Back in 2019, Elon Musk made a bold statement regarding Tesla vehicles, claiming that they would appreciate in value due to their full self-driving (FSD) capabilities. According to Musk, once the additional software updates were completed and regulatory approval was granted, Tesla vehicles on the road would achieve full autonomy. He reiterated this claim as recently as June 2023, suggesting that cars equipped with FSD could be worth five times their current value in the future.
Musk also envisioned a scenario where Tesla’s driver assistance suite, misleadingly called “Full Self-Driving,” would alone be valued at $100,000. This is because, with the necessary regulatory green light, these self-driving Teslas could operate as taxis, generating income for their owners.
However, four years after Musk’s 2019 prediction, the reality has been different. The average used Tesla Model 3 is now selling for $29,000, and the anticipated regulatory approval for FSD has yet to materialize. The premise that used cars typically appreciate in value was briefly true during the early 2020s due to a halt in automotive production, but Musk’s forecast has largely been proven incorrect outside of that anomaly.
The value of used Teslas has significantly declined in recent times, particularly as Tesla has initiated price cuts to maintain its edge in the increasingly competitive electric vehicle (EV) market. In 2020, Tesla accounted for 80% of all EVs sold in America, a figure that dropped to 64% by 2022 and further to 55% last year.
In response to growing competition from manufacturers like Ford, Hyundai, Kia, Audi, Volkswagen, and others, Tesla has aggressively reduced its prices, which, in turn, has devalued used Teslas. According to Cox Automotive, sticker prices for new Teslas fell by about 21% over the past year.
This price reduction strategy has had a notable impact on the resale market. The price of a used 2021 Tesla Model 3 sedan, for instance, has dropped by about 29%, moving from $40,522 in January of 2023 to just $28,700 in January 2024. This depreciation rate is significantly higher than the average for all model year 2021 used vehicles, which saw a value loss of about 19.5% in the same period.
The rapid depreciation of used Teslas was a key factor in Hertz decision to sell off 20,000 electric vehicles, most of which were Teslas. The decline in Tesla’s resale value has prompted concerns about the economic viability of such models for rental car fleets.
The trend of depreciating Tesla values has also influenced the broader market for used EVs, with models like the 2021 Ford Mustang Mach-E and the Tesla Model Y experiencing significant price drops. This ripple effect underscores Tesla’s still dominant but diminishing influence in the EV market.
