Tesla CPO: 'Playing the Long Game'

Tesla Model S
IRVINE, Calif. - 

The move by Tesla Motors to roll out a certified pre-owned offering online is good one, says Alec Gutierrez, but also a gradual one.

And eventually it could open doors to more brand exposure for the automaker.

During a conference call with reporters on Friday, the Kelley Blue Book senior analyst estimated that Tesla sells an average of 1,500 to 1,700 new Model S vehicles in a typical month.

“There’s still a relatively low volume manufactured, It’s going to take a lot of time for them to have enough vehicles coming back to sell as certified pre-owned. So, it’ll be a slow ramp-up, but from my perspective, they’re playing the long game here,” Gutierrez said of Tesla’s CPO growth potential.  

“They want to have enough certified pre-owned inventory out there to help give consumers something in between the Model 3, whenever that arrives, and the full blown Model S or Model X, when that arrives,” he said. “So to me, it’s a good play, but a long-term strategy for sure.”

He points out that on the Tesla CPO website, the certified cars are only available in about 10 to 12 markets currently, with a few dozen units on sale in each.

Without a “traditional lease program,” there’s not copious amounts of used Teslas in the overall used-car market, in general, Gutierrez said.

And when KBB does spot them in its own data set, they’re typically listed  “at premium prices,” he added. In fact, 1- to 3-year-old Teslas are still being listed at $80,000 to $100,000, Gutierrez said.

“So now what Tesla has done is offered buyers a little more peace-of-mind, offered a four-year extended warranty on their units, and added a little bit of price stability where prices actually, in some cases, look a little bit more affordable than what you can find today on a dealer’s lot,” he said.

A quick look at the Tesla's site for pre-owned Model S vehicles on Friday showed the lowest-priced option as a 2013 model-year 60kWh Model S with 29,691 miles listed in Los Angeles for $59,000.

Additionally, what Gutierrez finds interesting are a few of the “unanswered questions,” such as, where is the company going to store these CPO Teslas?

“They’re going to have to have these vehicles stored somewhere, right? And so that says to me, there might be the need to purchase warehouses, which could then convert to showrooms,” he said. “Or maybe they’re already thinking about investing in showrooms to showcase these vehicles, which opens the door to them showcasing their new inventory.”

Questions as there may be, Gutierrez certainly sees the demand for certified Teslas. Based on the prices that he has observed on the Tesla CPO website, the certified route may be an ideal one for consumers looking to enter the Tesla brand at a lower price point, but still at a higher quality.

“I look at this as a good entry point for someone who is not quite in a position to buy a brand new Tesla, but wants one with a few miles on the odometer with factory backing,” Gutierrez said. “I think this will be a good way to expose additional folks to the brand.”

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