First-generation Tesla Model S sedans
Traditional automakers fare well in the used car market and Tesla is starting to gain significant ground.
As we previously reported, not long before the Model 3 entered initial production, the discount pricing on used Model S' sedans was shocking. Now, it's commonplace to see many 2013 and 2014 models in the $40K range, and most of these are low mile vehicles.
According to Teslarati, the Silicon Valley automaker has already seen an increase of $151.1 million in used car sales thus far this year. While still healthy for a small-scale automaker, numbers for all of 2016 pale in comparison to the recent surge. Tesla reported $117.4 million in used car sales last year. This exponential growth forecasts a positive future for the electric carmaker.
A sample of used Tesla Model S' pricing (Image Credit: TRUECar)
The increase is due in part to the obvious fact that there are increasing numbers of used Tesla vehicles available. Soon enough, we will start to see more Model X SUVs in the used market. Significant discounts have surely helped the situation, along with the company's latest trade-in program push. Tesla has even gone so far as to list its vehicles on sites like Cars.com. The automaker reported during its Q2 earnings call:
“In future periods, we do not anticipate meaningful revenue from sales of powertrain or other vehicle systems and components to third parties. However, we anticipate that revenue from sales of pre-owned vehicles will continue to increase as the volume of pre-owned vehicle sales increases and that revenue from services by Grohmann will decrease as we primarily consume internally its services.”
Selling the used cars online through independent websites is a way for Tesla to work around some states' laws against the company's direct sales model. Tesla's new vehicles are ordered online, and those that live in a state that doesn't allow direct sales can order online and pick up their vehicles in a neighboring state.
With the massive interest in the just-released Model 3, more people are becoming aware of Tesla. Rather than waiting years for a Model 3, some consumers are splurging for a Model S or X in the meantime. The automaker has actually been pushing this option heavily for some time. Still others who can't afford to do so can purchase a used vehicle for about the same price as a new Model 3. Additionally, the used vehicles come with free, unlimited lifetime Supercharger access and the S and X are better-equipped than the Model 3.
Potentially, these new Tesla customers will eventually buy a Model 3 or even a Model Y in the future. The Palo Alto automaker is doing everything it can to bring new customers on board, as they will likely be lifelong Tesla supporters.