New information that has generated enthusiasm about potential electric vehicle (EV) customers is that second-hand Teslas are now cheaper. This trend is down to an increase in supply which has flooded the market and reshaped the dynamics of the used EV market.
The relatively high resale prices of Tesla vehicles in recent years are attributed to supply constraints and persistent demand in a market where Tesla dominates. However, a confluence of factors has led to a flood of pre-owned Teslas hitting the market, causing prices to fall significantly.
Demand for used Cybertruck prices plummeted from roughly $185k in early April to nearly $117k by September 2024 in the Netherlands. Some used Tesla Model Y vehicles with a suggested retail price (mid-2022) of $70,000, selling below $40,000.
Tesla slashed prices across its lineup by around 25% in 2023, price cuts ranged from 17% for Model 3 to 35% for Model X Plaid 3. New Model Y Long Range AWD dropped from $67,000 to $48,000.
Why Are Used Teslas Suddenly More Affordable?
Several factors explain the increase in supply, including; Firstly, the production capacities have increased over the recent years, with factories like Giga Shanghai and Giga Texas manufacturing capacities. This increase in production has been instrumental in meeting new vehicle requirements but most importantly replacing old vehicles with new ones.
Secondly, deliberate pricing on new model vehicles has placed considerable pressure on used car market prices in the same category range of models. Last year we saw Tesla cutting prices for many of its models, including the Model 3 and Model Y. It reduces the need to pay a premium for a used car especially when a brand-new Tesla is now affordable.
Also, changes in Tesla technologies like battery capacity, sophisticated technology, and better software and driving capability forced many current Tesla owners to trade in their current models for newer models. This has led to the current generation’s older models’ availability in the second-hand market, thereby equally raising supply.
In general, Tesla has been viewed as a strong investment in the used car market, since Tesla cars have several typical characteristics: They do not depreciate as quickly as other brands and old Teslas are not technology-obsolete, thanks to Tesla’s over-the-air updates. Yet more inventories have made the position of buyers more powerful and influential for the suppliers.
For now, used Teslas are being sold at 20-30% cheaper compared to their list price a year ago, industry data shows. This trend we observe across all Tesla vehicle models starting from the Tesla Model S and Tesla Model X and up to the more recently released Tesla Model Y.
For buyers, this is good news because it will allow them to enter the EV market on a lower note. In the past, models that could only be owned by the higher class due to their high resale price can now be afforded by many.
Impact on the Broader EV Market
The pricing trends for Tesla directly impact the entire ecosystem of electric cars depending on the company’s absolute market share. Tesla’s lowering of the prices is believed to exert some pressure on other manufacturers, especially luxury and premium electric vehicle makers.
Moreover, the fall of second-hand Tesla prices might have the same effect, meaning that the use of electric cars in general might be boosted as well. A number of the consumers who avoided purchasing EVs previously in consideration of the high prices now have lower barriers to overcome.
Conclusion
A sharp depreciation in second-hand Tesla prices has defined a strategic point on the market of EVs as beneficial to the buyers, though challenging for Tesla’s market positioning. For now, this abundance of used Teslas gives an opportunity that has not been seen before; people who want to convert to electric cars now have affordable means by which they can do so.
