Tesla (NASDAQ:TSLA) is taking steps to satisfy European car rental businesses after persistently falling retail prices led to a decline in the value of its fleet and slow service and high repair costs caused dissatisfaction among corporate customers, according to a Reuters report on Monday.
The actions include unadvertised discounts on new vehicles and addressing widespread complaints about service, repairs and ordering processes, after years of claims by fleet managers and rental businesses that the electric vehicle (EV) maker had overlooked these issues.
Tesla’s strategy of cutting retail prices is aimed at stimulating purchases amid weakening global demand for electric vehicles and growing competition, especially from Chinese EV makers like BYD. But the discounts have hurt margins for major customers in Europe, where fleet purchases account for nearly half of car sales, Reuters reported, citing conversations with nine executives from major car rental and leasing companies.
Leasing companies, which base their rental rates on the expected resale value of their vehicles, have suffered financial losses due to the sudden depreciation. Richard Knubben, CEO of Brussels-based car leasing and leasing group Leaseurope, said there was “nothing more detrimental” than the continued depreciation of the assets of fleet buyers.
“Tesla is actively communicating with our members: We can offer you rebates and compensation,” Knubben said. “But the decline in Tesla’s resale values has been so rapid, I don’t think the rebates they’re offering are enough.” While Tesla’s decline in resale values and strained relationships with fleet customers are recognized, Tesla’s efforts to remedy the situation have not been previously disclosed, Reuters noted.
An executive at a prominent European car rental company, who chose to remain anonymous, said Tesla has extended its non-advertised end-of-quarter discounts of up to €2,000 ($2,134) for Model 3 and Model Y purchases by rental companies from mid-2023, with these discounts now being offered throughout the year.
Tesla is reportedly facing similar issues with the resale value of its vehicles to rental car companies. Florida-based car rental company Hertz, for example, is selling Teslas in the US, while German competitor Sixt has stopped buying them. Sixt is reporting a €40 million ($42.7 million) drop in revenue by 2023 due to falling residual values of EVs, including Teslas.
Source: Investing
