“Affordable” Tesla Buyers Are “Moving Up”
During the recent quarterly earnings call, Tesla CEO Elon Musk mentioned the top five non-Tesla cars that are being traded in by buyers of the new Model 3. He didn’t give numbers or even rank the five, so this is all we have (in alphabetical order).
- BMW 3-Series
- Honda Accord
- Honda Civic
- Nissan Leaf
- Toyota Prius
We think each of these tells a story, albeit a sketchy one since we don’t really know all the details. Let’s take a closer look.
First, a word about trade-ins. Unlike conventional auto dealers, Tesla doesn’t have a used car department selling trade-ins. They offer to match what CarMax would pay for your car—or look for bids from other local dealers or wholesalers—and apply that money to your Tesla purchase. Of course, that may be less than you could get selling your car privately. Of course, this list specifically excludes trade-ins of other Tesla models, which would tell a different story. Cannibalizing your other models is not a sales tactic that would bode well.
The appearance of the 3-Series is a bit of a self-fulfilling prophecy. Tesla pitched the Model 3 as the successor to BMW’s legendary “affordable performance” machine. But, I would caution that while the 3-Series is a great handling car with plenty of power, it’s status in Silicon Valley (home territory for Tesla and also a prime sales region for BMW) is more of a “safe” car, one that no one will question. In my observation, 3-Series in SV tend to be automatics with drivers more concerned about being seen in a BMW rather than testing the cornering of their car on the track.
The Model 3 is a logical step-up for Leaf drivers, much as the Leaf was initially saw buyers moving up from Toyota Prius. It’s not clear whether this reflects drivers who deemed the second generation Leaf too conservative or simply not enough EV.
Given the popularity of the Prius as the go-to car for eco-drivers, seeing a substantial number of them traded in on the Model 3 makes sense. However, it’s worth noting that Prius owners are more than doubling the purchase price in this move, which may reflect the anecdotal stories of those who bought the Toyota while being able to afford more expensive vehicles.
These two trade-ins are head-scratchers. Does their appearance on this list just reflect their popularity and the down-market appeal of the Model 3? Does it mean that Honda underestimated the potential appeal of the Fit EV (which they just announced is coming back)?
We expect more information will be forthcoming in future months about Model 3 buyer demographics, which should help fill out the picture of the EV phenomenon we are observing.
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