Tesla Model 2 Demise Won't Matter, Affordable EVs Are Already Here: Analyst

More than half of used EV listings are priced under $30,000, Recurrent found.

Tesla Model 3 Highland charging at a Supercharger

Suvrat Kothari

By: Suvrat Kothari

Apr 10, 2024 at 1:00pm ET

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The electric vehicle community seems aghast at Tesla’s recent revelations, leading to an ongoing hullabaloo over decisions being made in Austin.

It’s unclear if the so-called Tesla Model 2, which was supposed to bring affordable and reliable zero-emissions mobility to the masses, will ever exist. Reuters reported last week that Tesla had canned the Model 2, something CEO Elon Musk denied. Hours later, he announced robotaxi plans. In a way, the announcement might have solidified the news wire’s report. Musk also added that Tesla would spend billions developing the self-driving system.

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Affordability remains a big concern for EV buyers.

The high cost of batteries has largely prevented carmakers from making truly affordable EVs. But as lithium prices are expected to fall this decade, EVs might be accessible to more people. And that's with or without the Tesla Model 2.

Amidst all this, let’s not forget the poor Q1 2024 sales that pummelled Tesla’s stock price and investor confidence even further. Does this mean the world’s most valuable car company has suddenly lost its brawn and brio?

“One bad quarter is just one bad quarter,” Liz Najman, the director of market insights at battery health and data start-up Recurrent told InsideEVs. “Probably Tesla was hoping to have a great turnaround story with all the news of slowing EV demand. But it's an upstream battle right now for car sales. Tesla is not the only one struggling,” Najman added.

Remember the phase of pessimism after a couple of bad quarters for EV sales last year? Despite that, overall EV sales for 2023 broke records with 1.1 million EVs pouring onto American roads.

Even though the growth rate is expected to decline this year, the research firm BloombergNEF is forecasting a strong year overall. That’s in part thanks to price cuts across the board and also models like the Hyundai Ioniq 5, Ioniq 6, Kia EV6 and Ford Mustang Mach-E among others gaining traction.

The $34,995 Equinox EV will likely lead the torch for General Motors once deliveries begin by mid-2024—Bolt EV sales are now fading out to make way for a new-generation Ultium-platform-based successor.

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But the new car market only tells part of the story. If you look at used EVs, things are shaping up nicely for the consumer.

“Sub $25,000 Teslas are already here. They're just a few years old,” Najman said pointing to the used EV market.

The Model 3 is Recurrent’s best used EV for this year. It found that used Model 3s at least two years old cost 27% less year-over-year whereas used Model Ys are selling 31% lower compared to last year. Recurrent found that 55% of all used EV listings average under $30,000 already, and 30% are under $25,000.

It’s a season of bargain deals bringing EVs within the reach of a whole new demographic, the firm believes.

from left: 2024 Tesla Model 3 (aka Highland) and Tesla Model Y

“Our instinct is that those cars are just turning over a lot faster. From what we're hearing in our community, people really are looking to cash in on that extra $4,000 tax credit,” Najman added. “A lot of people who have been waiting for their moment to buy an EV are moving in on that price bracket.”

“Everybody likes to point fingers at Elon Musk when he's unable to [stick to] his promises. But the age of affordable EVs is already here,” Najman said.

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Tesla’s price war has a ripple effect on the industry, leading competitors to also gain momentum. The Mustang Mach-E recently began flying off the shelves after Ford introduced steep discounts on the model-year 2023 inventory. At the correct price, with help from local and federal tax credits, adoption rates are trending upward.

“For better or for worse, Tesla is bringing affordable new and used EVs to the masses,” Najman said. “We don't need to despair the loss of the Model 2.”

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