By on July 14, 2016

2016 Tesla Model S

Getting a good price for a used Tesla is now solely up to its owner, after the automaker discontinued a program that allows three-year-old vehicles to be bought back for 50 percent of the purchase price.

Tesla dumped the program on July 1, Reuters reports, allowing the company earmarked for the program for other purposes. The program was created to assure would-be owners of a basic resale value after the Model S entered the marketplace.

With production of the Model 3 just over a year away, the electric automaker has its work cut out for it. Its facilities need investment if the company wants to reach an annual production rate of 500,000 vehicles, and that means it needs to access all available cash.

Tesla’s total liability for the guaranteed resale value program was $1.58 billion as of the end of March. A company spokesperson quoted by Reuters said the program was scrapped to (among other things) “offer a compelling lease and loan program to customers.”

As it hunts for new revenue sources, the automaker is fighting a PR battle with media, advocacy groups and regulators over its semi-autonomous Autopilot system. The fledgling technology contributed to a fatal crash in May, which raised questions about the system’s safety. The National Highway Traffic Safety Administration, National Transportation Safety Board and Securities and Exchange Commission are all looking into various factors surrounding that crash.

Now, Consumer Reports has joined the fray. In a story titled “Tesla’s Autopilot: Too Much Autonomy Too Soon,” the product testing publication accuses the automaker of sending mixed messages about the abilities of the system.

“Consumer Reports experts believe that these two messages — your vehicle can drive itself, but you may need to take over the controls at a moment’s notice — create potential for driver confusion,” the story reads. “It also increases the possibility that drivers using Autopilot may not be engaged enough to to react quickly to emergency situations.”

The publication wants Tesla to disable the automated steering function (“Autosteer”) in its vehicles until the system can verify that a driver’s hands are on the steering wheel. It also asks all automakers to give their automated features “descriptive” names, rather than “exaggerated” and potentially misleading ones.

Other requests of Tesla include testing automated systems fully before offering them in vehicles, and issuing clearer instructions to owners on how to operate the systems safely. (Tesla said it plans to do the latter in the wake of recent crashes.)

Despite the growing call to put a lid on Autopilot, Tesla CEO Elon Musk has said he has no plans to stop offering the feature in new vehicles. If you’re looking for a different take on semi-autonomous driving — one written from the point of view of a driver, not a consumer advocate — TTAC’s Jack Baruth shares his experiences here.

[Image: Tesla Motors]

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24 Comments on “Tesla’s Buyback Program Bites the Dust; Consumer Reports Takes on Automaker over Autosteer...”


  • avatar
    APaGttH

    The solutions to fix autopilot seem pretty simple to me. Tesla says the system is really meant for use on limited access multilane highways and the driver needs to keep their hands on the wheel. So why not use location data to go, “gee, not a limited access highway, you can’t use full autopilot,” and, “gee you took your hands off the wheel, turning off autopilot in 5, 4, 3, 2, 1…dude, put your hands on the feckin’ wheel!”

    I figure a 3 to 5 second window is more than long enough for that rare steering with your knees occasion or when both hands might for just a fraction of a second be off the wheel.

    I don’t understand why Tesla is digging in their heels here to have it so that autopilot is used only in the intended scenarios. These seem like very easy software fixes.

    • 0 avatar
      bricoler1946

      A 50% loss after 3 years of ownership doesn’t sound too rosy, that’s quite a depreciation hit in my book.

      • 0 avatar
        jpolicke

        Luxury cars typically depreciate faster than average, but with EVs, there is also the certainty that a very expensive battery will need replacement at a certain point. Tesla is the sole source for replacement and they strenuously avoid publicizing what that actual cost is or will be. Buying an electric car with 37.5% of its warranty used up is not for the faint of heart.

      • 0 avatar
        SCE to AUX

        @bricoler1946:

        50% depreciation in 3 years is pretty typical. My Leaf lost about 75% in 3 years (AFTER deducting the Federal credit from the MSRP!), so I’m glad I leased.

        With EVs, it’s all about battery degradation.

        • 0 avatar
          bricoler1946

          Thanks,I didn’t know that but I still lust for one.

        • 0 avatar
          jpolicke

          If Tesla is taking them in trade for 50% of original price, how much do they add when they sell them?

          • 0 avatar
            Luke42

            “If Tesla is taking them in trade for 50% of original price, how much do they add when they sell them?”

            Here are the listings:

            https://www.teslamotors.com/models/preowned

            It looks like prices on used Model S’s have gone down significantly since the Model 3 was widely publicized.

