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Tesla offering discounts to soothe European leasing firms - report

Published 20/05/2024, 09:58
© Reuters.

Tesla (NASDAQ:TSLA) is taking steps to appease European leasing companies after its repeated retail price cuts devalued their fleets and slow service and expensive repairs alienated corporate customers, Reuters said in a Monday report.

Efforts include unofficial discounts on new in-stock cars and addressing widespread service, repair, and ordering complaints after years in which fleet managers and leasing companies say the electric vehicle (EV) giant has ignored those concerns.

Tesla’s retail price cuts aimed to boost sales amid softening global EV demand and rising competition, especially from Chinese EV makers like BYD. However, these cuts hurt the bottom lines of its largest European customers, where fleet purchases account for nearly half of auto sales, Reuters said, citing interviews with nine executives from major leasing and rental-car companies.

Leasing firms, which calculate leases based on the expected resale value of cars, suffered financial losses from the sudden price drops.

Richard Knubben, director general of Brussels-based leasing and rental group Leaseurope, said there is “nothing worse” than persistently decreasing the value of a fleet buyer’s assets.

"Tesla is now actively telling our members: We can give you discounts and compensate you," Knubben said. "But Tesla's residuals have dropped so fast, I'm not sure the discounts they're offering are enough."

While Tesla’s falling resale values and tensions with fleet customers are known, its damage-control efforts have not been previously reported, Reuters noted.

A top executive at a large European car-leasing firm, speaking anonymously, reportedly noted that Tesla has been offering unofficial end-of-quarter discounts of up to 2,000 euros ($2,134) on Model 3 and Model Y for leasing-company purchases since mid-2023, with these discounts now available year-round.

Per the report, Tesla faces similar resale-value issues with rental-car companies. For instance, Florida-based car rental company Hertz is selling off Teslas in the U.S., while German rival Sixt has ceased purchases.

Sixt reported a 40 million euro ($42.7 million) earnings decline in 2023 due to lower residual values on EVs, including Teslas.

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