Tesla is making efforts to re-establish relations with some European leasing companies after its repeated retail price cuts tanked their fleets’ value. Additionally, its slow service and expensive repairs affected their corporate clientele. As a damage-control tactic, the carmaker is providing unofficial discounts on purchases of new cars if they are in stock.
It is addressing widespread service, repair and ordering complaints of fleet managers and leasing firms who have alleged Tesla ignored their problems, according to Reuters interviews with nine executives from major leasing and rental-car firms. A dozen corporate fleet managers were also interviewed by the wire service.
The retail price cuts by Tesla were aimed to bolster sales in response to softening electric-vehicle demand globally and rising competition, especially from Chinese EV makers such as BYD. However, the move damaged the bottom lines of its biggest customers in Europe, where fleet purchases represent nearly half of auto sales.
Leasing companies in the bloc often purchase new cars and arrange leases calculated on how much they believe they can sell them for at the end of the lease. But they saw sudden drops in price which undercut those residual values, costing leasing firms money.
Richard Knubben, director general of Brussels-based Leaseurope, a leasing- and rental-industry group which represents national groups across 31 countries, told Reuters, There’s “nothing worse” than continuously dropping the value of a fleet buyer’s assets. “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.”
From mid-2023, Tesla has been offering unofficial end-of-quarter discounts on its Model 3 and Model Y electric cars by up to 2,000 euros (USD 2,134) for leasing-company purchases, if those vehicles were in stock.
Tesla faces the same issue with rental car companies like Hertz and Sixt. While Hertz has been selling off Teslas in the US market, its German rival Sixt has completely stopped buying them because lower residual values on EVs from Tesla and other brands reduced its 2023 earnings by 40 million euros (USD 42.7 million).