Steve Lang, a special contributor to Capital One, wrote an interesting piece a few weeks ago titled, The Tesla Effect: How Tesla Is Changing the Used Car Game. Lang asserts that the once strong demand for European luxury brands is declining dramatically due to the demand for Tesla among European automotive owners. As these European vehicle owners increasingly trade-in their cars for a Tesla, they’re creating a glut of used luxury cars, which is driving down the price of these used vehicles. European vehicles are now traded-in twenty-two percent of the time for a Tesla versus just under eleven-percent for any vehicle other than a Tesla. It seems that Tesla’s Model 3 has truly been a luxury competitor game changer. While a lot of attention is correctly paid to Elon Musk’s comments, pot smoking, manufacturing issues, etc. consumers seem to be ignoring all of that and voting through their increasing purchases of Tesla vehicles – particularly the Model 3. In the article, Lang also asserts that Tesla is changing the definition of what defines a luxury automobile. For those trading in European luxury vehicles to purchase a Tesla, luxury has become technology-focused (autonomous vehicle capability, electric, etc.) as well as vehicle performance driven. Might the introduction of the Tesla Model Y SUV next year only amplify what’s already occurring in the luxury vehicle segment? Will the introduction of more electric vehicles from luxury automakers help their cause? Will the introduction of Rivian’s truck and SUV next year put further strain on traditional luxury vehicles or maybe the truck segment in general? Or can traditional automakers push back with their own models that match or maybe redefine new segment definitions?
Is There a Tesla Effect? If so, What Does it Mean for Traditional Automakers?
