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A few days in the past, I wrote a few considerably sophisticated state of affairs within the used electrical automobile market. I included a number of notes for issues affecting used EV costs and time on lot. Nonetheless, among the particulars additional, I wished to revisit this and spotlight a vital level for the market now and going ahead: the used electrical automobile market within the US is, even broadly talking, on the whim of Tesla’s supply-vs-demand tendencies.

Beginning with the matter of value, in 2022, many Tesla homeowners had been promoting or buying and selling of their Teslas as a result of they’d retained a lot worth or had in some circumstances even risen in worth. The problem was that because of the wackiness of COVID-19, financial lockdowns, provide chain challenges, stimulus funds, and related issues, demand for automobiles (new and outdated) had skyrocketed on the identical time that provides had been crunched, and this led to excessive automobile costs. Given the stage of Tesla’s progress at that time, this significantly affected Tesla autos. I recall a number of Tesla homeowners promoting or buying and selling of their automobiles on the time and bragging about how a lot cash they bought for them. Tesla was by no means the one firm influenced by these issues, however its swing was accentuated.

As these points labored themselves out and the market bought again to one thing extra “regular,” Tesla ramped up manufacturing globally and set gross sales report after gross sales report quarter after quarter. That led to: ramp manufacturing, ramp manufacturing, ramp manufacturing. However … as we all know, Tesla reduce costs significantly in latest months. Clearly, manufacturing caught up with demand after which surpassed it at earlier costs. Which led to Tesla reducing costs, after which reducing them extra. After which we get this:

Common used EV costs within the US (most notably, common Tesla costs, which account for almost all of US EV gross sales) had been actually excessive in October 2022, after which had been down significantly in October 2023. Taking a look at what was taking place with Tesla, this comes as no shock. Add in the truth that new Tesla autos now get a $7,500 tax credit score! (That knocks hundreds of {dollars} off of the worth of a used Tesla by default.)

There’s yet one more factor to have a look at as properly. When Tesla’s costs drop sharply and unexpectedly, you already know that has to have an effect on different electrical automobiles available on the market. That drags down costs persons are keen to pay for different, competing electrical autos. However, how shortly are the sellers of these different used EVs really going to reply? They gained’t reply in a single day. The outcome: quite a lot of used EVs sitting on the lot for longer than regular.

Apparently, with used Tesla costs depressed first and most straight by the worth cuts to new Teslas, Tesla’s autos had been transferring off of the lot barely faster than the nationwide common.

As we are able to see, large fluctuations in Tesla provide & demand don’t simply have an effect on Tesla. They’ve a notable impact on the costs and motion of competing electrical autos. We will’t make broad statements in regards to the used electrical automobile market with out making an allowance for that Tesla dominates the US electrical automobile market, and large adjustments at Tesla will inherently imply large adjustments throughout the market.

With all of that in thoughts, what is going to 2024 carry? Are we going to see any sudden or dramatic adjustments in Tesla costs and availability? I don’t assume so. I don’t see demand capturing up properly above manufacturing capability, and I don’t assume Tesla can decrease costs way more because it has already considerably reduce into gross margins in an effort to transfer product. Although, it’s notable that the Lengthy Vary and Commonplace Vary Mannequin 3 might be dropping entry to the $7,500 US EV tax credit score (as a result of too their batteries coming from China, a difficulty Tesla apparently hasn’t been in a position to resolve up to now 12 months). As such, I believe there may very well be somewhat additional stress on Tesla costs and thus different electrical automobile costs. However — that can most likely additionally imply extra Tesla consumers deciding to go for the Mannequin Y as an alternative of the Mannequin 3. Shifting vital volumes of Mannequin 3 demand to the Mannequin Y may put a manufacturing bottleneck on the Y relative to demand, doubtlessly resulting in notable value will increase. If this occurs, different electrical crossovers may additionally get value will increase or see their wheels roll off of supplier heaps and into buyer driveways faster. So, once more, there are methods the remainder of the US electrical automobile market, together with used electrical automobile market, may very well be considerably influenced by adjustments in Tesla demand vs. provide. We’ll see what comes about in 2024.

What do you consider coming adjustments to Tesla demand, pricing, and gross sales within the US — and, equally, adjustments to the remainder of the US EV market?