Elon Musk said in 2019 that buying a Tesla TSLA was an investment in the future. Where most cars depreciate in value the moment they are driven off the lot, Musk claimed that his cars were different.
“The cars currently being produced are capable of full self-driving,” Musk said. “Buying a car today is an investment into the future. I think the most profound thing is that if you buy a Tesla today, I believe you are buying an appreciating asset, not a depreciating asset.”
Related: Musk must take steps to stop Tesla’s stock slide, key analyst says
The reason behind this apparent value appreciation has to do with full self-driving and robotaxis. Musk in 2019 claimed that Tesla would have one million robotaxis on the road by the end of 2020; Tesla owners, he said, could make up to $30,000 a year while they slept by allowing their cars to moonlight as driverless taxis.
Built into this was his 2019 assertion that the cost of Tesla’s FSD would increase every few months, meaning that “Those who buy it earlier will see the benefit.”
All of these predictions have yet to pan out.
Tesla’s highly-anticipated Cybertruck will begin making deliveries at the end of November. Musk said that it could take up to 18 months for the new model to become profitable.
Regardless of the fact that Tesla’s FSD remains stuck at a Level Two designation, far below the Level Four or Five it would need to become a robotaxi, and regardless of the fact that there remains an enormous amount of regulatory hurdles for the struggling, nascent robotaxi industry to surmount, Teslas have not been appreciating in value.
They’ve been doing the opposite.
For months now, Musk and Tesla have been engaged in a vicious price war. Tesla prices are down on average by about 25% compared to last year. And some are down even more.
A 2022 Model Y Long Range, according to Kelly Blue Book, went for about $65,000. The same car — with only 17,390 miles — according to one X user, is today worth about $27,000, depreciating by about $2,000 per month. And a 2023 Model Y Long Range starts at $37,000, according to Tesla’s website.
Related: What’s stopping Tesla from achieving Level 3 self-driving
I bought my Tesla Model Y Long Range in 2022 for $66,990.
Today it’s worth $27,000. It depreciates $2k per month.
Elon Musk said I’d be able to add it to a RoboTaxi Network and it would do Uber drives while I slept; this never materialized. pic.twitter.com/9TxOTnwGBj
— The Lamb (@QuinnvestLamb) November 7, 2023
Further, contrary to Musk’s claim that FSD would continue increasing in cost, he recently cut the cost of it by $3,000, bringing the package down to $12,000 from its earlier price point of $15,000.
The Tesla price cuts are doing more than just irritating investors; Hertz, recently announcing that it will be slowing the expansion of its electric vehicle rental fleets, said that the price cuts have cut the resale value of the bulk of EVs in its fleet by about one third.
The price cuts — which Musk has said are the only way to make his vehicles affordable in the current macroeconomic environment — have not been friendly to Tesla’s stock, either. With no clear end in sight, investors, nervous about ongoing reductions in gross margins, have been feeling negative toward Tesla the past month.
The stock is down around 16% over the past month, falling again in pre-market trading.
The only possible bright spot on the horizon for Tesla is that the company is planning to increase the prices of several of its models in China, something that could boost investor sentiment.
“This would increase conviction that Tesla auto gross margins have bottomed — a necessary condition for Tesla stock to rise from here,” Gary Black, managing partner of the Future Fund, said.
Related: Key investor highlights the start of a positive trend for Tesla’s stock
Get investment guidance from trusted portfolio managers without the management fees. Sign up for Action Alerts PLUS now.
