What Happens When Tesla Starts Taking Used Car Market Share?

Good things happen if you’re Tesla Inc TSLA, not so good things if you’re any other automaker.

“Consumers are going to feel better purchasing a used Tesla as opposed to a used traditional car with hundreds of thousands of miles on it,” Gene Munster, managing partner at Loup Ventures, told Benzinga. The fact that Tesla motors are guaranteed for life makes the option particularly palatable.

Dominant In All Ways

Despite reports of swelling in used inventory and market oversaturation among traditional automotive manufacturers, Munster foresees no problem in Tesla clearing its pre-owned stock. Recent financial figures seem to back his assessment.

So far this year, Tesla boasts used vehicle sales of $151.1 million and counting ━ and the mid-year rate is already significantly higher than the 2016 full-year total of $117.4 million, according to Teslarati. The 29-percent annual growth compares with 50 percent growth in new Tesla units.

Driving Distribution

For its new car business, Tesla is known for direct-to-consumer sales, a model that bypasses dealerships and, in some states, precludes Tesla from participating in the market altogether. Michigan, home of the Big Three, for example, requires the use of third-party sellers. Many U.S. consumers are then forced to drive out of state to make a purchase.

Tesla hasn’t yet caved to state demands and embraced the dealer model, and Munster doesn’t see it changing course as it penetrates the used vehicle market. In fact, he sees a 1-percent chance of Tesla partnering with dealers or even franchising its own stores.

“The company views the dealership model as a waste of money,” he said, noting that Tesla keeps just 2 percent in dealer fees and financing.

So how will the used cars get to market? Tesla currently sells through its own and independent sales websites as well as existing showrooms in permitting states.

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