- Nearly 50 percent of the European new car market is made up of fleet sales
- Price cuts have reduced Tesla residuals, leading to leasing companies losing out on resale
- Tesla is offering discounts and promises of better service to European fleet buyers
Tesla’s recent and continued price cuts are great for most consumers. But, as with many things in life, there’s always another side to the coin. That’s why, if you were, say, a rental company that had seen the value of your fleet plummet over a short span, you’d be justifiably upset.
Compound that with high repair bills and slow turnaround times for said repairs, and you’re left with some rather unhappy fleet owners. However, it seems that Tesla is trying to make up for it in Europe.
Read: Tesla Price Cuts And High Repair Costs Crash Hertz’s EV Expansion Plans
Tesla triggered a price war last year when it started marking down a number of its popular models in the face of slowing EV sales and increased competition from legacy manufacturers. The American automaker has also seen market share being challenged by Chinese automakers, particularly within Europe.
Nearly half of the European market comprises fleet sales, as many companies lease cars for their employees. According to data from market research firm Dataforce, leasing and rental car firms accounted for 44 percent of Tesla sales from the UK and 15 EU nations in 2023. With Tesla’s global deliveries dropping by 8.5 percent in the first quarter, fleet sales in Europe dropped by 2.3 percent for the same period.
Leasing companies make purchases based on how much they estimate cars can be sold for at the end of the lease period. With repeated price cuts, second-hand Tesla residual values have tumbled, squeezing leasing companies’ bottom lines.
To get firms back onside, Tesla appears to be offering their European fleet buyers additional discounts to make up for it. A report from Reuters quotes multiple industry insiders, saying that the EV maker has provided price cuts exclusively to the leasing industry, with one unnamed executive claiming that Tesla offered a 2,000 euro ($2,134) discount on Model 3 and Model Ys.
However, it could be a case of too little too late. Richard Knubben, director general of Leaseurope, representing national groups across 31 countries, said, “Tesla is now actively telling our members: We can give you discounts and compensate you… But Tesla’s residuals have dropped so fast, I’m not sure the discounts they’re offering are enough.”
The report also highlights Tesla’s higher-than-average repair costs, which are plaguing fleet buyers. The fleet manager of UK energy firm National Grid, Lora McAtear, reports data showing that Tesla repair bills are three times the industry average. Other quality control issues have wreaked havoc, causing a number of Teslas to be delivered with warped windshields, which the company had refused to repair under warranty.
However, after a face-to-face meeting with Tesla representatives last month, McAtear said that she was promised service improvements and a roadmap for resolving other issues. The meeting was a relief, with the McAtear stating that there had been years of frustration not being able to talk to the company. Meanwhile, Chinese rival BYD has begun delivering cars to National Grid, with the Chinese automaker reportedly aggressively courting fleet managers across Europe.
However, not all companies have a dim outlook on Tesla. Fiona Howarth, CEO of car-leasing firm Octopus Electric Vehicles, says that their company has a “really good working relationship with Tesla,” and that other legacy automakers are now facing challenges with high-priced EV repairs and service operation hiccups. She also reasoned that Tesla resale values were artificially high during the coronavirus pandemic and needed to come down.
