just costs about $20k less. That can't be good for resale value.

 

[mjs020294]

But I have to wonder what will happen with this Tesla price drop. The MYLR is roughly equivalent to a MME Premium LR, it just costs about $20k less. That can't be good for resale value.

The resale prices will adjust downwards based off the MRSP. Once there is supply EVs first year depreciation will be far worse than a ICE car. Who would want a used EV for $40k when you can get a brand new one for low $50s and get a $7,500 tax credit. Realistically EVs will depreciate $7,500 plus 20% in the first year.

 

[EVS]

Phil,
You haven't been following the Tesla plan very closely. Scaling to "extreme size" doesn't include cutting production. And with the profit margins they have they could very well be the only EV manufacturer that could do that now as others have pointed out.

It could be you have a better grasp of the EV business than Elon though, so I'll give you the benefit of the doubt.

SCPony

Regarding the gross margin Tesla reports: It's an apple to orange comparison because Tesla categorizes many costs differently to goose up its gross margin. Most notably, it doesn't have dealers like other OEMs. This creates a big discrepancy. Warranty costs classified as "goodwill" has been another trick up Elon's sleeves. Then these high gross margins are regurgitated by stock market pimps like Cathie Wood, Ron Baron and the sell-side analysts till these are imbibed in people's brains. When the one-man company's main purpose is to pump up the stock so the CEO can get richer, many odd things happen.

I don't know about Mr. Phil's expertise. But it is quite likely that his opinion is more unbiased than that of a lying CEO with no controls whose very fortune depends on contiuously lying to the investors and consumers. Perhaps Mr. Elon will try practicising a bit of what he preaches; like not take his private jet for a 6 minute flight within SF bay area.

 

[EVS]

Mark I think it is normal on just about any automotive forum to have a lot of negativity written by its' members in regards to other manufacturers vehicles. The amount of Tesla hate on this forum though is downright hilarious with some posters showing their disdain even several times in the same thread. I have honestly been very surprised about the hatred for Elon Musk when he has done so much to make EV's mainstream. ?

Wait till you read the posts in the Tesla forums like teslamotorsclub.com.

But that is the whole point. People have different reasons to buy a car. These price cuts will influence the decision of some buyers. But for many (like myself), a Tesla aka an Elon-car is a no-go and I think this fraction of the population is growing rapidly due to the CEO shenanigans, who BTW, is the only branding Tesla does now. Instead of spending money on marketing, Elon awarded himself tens of billions to do it through twitter. Obviously, no one else will lie as much as he does. And no other media other than social media has such low liability for frauds. So he had his reasons besides collecting billions more.

If price was everything, then everyone will be buying the Chevy Bolt, not the Model Y at 2x the price.
Ford and other companies will adjust prices, either through MSRP cuts or ADMs turning into discounts, when they can't sell every car they make. That doesn't depend on Tesla alone. They just have to look at their own unsold inventory. These things are nothing new for the car companies They have been doing these for multiple decades. if anything, it's the tax rules they are more worried about.

 

[EVS]

Tesla have been working towards this for several years. The super facilities and controlling there own battery development gives them a massive market advantage. Musk started buy lithium and other mineral resources years ago. Tesla can undercut the market and still maintain a decent margin.

And yet instead of expanding the Nevada Gigafactory, Tesla is buyign the LiFePO4 batteries from CATL. Same as Ford. Makes one think if the Gigafactory tour and hype was yet another Potempkin village show to goose the stock.

https://www.reuters.com/business/au...per-catl-ev-batteries-catch-tesla-2022-07-21/
https://cleantechnica.com/2021/10/30/tesla-to-buy-45-gwh-of-lfp-batteries-from-catl/

Also, Tesla never had any battery tech. It was Panasonic's technology. Tesla just built the building in Nevada. AFAIK, Tesla employees weren't even alloweed in the Panasonic area.

 

[EVS]

Maybe its all part of a longer term play. Tesla have spent years building the supply chain and their own battery tech, not to mention massive purpose built production facilities.

The $60k plus EV sector was getting crowded and the competition are still making a loss on their vehicles. The new pricing model will put extreme pressure on manufacturers struggling to make it work at a much higher price point.

I highly doubt this "extreme pressure". Many EVs like Chevy Bolt, Kia & Hyundai EVs, Volkswagen ID4 were already cheaper than the much higher priced Tesla cars. Most also have diferent brands to cater to different economic sections of the population, so they could contain the price war to those brands only.

Rather than cutting price all the time, competitors can also distinguish their products with better quaity or features. Tesla has been cutting R&D expenses for few years to show high profit margins. So it seems now its only option is to cut prices to spur sales. Sure, some gizmos like the fart app and watching netflix on the dashboard is cool for some folks. I have no idea what portion of the non-Tesla community cares for such gimmicks.

 

[EVS]

Yah, Tesla would make more money, but would you pay the extra premium costs of charging at a Tesla SC ?

My co worker pays $0.69/kWh on a SC at peak times and if Musk allows non Teslas to charge, how much would you pay above that rate ?

Would you be fine with paying Musk up to $1.00 / kWh ?

I like charging at lower cost at my EA and EVGo chargers...

So true. Yet Musk has promised $0.07 per KWh (1/4th of my lowest electric rate at home) for the semi truck charging, a mega charger that will likely be huge investment to install and maintain.

 

[SWO]

Spot on!

The funny thing is deriding the Tesla because they don't like the styling, which is ridiculously subjective.

Is there anyone (even people who own one) who thinks the MY is a good looking vehicle? The MY might be proof that something can be objectively ugly.

 

[newmme]

Regarding the gross margin Tesla reports: It's an apple to orange comparison because Tesla categorizes many costs differently to goose up its gross margin. Most notably, it doesn't have dealers like other OEMs. This creates a big discrepancy. Warrant costs classified as "goodwill" has been another trick up Elon's sleeves. Then these high gross margins are regurgitated by stock market pimps like Cathie Wood, Ron Baron and the sell-side analysts till these are imbibed in people's brains. When the one-man company's main purpose is to pump up the stock so the CEO can get richer, many odd things happen.

GLJ, seems factually correct

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