Published on May 8th, 2020 | by Zachary Shahan0
Tesla Model 3 Value Drops 5.5% In 1 Year, BMW 3 Series Value Drops 38% In 1 Year
May 8th, 2020 by Zachary Shahan
Looking at collapsing used auto sales recently, I referenced a market research report from iSeeCars that showed a used Tesla Model 3, on average, lost 5.5% of its original value after one year, a much better result than any other vehicles on the market.
A commenter, John Moore, highlighted something from that article that inspired me to write a new one. “A Tesla Model 3 drops 5.5% after one year. A BMW 3 Series drops 38.2% after one year. Try to take in what this means. Try to comprehend the magnitude of this incredible, unsustainable difference,” John wrote.
There’s a lot to write about on that topic. Much worse resale value means leasing companies recoup much less money from a BMW 3 Series when the lease ends and they have to sell it, which means they either have to charge more for the lease or make less money (perhaps even lose money) on each lease. The difference in resale value probably also means the Tesla Model 3 is in crazy-high demand on the used vehicle market, which incentives new-vehicle buyers to buy a Model 3. They see that they can get a good resale value later on, they see the used car prices are so close to new car prices that it pushes more people to just buy new, and they can see that Teslas are very popular, which must mean they’re cool.
John also points out that these findings indicate Tesla could disrupt some big markets. “They sell 2 million cars like the BMW 3 Series in China, including Benz and Audi. Anyone who had thought that Tesla is not going to absolutely destroy these companies in China will have to rethink it. Tesla will sell millions of Model 3s and Ys in China, as fast as they can make them. At the expense of the BBA companies. This will be a bloodbath in every way for those companies. They have nothing in the pipeline. And whatever meager resources related to EVs that are in the pipeline will be dropped first, as these companies struggle to survive. Sweet Jesus. This is going to be game over for many FF car companies. And sooner than most people think. And now the plague has sped this process up dramatically. Prepare for change.”
We are seeing strong Tesla sales through the coronavirus pandemic so far (Q2 may be a lot harsher in that regard). And we’re seeing overall auto markets — fossil fuel vehicle sales — collapse. In countries across Europe, in particular, EV market share is stunning — even for a rather bullish EV enthusiast like myself — and Tesla is usually at the head of the pack. How much that mixed-market trend continues through the rest of 2020 and into 2021 is highly uncertain, but Tesla looks more likely to come out of the crisis with its market share growing.
Regarding used car depreciation, there are well known reasons for Tesla’s excellence here: highly desirable advanced tech and design, expected longevity of the electric powertrain compared to gasoline powertrains, and limited supply. However, it’s also worth noting that you can’t do a true model-to-model comparison here. Yes, you can look at all vehicles sold in 2019, for example, and compare results to today, but it should be remembered that the BMW 3 Series has been selling for decades, which means you’ve got 2019 BMWs to choose from as well as BMWs from 2018, 2017, 2016, 2015, 2014, etc. That greater supply brings about greater depreciation. We’re yet to see how much new Tesla Model 3s depreciate once the model has been on the market for 10 years.
That said, if Tesla is rising strongly in the next several years and BMW is having a hard time succeeding, that will raise the question of whether BMW can survive the electric transition, and if it’s showing signs of duress, used BMW prices could fall even further. At the moment, BMW sells a decent number of “electrified” cars — plug-in hybrids (mostly) and fully electric BMW i3s. It’s one of the top selling brands for plug-in cars in the world. But BMW has been relying heavily on a plug-in hybrid approach that many consider a short transition tech that is already mostly uncompetitive compared to fully electric vehicles designed well.
Also, and perhaps much more importantly, Tesla only had its mass-market sedan and two much more exclusive/expensive vehicles on the market before this year. Now it has the Model Y, which competes in a class everyone knows has become the most popular. Whereas big drops in BMW sedan sales could be attributed to consumers shifting from cars to SUVs and crossovers — not Tesla stealing BMW customers — we’ll find out soon how much the Model Y pulls demand away from BMW’s top selling SUVs and crossovers.
One thing we can be certain of: the Model Y is going to hold its value in initial years much better than any BMW SUV is going to hold its value. Will it beat the Model 3’s current record?
Follow CleanTechnica on Google News.
Latest Video from CleanTechnica.TV