It's been a bit of a weird year for Tesla (TSLA 0.62%) investors. The company is dealing with external factors hurting business, including tariffs on imported vehicles and parts, a decline in global sales, increasing competition in China amid a brutal price war, mounting lawsuits, a talent exodus, and consumer backlash against CEO Elon Musk's political adventures. Despite all those negative developments, Tesla's stock has surged 54% higher over the past 12 months. And one recent move could help move more vehicles, which is exactly what the company needs in the near term.
Worrisome pricing?
Political backlash has put pressure on Tesla's used-car pricing. So much pressure, in fact, that even though Tesla is often considered a premium brand, its used vehicles are now selling almost as cheaply as the average used car -- and the latter's price is moving higher, while Tesla's prices continue to move lower. The problem started last year when the broader used car market in the U.S. started seeing values drop, but the broader market began recovering in the spring, and Tesla values continued to drop.
Image source: Tesla.
What's Tesla to do?
While consumer backlash is likely to eventually fade, Tesla's primary problem in the near term is to reverse its sales decline. Tesla recently started offering leases of certified preowned cars, which is fairly rare in the automotive industry. It's also offering $0 down as it tries to load as many deliveries into the third quarter as possible before the federal $7,500 tax credit on new electric vehicles (EVs) and the $4,000 credit for used EVs expire at the end of September.
The industry is banking on demand being pulled into the third quarter, and Tesla is aiming to capture as many sales as possible with the new leasing strategy. Telsa is doing this for the first time, and these certified preowned vehicles, mostly Model 3 and Model Y vehicles, are being offered for as little as $215 per month with $0 down for a 24-month lease and 10,000 miles per year. Tesla is also offering a 12-month lease and up to 15,000 miles annually, with $0 down but an acquisition fee of nearly $700.
NASDAQ: TSLA
Key Data Points
Whether you're a fan of Musk or not, or Tesla or EVs in general, this is a compelling deal and the cheapest way to get into a Tesla at the moment. The problem is that used Teslas have been piling up, as the brand took a hit this year, and this does appear a little desperate.
Tesla is also trying a new strategy with its Cybertruck that has left investors and analysts unimpressed with its deliveries. Tesla raised the price of the high-end version of the Cybertruck to $114,990, up from $99,990, in the U.S., per listings on its website. The Cybertruck now comes with what Tesla calls a "Luxe Package" including Full-Self Driving (FSD), four-year wheel and tire protection, and free supercharging access. Unfortunately, pricing changes on a single trim, even a high-end and more profitable trim package, aren't likely to move the needle for either deliveries or financials.
What it all means
With Tesla's stock up 54% over the past year despite all the negative developments, it's clear that investors are truly hoping the EV maker will capture lightning in a bottle with earnings growth driven by autonomous vehicles. Investors are in a tough position as they revisit their investing thesis for a company that might be in the middle of transitioning from an automaker to a company defined by self-driving vehicles, robotics, and artificial intelligence -- maybe not what everybody signed up for when originally investing in Tesla for its electric vehicles. What it all means is that the risk of owning Tesla is higher now and that the company will face a few bumpy quarters as the markets deal with losing the EV tax credits -- so buckle up and prepare for the ride.
