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Tesla risks rocky residual values further with more EV price cuts

Tesla has risked further hit to used car residual values and increases to monthly finance payments with further price cuts to certain models in its electric vehicle (EV) line up.

Elon Musk’s EV brand has levied new reductions of between 4% and 9% in the UK and US markets a matter of weeks after January cuts which deliver a saving of over £8,000 for its flagship Model Y Performance model alone.

At the time AM reported that the cuts had not only sparked “ill-feeling” among thousands of owners that had recently purchased a new Tesla. The brand had registered a third of its entire 2022 volume in December.

It also triggered a fall in residual values that, in turn, increased monthly finance repayment rise by over 50% in some cases.

The latest price cuts come less than a week after the EV brand outlined a strategy to halve its production costs and speed up the time it takes to build a new car in a bid to launch more affordable models.

The BBC reported that Tesla missed its 2022 target of increasing its deliveries by 50% annually, a shortfall the firm blamed on supply strain constraints and a weakening economy, but added that Musk had said price cuts were working to lift demand.

“The desire for people to own a Tesla is extremely high. The limiting factor is their ability to pay for a Tesla,” Musk said last week during a presentation to investors.

Dylan Setterfield, head of forecast strategy at Cap HPIIn a recent column for AM’s sister title, Fleet News, Cap HPI’s head of forecast strategy Dylan Setterfield suggested that the timing of Tesla’s new car price reductions announced overnight on January 12 “could not have been worse”.

AM reported later that used car retailers have been imposing EV stocking bans in a bid to avoid a slump in values.

Setterfield said that most other OEMs are unlikely to follow suit with reductions to their own list prices, however.

He added: “Some, like Kia, came out very quickly, keen to rule such a move out and distance themselves from Tesla’s behaviour, while others have kept their cards closer to their chest.

“It seems more likely that future planned list price increases may be cancelled, rather than making any attempt to match Tesla on the cost new front.”

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