Tesla price cuts hit rental companies hard
If you’re in the market for an electric car, then Tesla’s barrage of price cuts in recent months might have been the welcome push you needed to go all in on battery power. But if you’re a rental firm that plowed millions into electrifying your fleet, only for its value to be slashed by such price cuts, then Tesla might not be your favorite company right now.
Because of repeated price cuts made by Tesla, rental EV fleets are now worth a fraction of the value paid when they were new, reports Reuters. This makes offloading the electric models at a decent price much harder for rental companies, who are also complaining about poor service and expensive repairs over the lifetime of the cars they bought from Tesla. Now, the American company is in damage-control mode to try and repair its ruined reputation among renters. As Reuters reports:
The efforts include unofficial discounts on purchases of new cars if they are in stock and efforts to address widespread service, repair and ordering complaints after years in which fleet managers and leasing firms say Tesla has ignored those problems, according to Reuters interviews with nine executives from major leasing and rental-car firms, along with about a dozen corporate fleet managers.
Tesla’s retail price cuts aimed to bolster sales in response to softening electric-vehicle demand globally and rising competition, especially from Chinese EV makers such as BYD. But that damaged the bottom lines of its biggest customers in Europe — where fleet purchases represent nearly half of auto sales.
Leasing companies buy new cars and arrange leases calculated on how much they believe they can sell them for at the end of the lease. Sudden drops in price undercut those residual values, costing leasing firms money.
Despite its efforts, one expert Reuters spoke with warned that the measures may be too little, too late. This could spell trouble for the EV maker, as its sales have begun slowing in recent months as other automakers enter the EV space, the second hand market begins growing and buyers consider hybrids instead.
If Tesla can’t get rental companies back on side, storage space at its facilities in California, Texas and Europe could soon begin piling up with unsold models.
A version of this article originally appeared on Jalopnik’s The Morning Shift.
