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Tesla doing damage-control, discounts for European fleet buyers

TESLA

 

Tesla is actively working to address concerns from European leasing companies following a series of retail price cuts that devalued their fleets and strained relations with corporate clients due to slow service and costly repairs.

Efforts to remedy these issues include informal discounts on new car purchases, especially those in stock, and initiatives to tackle widespread complaints regarding service, repairs, and ordering processes. According to interviews with nine executives from major leasing and rental car firms, along with about a dozen corporate fleet managers, Tesla has been responsive to these concerns after years of neglecting them.

The retail price cuts, aimed at boosting sales amidst softening electric vehicle demand globally and increased competition from Chinese manufacturers like BYD, had significant repercussions for Tesla’s largest customers in Europe. Leasing companies, which base lease calculations on projected resale values, suffered losses when sudden price drops undermined these values.

Richard Knubben, director general of Leaseurope, emphasized the detrimental impact of continuous devaluation of fleet assets, despite Tesla’s efforts to offer discounts and compensation. However, he expressed skepticism about the adequacy of these measures given the rapid decline in Tesla’s residual values.

While Tesla’s struggles with resale values and tensions with fleet customers are well-known, its recent efforts to address these issues have not been previously reported. The automaker has reportedly offered unofficial end-of-quarter discounts on certain models for leasing-company purchases since mid-2023, with these discounts becoming available throughout the year.

Despite improvements in Tesla’s service, Tim Albertsen, CEO of Ayvens, Europe’s largest auto-leasing company, highlighted the damaging impact of falling resale values. He acknowledged Tesla’s efforts to provide solutions but declined to provide specific details.

In response to declining Tesla values, Arval, the car-leasing unit of BNP Paribas, is exploring partnerships with Chinese automakers for EV purchases. Bart Beckers, Arval’s Deputy CEO, criticized Tesla’s pricing strategies and noted the new focus of Chinese EV makers on maintaining strong resale values.

The impact of Tesla’s price cuts extends beyond leasing companies to rental car firms like Hertz and Sixt, which have faced challenges with depreciating EV values. Sixt reported a €40 million reduction in earnings due to lower residual values on EVs from Tesla and other brands.

Fleet customers, representing a significant portion of Tesla’s European sales, have been crucial for the automaker, particularly in meeting internal climate goals and EU emissions targets. However, increased competition from Chinese automakers and legacy manufacturers is reshaping the market landscape.

Despite mixed experiences with Tesla, some fleet customers like Octopus Electric Vehicles have maintained positive relationships with the automaker. CEO Fiona Howarth acknowledged Tesla’s pioneering role in the EV market but stressed the need for realistic resale values.

However, other fleet managers, such as Lorna McAtear from UK energy firm National Grid, have faced numerous challenges with Tesla, including high repair costs, defective deliveries, and poor customer service. McAtear highlighted the frustration among fleet operators and expressed hope for improved communication and service from Tesla.

In summary, while Tesla is actively addressing concerns from European leasing companies and fleet customers, challenges remain regarding pricing strategies, service quality, and customer relations. The automaker’s response to these issues will be critical in maintaining its market position amidst growing competition in the EV sector.

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