Tesla's price drop

My wife bought her model Y for 55k in late 2020, and then the prices went up thanks to the COVID boomlet. Cars were in very short supply. So Tesla jacked up prices. Every other car maker works through dealers, and they all jacked up prices too. And now prices have returned to reality, and car makers actually have inventory on their lots.
 
And here is what has happened to lithium (and lumber and many other commodities):

Lithium - 2023 Data - 2017-2022 Historical - 2024 Forecast - Price - Quote - Chart

Lithium carbonate prices in China fell past CNY 480,000 per tonne in January, the lowest since August, and nearly 20% down from an all-time high of CNY 600,000 touched in November on stronger supply and signs of low demand. Added capacity drove Chinese domestic production to soar by 89%...
tradingeconomics.com tradingeconomics.com
 
Interesting.
The little I heard was that the price reduction was prompted by excess inventory, in that case the price could go up again when inventory is reduced. The resale value of used Teslas may not be affected longer term. If it is permanent then the resale value drops. From Scott's numbers I recall Teslas depreciate slower than ICE cars, but that can change once there is a large supply of used cars. At some point the price and supply of used Teslas may lower the offered price for new ones, unless of course Tesla can make used cars obsolete like Apple does for phones.
Competition, in the form of aftermarket batteries for Teslas and independent service shops is key to normalizing to market pricing. I am not sure that will happen near term.
 
Arde said:
Interesting.
The little I heard was that the price reduction was prompted by excess inventory, in that case the price could go up again when inventory is reduced. The resale value of used Teslas may not be affected longer term. If it is permanent then the resale value drops. From Scott's numbers I recall Teslas depreciate slower than ICE cars, but that can change once there is a large supply of used cars. At some point the price and supply of used Teslas may lower the offered price for new ones,
Click to expand...
Yep...supply and demand affect the price of just about everything. ;)

Arde said:
unless of course Tesla can make used cars obsolete like Apple does for phones.
Click to expand...

Actually, it looks like BMW is employing that tactic..

  • Tesla’s long-term reliability makes them the cheapest luxury brand to maintain, costing just 7.1% of their value, while BMWs will cost you 25.3% of their price in upkeep over a decade.

Which Cars Have The Best Maintenance Costs? | The Clunker Junker

Not all cars are created equal. Some are more reliable than others, and some are more expensive to fix. We explorer the best and worst brands with regards to vehicle maintenance and ownership costs.
theclunkerjunker.com theclunkerjunker.com
Arde said:
Competition, in the form of aftermarket batteries for Teslas and independent service shops is key to normalizing to market pricing. I am not sure that will happen near term.
Click to expand...

Although there certainly will be a need for replacement batteries, it doesn't look like that will be as big a market as, say, replacement engines for ICE vehicles...

How often do Tesla batteries need to be replaced​

Your Tesla is due for a battery replacement once it has lost 20% of its range. Tesla owners reportedly only lose 5% after 100,000 miles.

Tesla CEO Elon Musk claimed in a Tweet that a Tesla battery can last between 300,000 to 500,000 miles. If you’re driving within the national average of 273 mile per week, expect your battery life to last anywhere from 21 to 35 years.

The point is a Tesla battery replacement will rarely (if ever) happen. There’s a higher chance you’ll need to replace your electric vehicle before you replace your battery.

ev-lectron.com

How Long Does a Tesla Battery Last?

Range anxiety is one of the main concerns for potential electric car buyers. But the technology used in electric vehicles has improved by leaps and bounds since the introduction of the first EV. Tesla has been at the forefront of this development, with most of its models having 300-400 miles of...
ev-lectron.com ev-lectron.com


Reliable independent shops would be good. Competition is always good. Tesla would be smart to work hard so that their service centers are not viewed like current ICE dealerships. The term "stealer" comes to mind. :(. It would be hard to compete with a branded service center if the service and price can't be beat.
 
I think the transition to electric cars is going to make it very difficult to price used cars. For used ICE cars, it will be difficult to predict future demand because the rate of changeover to electric cars is not easy to predict and because the infrastructure to keep used cars going is being dismantled. For electric vehicles, we don't really have good data on how long they last, and predicting their useful life depends on technologies that are not mature and are constantly changing.

Using Dick's example, no bank is going to finance a used Tesla based on the prediction that their batteries last between 300000 and 500000 miles. There is simply not enough real world data to back this up. And even if Tesla sets up a captive finance company to finance used Teslas, the finance company has to follow financial accounting and regulatory rules that will severely limit their ability to issue loans without data to back up the risk assessments that go into their pricing.

One other thing I see coming - at some point there is going to be a huge game of chicken around who gets stuck with the losses from abandoning ICE cars, which is effectively what we will be doing if we adopt electric cars fast enough. Right now, banks and finance companies are not including these losses in the prices of loans on used cars. This means that they are effectively predicting that they will be able to exit the used car lending market before used car prices crash.

Remember banks and other motor vehicle lenders have to predict vehicle value at the end of their loans and leases, because these values have a huge effect on their risk. I think it is going to become increasing difficult to predict used car pricing that far out into the future, which will inhibit the ability of banks and captive finance companies to confidently price loans and leases. When this happens, lending practices will change, and there will be a huge effect in the used car market.
 
Hard for me to say how does energy market looks like in US, but in EU the energy debt is a regulation factor together with limited production abilities for electric cars.

EU is planning to have ~20% of own batteries which is only possible by recycling of used batteries - no other way due to rare metal technology leading so far.

It means car's battery will become an European good which will be strictly registered.

Adding into the fact even without electric cars EU is choking due to lack of energy (you know growth-energy relationship) so governments are just thinking how to limit the use of cars (not only ICE but also electric). Someone from EU will see that by regular "tightening the belt" for any car user. In the end some above us would like to keep us dependent of public transportation and big corporations like UBER.

But for Tesla... I'm pretty sure they can go lower with prices.
Such situation (not for cars) is used to finish some competitors.
Probably only Tesla currently is able to play that hard.

It is interesting battle. We can only look probably as if some of us will buy this or that car will not impact global market fight result.
 
Krzysztof said:
But for Tesla... I'm pretty sure they can go lower with prices.
Such situation (not for cars) is used to finish some competitors.
Probably only Tesla currently is able to play that hard.
Click to expand...
Tesla's gross margin is running about 27%. Ford and GM are around 12%. BMW about 16%. All of the legacy automakers current profit is on their ICE vehicles. EVs loose money for them on every one they sell. Although Elon is a jerk, I don't think his motivation is to crush the competition. They may get crushed in the process, however. Tesla has a 10 year head start. That may be too much for the slow moving legacy manufacturers. Elon is going to try to keep his plants (and future plants) going at full capacity. He has a lot of margin to play with if necessary in order to do that
 
Well I bought the TSLA price drop at the bottom, I'm hoping we can rename this thread to "Tesla's Rebound" in the near future :) I am more impressed that he has been able to avoid the slings and arrows for uncensoring Twitter.
 
If we assume that the price drop is not really against competitors the other explanations is as Dick mentioned to run at full capacity as this gives the lowest production costs.

Before the price down people were also waiting for Tesla cars, so it is not convincing me they would like to clean the car parks.
 
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