by Nick Carey and Marie Mannes
LONDON (Reuters) – Tesla is trying to assuage the anger of some car leasing and rental companies in Europe, after repeated price cuts for its electric vehicles have caused the value of their fleets to fall while these professional customers were already complaining about the slowness of its service and the amount of its repairs, shows a Reuters investigation.
Among the measures decided by Tesla are unofficial discounts on purchases of new cars if they are in stock. Efforts have also been made to address widespread service, repair and ordering complaints, with auto fleet managers and rental companies saying Tesla has ignored these issues too much for years. These grievances were collected during interviews conducted by Reuters with nine executives of large rental and leasing companies, as well as with a dozen corporate fleet managers.
To cope with the slowdown in global demand for electric vehicles (EV) and the intensification of Chinese competition, notably that of BYD, Tesla has lowered its retail prices in Europe, China and the United States. .
This price reduction, however, weighed on the results of the group’s large customers in Europe, where fleet purchases represent almost half of automobile sales.
Leasing companies buy new cars and set up lease contracts based on how much they think they can sell them for at the end of the contract. Unexpected price drops reduce the residual value of vehicles, costing leasing companies money.
There is “nothing worse” than the continued decline in the value of a fleet buyer’s assets, says Richard Knubben, managing director of Leaseurope, a Brussels-based leasing federation which represents companies in the sector in 31 countries.
“Tesla is now actively saying to our members: ‘We can give you discounts and compensate you,’” continues Richard Knubben.
“But the residual value of Teslas has fallen so quickly that I’m not sure the discounts offered are enough,” he adds.
Tesla did not respond to Reuters’ requests for comment.
While the decline in the resale value of Tesla vehicles and tensions with fleet customers are nothing new, the group’s initiative aimed at containing the anger and damage caused by its policy has so far never been successful. been made public.
A high-ranking executive at a major European car rental company, speaking on condition of anonymity, said that since mid-2023, Tesla has been offering leasing companies unofficial end-of-quarter discounts on its cars Model 3 and Model Y up to 2,000 euros as part of a purchase when the vehicles are in stock.
Since the end of last year, he added, these discounts have been available continuously.
Tim Albertsen, managing director of Ayvens, Europe’s leading car leasing company with a fleet of 3.4 million vehicles, of which around 10% are EVs, noted an improvement in Tesla’s services. However, he deplored the decline in the resale value of vehicles. “Tesla understands this and is offering solutions that help us solve this problem,” he said, without elaborating.
Arval, the car rental division of BNP Paribas, is currently talking to three Chinese automakers about purchasing EVs after suffering losses linked to the falling value of Tesla vehicles.
Reacting to Tesla’s price cut last year, Bart Beckers, Arval’s deputy CEO, said of the American carmaker: “You’re really shooting yourself in the foot.”
In a fleet of 1.7 million vehicles, Arval rents around 170,000 EVs, Bart Beckers said, noting that Tesla is working to resolve issues related to repairs and its services in general. He added that the automaker’s “new challengers” – Chinese EV makers – appeared to be avoiding Tesla’s mistakes by focusing on maintaining a strong resale value of the cars.
The traditional car rental market is also suffering from problems caused by the decline in the resale value of Tesla vehicles. Hertz has sold its fleet of Tesla vehicles in the United States, while its German competitor Sixt has stopped purchasing new models.
Asked about the impact of Tesla’s price cuts, Sixt said the decline in the residual value of EVs from Tesla and other brands had reduced its profit for 2023 by 40 million euros.
ESSENTIAL CUSTOMERS
Fleet customers are vital to the entire automotive chain, particularly in Europe, where companies often lease large numbers of company cars for their employees, in part because of the associated tax benefits. According to market research firm Dataforce, purchases by car leasing and rental companies accounted for 44% of Tesla’s sales last year in the UK and 15 EU countries.
In the first quarter, Tesla sales in these countries fell 2.3%, while the market as a whole grew 3.5%. Despite the decline in fleet sales, the share of car leasing and rental companies in Tesla’s revenue in these markets increased to 49%.
But after a long period of strong growth, Tesla’s sales and profits are now in decline overall. The automaker reported an 8.5% drop in global deliveries during the first quarter, the first decline in four years.
The decline in fleet sales in the UK and 15 EU countries comes after growth of 57% in 2023 year-on-year, according to Dataforce. Tesla posted the same percentage growth for its overall sales in Europe, according to the Association of European Automobile Manufacturers.
Tesla, a pioneer in electric vehicles, has long benefited from this advantage, the group’s European client companies having few alternatives to achieve the climate and Co2 emissions objectives set in the bloc.
But this situation is changing rapidly. Chinese automakers, including BYD, are offering less expensive electric models in Europe and are ruthlessly courting Tesla’s corporate customers, according to fleet managers and leasing company executives. Traditional automakers like Volkswagen and BMW are also producing increasingly competitive EVs.
pent-up FRUSTRATION
The slowness and cost of Tesla services are another sore point for European leasing companies and their customers, according to Reuters interviews with a dozen corporate fleet managers. Most of them declined to be identified, keen to resolve ongoing issues with Tesla.
They note, however, that the American manufacturer’s repairs take too long and cost much more than the competition, partly because of the price of spare parts.
Tesla, however, displays a good level of satisfaction among certain fleet customers.
Octopus Electric Vehicles, the car rental subsidiary of British energy company Octopus Energy, has around 5,000 Tesla vehicles in a fleet of some 15,000 EVs. The group’s chief executive, Fiona Howarth, believes that Tesla, as an EV pioneer, needs time to understand service operations and that traditional automakers now face similar challenges with their own EVs.
According to her, the resale value of Tesla vehicles was artificially high during the COVID-19 pandemic and it makes sense that it is now falling.
“We’ve had a very good working relationship with Tesla,” she said.
Lorna McAtear, head of the vehicle fleet at the British energy company National Grid, for her part, spoke of much more difficult relations with Tesla. Compiling data on repair costs, she found that Tesla’s was three times higher than the industry average.
Lorna McAtear also notes problems with the order book, as well as cars being delivered with defects. She cites in particular vehicles received with deformed windshields that Tesla refused to repair under the warranty.
National Grid has more than 500 Tesla vehicles in its fleet of 2,000 cars intended for corporate customers. According to Lorna McAtear, the company could remove Tesla models from its fleet if the problems are not resolved. In the meantime, the Chinese group BYD has started delivering vehicles to National Grid.
Lorna McAtear says she insisted on a face-to-face meeting with Tesla representatives in mid-April. During this meeting, the American automaker committed to improving its service and making a change in its ordering system, as well as setting up additional meetings and a “road map” to resolve the problems in progress.
Coming out of the meeting, Lorna McAtear said she felt like “we finally have customer service,” adding: “There were years of pent-up frustration because fleet managers couldn’t communicate with Tesla.”
(Reporting by Nick Carey in London, Marie Mannes in Stockholm and Hyunjoo Jin in San Francisco; with contributions from Christina Amann in Berlin; French version Claude Chendjou, editing by Kate Entringer)
©2024 Thomson Reuters, all rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. “Reuters” and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.