Flipping a Tesla for a nice profit is coming to an end.
Those who purchased a new Tesla, regardless of whether it's a fully-loaded Model S Plaid or the least expensive possible Model 3, have faced a choice over the past couple of years: keep it or sell it for a handsome profit. It's a great position to be in, but now that appears to be coming to an end. According to Reuters, the days of flipping a Tesla are quickly ending, which could ultimately affect new car prices.
Used Tesla prices are now dropping faster than those from rival automakers also selling electric vehicles. These used Teslas are now sitting on used vehicle lots longer than previously. For example, the average price of a used Tesla last month was $55,757. In July, it was $67,297 - a drop of 17%.
In fact, the used car market as a whole suffered a 4% drop during that same time period, but Teslas are faring worse than others.
Used Teslas were in dealer inventory for an average of 50 days in November, while other used vehicles were there for 38 days on average. A number of factors contributed to this: There were rising gasoline prices last summer due to the Russia-Ukraine war, higher than normal demand for Teslas, and Tesla itself. The carmaker has increased prices faster than rivals in an effort to boost profits.
While all that was happening, Tesla owners took advantage of their market situation and started selling their vehicles for profit; almost a third of Teslas for sale in August were 2022 models. And then they ordered new ones. That increased demand. And then the market began to settle down.
Gas prices have since dropped, interest rates are increasing, Tesla production output is also rising, and - perhaps most importantly - EV competition is growing fast.
All that combined led to reduced Tesla demand, which helps explains the company's decision to drop the price tag by $7,500 for the Model 3 and Model Y for customers who take delivery before 2023. At present, Tesla owners can't sell their cars for more than what they originally paid - and they're not alone. Used car prices, in general, are dropping rapidly, causing what some analysts describe as a "used car recession."
But used Teslas are dropping in price faster than everything else, partly because of fresh EV competition from the likes of Ford and Hyundai. This trend is not expected to let up anytime soon, given current market conditions.