Tesla Motors Inc No More Guaranteeing Its Cars’ Resale Value

Tesla Motors Inc (NASDAQ:TSLA) has probably lost faith in the resale value of its cars and thus has stopped its resale guarantee program in North America. The resale program, which started in 2013, guaranteed that Tesla cars would have a higher resale value after three years than premium sedans from automakers such as Mercedes and BMW.

Tesla Motors Inc No More Guaranteeing Its Cars' Resale Value

Tesla no longer guaranteeing resale value of EVs

The program was personally backed by Tesla CEO Elon Musk. He said he wanted to give buyers peace of mind. In some international markets, the resale guarantee will still be available.

On Wednesday, a Tesla spokesperson said that the program was there to reassure customers in the early years of Tesla that the car will hold its value, but now its cars are holding their value even better than the guaranteed resale value, so the program is no longer necessary.

“We have discontinued the Resale Value Guarantee program as of July 1 so that we can keep interest rates as low as possible and offer a compelling Lease and Loan program to customers,” the spokesperson said in a statement.

Maintaining Tesla’s resale program was quite expensive also, given that the EV maker promised that buyers would get at least 50% of the base price and 43% of the options pricing. The program was not a huge hit to the bottom line, even when the automaker was selling a relatively small number of luxury cars.

Autopilot feature not helping Tesla’s track record

The spokesperson was right when he said Tesla’s track record is better now, but lately, a number of crashes are clearly worsening it. A May 7 crash of the Model S which reportedly had its Autopilot system — an autonomous feature that is still in public beta — in use killed the driver after the electric sedan collided with a big rig in Florida. The National Highway Traffic Safety Administration (NHTSA) is investigating the crash. Since then, two more Autopilot incidents have come up.

Over the weekend, a driver in Montana crashed his Tesla and told the Montana Highway Patrol that the Autopilot feature was engaged in his electric vehicle. Also the NHTSA was already looking into a July 6 crash in Pennsylvania. In the July 6 crash, a Model X flipped upside down, and according to the driver, it was in self-driving mode.

In addition, the automaker missed its vehicle delivery target again.

About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com