Tesla price cuts undermine used EV market

Price cuts applied to new Tesla models risk undermining the values of used electric vehicles (EVs), in an already volatile market.

Tesla slashed the prices of its Model 3 and Model Y by up to £8,000, last week. The move is expected to help it compete in an increasingly competitive EV market in the UK.

Shortly after the announcement, Cap HPI revealed that used EV values are declining four times faster than their diesel-powered equivalents.

Steve Tigar, CEO and founder of Loveelectric, said cuts on this scale could undermine the value of secondhand cars, which have to be priced significantly cheaper than new models to attract buyers. He predicts the move could trigger a price war among car makers and weaken the values of all used electric cars.

“Downward pressures on the residual values (used prices) of electric cars are intensifying. The cost-of-living crisis allied to rising interest rates for car finance is limiting the budgets of used car buyers, while the growing supply of used electric cars risks temporarily exceeding demand,” Tigar added.

Data from Aston Barclay shows wholesale prices for used EVs fell by almost £5,000 during Q4.

The remarketing firm said the data suggests consumer interest is moving back towards petrol and diesel cars.

“Used EV prices were unlikely to stay at record highs forever and it took the rising cost of living to contribute to a major market correction,” said Mark Hankey, Aston Barclay’s chief revenue officer.

“We are on a one-way road towards EVs with new car take up continuing to grow. Some vendors expect to reach BEV/ICE used car parity in 2024 and as EV volumes continue to rise, prices should stabilize.”