A quick glance at social media shows many Tesla owners complaining about depreciation, and we’ve rounded up some of those sentiments.
— Hemant Basavapattan (@HemantBasva) January 13, 2023
— ozarej (@3vad0r) January 13, 2023
— bizwax.eth (@galarraga_yimy) January 13, 2023
— Nick (@cerdafied_nick) January 13, 2023
— Pranav Talegaonkar (@pranavrdboy) January 13, 2023
Of course, not every Tesla owner is upset about the discounts. Some see it as a great opportunity to grow the brand, like this guy here.
These Tesla markdowns remind me of when Chevrolet announced deep MSRP discounts on 2023 Bolt EV and Bolt EUV models, although Chevrolet Bolt owners seem to have reacted to the 2023 Bolt’s lower MSRP a bit less harshly than many Tesla owners are taking these price cuts.
So why do a bunch of Bolt owners seem to be taking the 2023 discount in stride while the general sentiment of Tesla owners towards recent discounts is hostile? Well, Tesla is a bit of a unique case regarding the customers it attracts and the financial decisions those customers make. Let’s start with the customers Tesla attracts. S&P Global crunched the numbers on Tesla conquests from October 2021 through September 2022 and here’s what the firm found. BMW owners accounted for 6.7 percent of Tesla conquests, followed by Mercedes owners at 6.2 percent and Audi owners at 4.4 percent. That’s roughly 17.3 percent of owners new to the Tesla brand that should’ve been used to rapid depreciation. Worryingly though, a large number of Tesla conquests aren’t coming out of cars with high depreciation. Toyota and Honda owners made up 28.6 percent of Tesla conquests during that period, so I wouldn’t be surprised to hear that Tesla owners coming out of mainstream ICE cars weren’t expecting such depreciation.
Such a dramatic drop in value could see some owners going from positive equity to negative equity overnight — a rather dramatic shift considering how Teslas appear to be stretch purchases for many. Marketwatch reported that Tesla owners took out the longest loans of any car brand’s owners during the first 10 months of 2021. This drop in value also comes off the back of numerous price hikes through 2021 and 2022, so like with most dips, those who got in early are likely better off than anyone who came in at the peak. In addition to every owner, every dealer with Tesla-heavy inventory is left holding the bag. Eventually, they’ll have to take losses in order to shift units bought at the top of the market, digging into the bottom line. The whole situation is just a shit sandwich for everyone involved, and it could result in very real consequences.
So, let’s recap. On the plus side, Tesla’s discounts may bring more people into the EV fold by making new EVs with access to a reliable DC fast charging network more affordable. On the other hand, Tesla’s discounts will leave some owners underwater on their loans and kick dealers who bought high in the teeth. Perhaps overarching all else though, these Tesla discounts could be a sign that incentives are returning to the new car market. We’ll see in a few months whether this is a leading indicator or just a fluke. (Photo credits: Tesla, Tesla Owners Worldwide, chevybolt.org)
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Ha-ha!
First, it’s long been legally required in the U.S. (by law and court decisions going back about 100 years) that any investor-owned company’s highest priority and obligation is to ‘maximize shareholder value’, which means inflate the stock price as much as possible, using any means available (usually, hype). Any company that doesn’t ‘maximize shareholder value’, in the opinion of shareholders, is subject to be sued, and senior management replaced with those who embrace the hype machine. There are law firms whose only business is to sue companies whose stock is seen as ‘underperforming.’ Senior management at major corporations know this, and realize if they don’t feed the hedge fund beasts with endless stock pumping, they’ll get sued and booted out.
Second, the compensation of most senior executives at major corporations is largely stock based (such as options). They themselves have a personal vested financial interest in pumping the stock as high as possible, because it makes them worth more. Elon Musk used to be the richest man in the world, with most of that wealth being his Tesla stock – but not any more, ever since his net worth dropped by $182 billion, setting a world record –
https://fortune.com/2023/01/11/elon-musk-breaks-guinness-world-record-for-largest-loss-of-wealth-in-history-after-182-billion-drop/
That isn’t actually true. The requirement is to act in the enterprise’s best interest and maximize enterprise value, which isn’t the same thing (though it often is).
https://insight.kellogg.northwestern.edu/article/shareholder-value-purpose-corporation
The history goes back over 100 years, when the Dodge Brothers successfully sued Ford. Ford wanted to reinvest in building the fundamental business, while the Dodge Brothers wanted the money used to pay out dividends (for stock they held). They won.
https://corpgov.law.harvard.edu/2021/12/01/dodge-v-ford-what-happened-and-why/
I worked in publicly held companies for over 30 years, and have seen the real-world ramifications of shareholders claiming that a company didn’t do everything imaginably possible to ‘maximize shareholder value.’
