One more reason to not buy a Telsa: Devaluation. That’s right, Tesla price cuts its current lineup – in a big way.
In a move that affects both US and major European markets, Tesla cut prices by more than 20 percent in order to create sudden “demand” for its electric vehicles.
The move comes after several quarters of lackluster deliveries.
Here’s the rundown: The company lowered the cost of the cheapest Model Y by a whopping 20 percent and cut nearly $21,000 off its most expensive vehicles in the United States. Similar reductions were carried out in Germany, the UK, and France – just a week after a second round of price cuts in China.
This is very bad news for current Tesla owners, whose car values are, of course, plummeting with this devaluation – all because the Elon Musk-led company missed its 2022 mark to grow deliveries by 50 percent annually.
Similarly, Tesla owners’ trade-in values are falling just as quickly.
This means that many current Telsa owners will be forced to stay in their lease for the full term without the option to get out without paying their negative equity.
Eventually, this will lower the residual values which will actually make the lease payments higher for a Tesla.
In other words: This is not a good time to own a Tesla and it’s definitely not a good time to buy a Tesla.
When you buy a luxury car at indiGO Auto Group, this will not happen. Porsche, for instance, is never going to break a cardinal business rule and devalue its brand just to push a few more cars out the door.
Now, these drastic – dare we say catastrophic – changes at Tesla are sending its stock falling sharply as the car company faces the specter of coming up short of its vehicle deliveries target.
In order to continue growing and fully utilize the production plants that it’s opened and/or expanded in the last year, “Tesla appears to be compromising the profit margins that Wall Street celebrated when the company was running up against production constraints,” according to an article in Bloomberg.
Like we said, cutting value overnight is something that Porsche and the Volkswagen Group will never do. It’s not only a bad business practice it’s disrespectful to a very loyal customer base.
Check out: Tesla Model S vs Porsche Taycan
The ongoing devaluation is another reason to avoid Tesla and go with a company that values its products and its customers in a way that will help your lease and the resale value of your vehicle.
In fact, according to Bloomberg, Tesla’s stock fell as much as 5.8 percent when Tesla cut prices across the US.
“There will be a significant impact to TSLA’s near-term gross margin, and the math depends on how long these new price levels last,” Chris McNally, an Evercore ISI analyst with the equivalent of a hold rating on the stock, wrote to clients Friday in a newsletter that was quoted by Bloomberg.
McNally noted in his letter that even if the cuts apply to just a portion of the year “and Tesla partially reverses them, 2023 earnings per share could end up 30- 40 percent below the current consensus.”
Toni Sacconaghi, a Bernstein analyst with the equivalent of a sell rating on Tesla shares, was also quoted in the Bloomberg article, saying the automaker was facing “a significant demand problem” and that its challenges would continue because its models were too expensive to qualify for tax credits.
“We believe Tesla will need to either reduce its growth targets (and run its factories below capacity) or sustain and potentially increase recent price cuts globally, pressuring margins,” Sacconaghi wrote in a Jan. 2 report. “We see demand problems remaining until Tesla is able to introduce a lower-priced offering in volume, which may only be in 2025.”
Marianne Simmons, a self-professed “Tesla fan girl,” told Fortune Magazine she was upset by the Musk-led move. She said she bought her second electric vehicle from Tesla in September.
She paid $77,000 for the white Model Y. But amid last week’s cuts, she said she realized she could have bought the same car for $13,000 less.
“I feel like I got duped. I feel like a got taken advantage of as a consumer,” Simmons, 32, a web designer in Naples, Florida, told Fortune. “Right off the bat, I’m out $13,306. It’s such a large reduction that it’s going to affect a lot of people who just bought a vehicle.”
It’s all part of a push from Chief Executive Officer Elon Musk to increase sales volume in the face of weakening demand. “For existing customers, the resale value of the cars they own will take a hit along with the drop in prices of new models,” the Fortune article noted.
“For any existing owner it’s a kick to the teeth,” Ivan Drury, director of insights for research website Edmunds.com, told Fortune. “Anyone who bought a Tesla recently will feel an immediate impact wish they leased it.”
Tesla cut prices in a bid to boost customer demand. What does this mean for all Tesla owners? Devaluation.
So, why not shop from a company that prioritizes quality over quantity? Check out our latest electric car inventory below.