          • 0 avatar
            VoGo

            2-3 year old Model S 60 are offered for $50K. If I ought a new one, I’d pay around $60K after tax impacts for a base model, maybe $70K nicely optioned.

            That’s not much depreciation in my book – maybe 10%/year.

    • 0 avatar
      SCE to AUX

      @APaGttH:

      Tesla’s system is an NHTSA Level 2. Unwashed consumers and mass media expecting something else (like Level 4) will be disappointed.

      http://www.techrepublic.com/article/autonomous-driving-levels-0-to-5-understanding-the-differences/

  • avatar
    orenwolf

    “allowing the company earmarked for the program for other purposes.”

    What?

    • 0 avatar
      SCE to AUX

      “allowing the MONEY earmarked for the program TO BE USED for other purposes”

      • 0 avatar
        orenwolf

        Now that makes a lot more sense. I couldn’t for the life of me reconcile the word “company” in that context.

        Sadly, I don’t think Steph re-reads his articles after posting (I don’t recall him often commenting on anything he writes, for example), so I wager it will be a long time correcting that sentence. :/

      • 0 avatar
        ToddAtlasF1

        I don’t see how the money has been freed up for anything. Tesla can stop preparing to support the residuals of cars they sell today, but how are they off the hook for supporting cars they sold yesterday? They still have three years of remaining liability.

        • 0 avatar
          VoGo

          If Tesla has been accounting properly, then they put aside money upfront when they sold a car, in the event they had to take it back at the guaranteed resale price. By eliminating the guarantee, Tesla no longer has to set aside that money for new sales.

          • 0 avatar
            ToddAtlasF1

            Sorry. I spent too much time working for progressive politicians to consider that improbability. Planners I worked for would have looked at it from three angles: How much does one set aside when betting against the three year residual of one’s unknown product? Besides, there’s always infinite revenue in the future! If things don’t work out, we won’t be here to worry about it.

          • 0 avatar
            VoGo

            It’s pretty easy for statisticians to model expected residuals and the appropriate amount to set aside by using options theory from Wall Street.

          • 0 avatar
            stuki

            +1.

            Tesla may well be offloading the depreciation risk as well, which may have gotten pricier due to the less than positive press they have gotten recently. And even if they choose to carry it themselves, they have to account for it properly.

          • 0 avatar
            ect

            I haven’t looked at their statements, but accounting principles don’t require them to set aside actual cash in a dedicated account, but only to set up an accounting reserve as a liability.

            Even then, they probably have scope to adjust the reserve by whatever they think they could actually sell the cars for, so it won’t be anything like the $1.5 billion that others have thrown around.

  • avatar
    gasser

    This is another of the times when uncertainty in the marketplace creates opportunity. First, 50% residual on a 3 year old luxury car is with in the ballpark. Lots of high end sedans end up going for low 50%s of list after 3 years. After all, is a 3 year old luxury car still a status symbol? Secondly there is the battery issue raised above. No one is exactly sure how long the battery will last (especially with varying usage and varying recharging cycles at different voltages).
    Also we don’t know the future price of a battery pack in 2018 or 2019, or the price of any other proprietary parts from Tesla. Right now these cars seem to be clustered in major cities. A glut in one area, might lower prices enough to warrant buying, shipping and selling in another geographic area. For me, however, I’m not enough of a betting man to wager $40K to get a 3 year old Tesla and trying driving it to year 6 when it might be worthless.

  • avatar
    SCE to AUX

    I am becoming concerned that Tesla is diluting its own brand by showering the market with countless permutations of its cars.

    It is getting difficult to track the various combinations of battery size, motor power, RWD/AWD, and trim levels. They don’t even really go by model year. The constant revisions are released like antivirus software updates. This in turn will make it hard to assign a used-car valuation to YOUR particular car, which I’m afraid will result in artificially low numbers.

    Upon reflection, the Model 3 I’ve pre-ordered will only be fresh for a few months, until Tesla offers some better configuration or option. Oh well.

    • 0 avatar
      Luke42

      I’m about 100,000th in line for my Model 3 abd plan to configure it with middling options — so I’m hoping to get a better car than those in the front of the line.

      The model year thing has seemed silly for most of my life. We need something to tell which is which, and I’d be happy with semver customized for the automotive world.

  • avatar
    TeslaS

    I guess no one actually used it. I sold mine at about 3 years (2013 model) for more than 60%

  • avatar
    jthorner

    Back in the good old days of TTAC, we would have a Tesla Death Watch series to enjoy :).

  • avatar
    shedkept

    Try trading one in to your local MB, BMW, GM, Lexus, Toyota etc. dealer.

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