As you said, it’s often the same thing, and senior management’s and shareholder’s interests could be said to be ‘aligned’ in that regard. The problem is, most of the thinking is short-term. Hedge funds don’t care about building long-term or sustainable value in a company. They want the stock price pumped up as high as possible today. Long-term thinking for most institutional shareholders is the end of the current quarter.
Since most senior management’s tenure at the top is relatively short (often just a few years), they also usually have little incentive to invest for the long term. After all, their bonuses are based on current year performance, and if they’ll be gone in a couple of years, why should they diminish the value of their stock options with decisions that might not pay off for a decade?
The problem with hyping and pumping is, eventually reality catches up to you. People like Roger Smith at GM, and Jack Welch at GE, were initially heralded as financial geniuses. But history has shown their obsession with cost-cutting and squeezing short-term profits led to long-lasting damage to their companies that they never recovered from.
You can only kick the can down the road for so long. As Musk is finding out. Bubbles might be fun as long as they’re inflating, but not so much once they pop, and it’s awfully hard to re-inflate a bubble.
I also see, in my account settings, that I have invested one hundred of my own American dollars in this website, and I wonder what the difference between my posts and Rob’s might be.
“A group representing the nation’s most powerful chief executives on Monday abandoned the idea that companies must maximize profits for shareholders above all else, a long-held belief that advocates said boosted the returns of capitalism but detractors blamed for rising inequality and other social ills.
“In a new statement about the purpose of the corporation, the Business Roundtable, which represents the chief executives of 192 large companies, said business leaders should commit to balancing the needs of shareholders with customers, employees, suppliers and local communities.”
https://www.washingtonpost.com/business/2019/08/19/lobbying-group-powerful-ceos-is-rethinking-how-it-defines-corporations-purpose/
P.S. Metrics. In virtually you get what you measure. It’s more than a little important to measure what’s actually important. See: Vietnam and Body Count. See also EVs and range.
What I am mad about is the idiots at the IRS that love their unions so much, they will do the single worst thing they could with the new tax credits!
Sorry, a Wrangler hybrid isn’t an environmentally sounds choice, and one vehicle model can’t be both a car and SUV (don’t get pedantic with me…), taking a page right out of trump’s book, just make shit up as you go to please your supporters!
My Tesla stock tanked, not because of market conditions, but because of hubris amongst the opinionated. Nothing on wall street is based on facts. They are based on statistics, which you can literally massage into any desired outcome!
I’ll continue to enjoy my Model Y, best car I’ve ever owned, hold onto my stock, and support Tesla, as well as other companies that are truly making concerted efforts to get rid of fossil fuel powered conveyances. Ford, basically just Ford. Chevys lineup right now is an American joke.
What I say when people ask me if I like the car: The least I have to interact with the company, the more I love the car.
By most metrics they really aren’t.
You can write off the former “cool factor” of driving a Tesla in any area dominated by us left wing nut-jobs and I don’t see rural hillbilly Trump voters taking up that slack.
Personally I had planned on buying a new vehicle about the time the prices started to rise and I decided to wait rather than watch a ton of my money evaporate when the market returned to something resembling sanity. Granted some people couldn’t wait due to their car being totaled ect, but many just didn’t want to wait.
Yes, the price cut was inevitable. I’m very certain it was planned. As all price strategies are. If you can increase price while people keep buying your product more than they ever have before, increase the price! If you can do that AND maintain a leading position in your market, great! Now that they’re in a leading position in the market, and competition is increasing, drop the price. It’s a bit of a bully move – slightly defensive, but more of a price offense than anything. It’s a good move.
Now they need to follow up with new product to increase margins again…
I’m sure if some website ran a live tally of actual deals completed for say Ford F-150s, there would be a bunch of pissed off buyers who see they paid more than someone else.
