Tesla CEO Elon Musk is warning car buyers that they need to take into account that the electric vehicle transition might cause “residual values of gas/diesel cars to plummet in the coming years.”
Last year, Musk claimed that Tesla vehicles are now “appreciating assets” due to their self-driving capability.
He aims for Tesla vehicles to become revenue-generating assets for their owners, but if the price doesn’t increase, the value would still depreciate since new buyers could still buy the vehicles for the MSRP.
The CEO later confirmed that Tesla plans to “substantially” increase the price of the Full Self-Driving option over time:
Please note that the price of the Tesla Full Self-Driving option will increase substantially over time.
He confirmed that it is what he meant by Tesla vehicles becoming “appreciating assets”:
— Elon Musk (@elonmusk) April 13, 2019
But beyond seeing Tesla vehicles potentially gaining in value and generating revenue, Musk now also warns that it’s a risk buying gasoline cars due to the potential for an accelerated depreciation:
Your comment above: “Who in their right mind would buy an ICE after 2025 knowing its residual value will be zilch? Legacy auto: go EV or go BUST!” is super important for car buyers. Residual values for gas/diesel cars will plummet in coming years.
— Elon Musk (@elonmusk) February 10, 2020
Musk was responding to a comment about the tipping point of electric vehicles when most people see people see that the electrification of the auto industry is inevitable.
This is something that I have been hammering for a while now. I’m glad Elon is talking about it because most people need to be informed about this. In fact, it was a big part of the genesis of this site back in 2013:
Cars will change more in the next 10 years than they have in the last 100.
Almost every car on the street right now will be valueless.
— Seth Weintraub (@llsethj) November 18, 2013
I am not sure when Tesla’s vehicles will become appreciating or revenue-generating assets, but I have a way better idea of when gasoline car depreciation will accelerate drastically.
I already wouldn’t buy a new gasoline car right now because I’d be extremely concerned about its resale value in five years.
This mind-set comes from my understanding of the electrification of the auto industry being ready to accelerate significantly in the next few years, and it having a broader impact than people think in a shorter timeframe.
Once this becomes clear to other people, which I think will happen with all the new EVs hitting the market in the next few years, they will adopt the same mind-set that electric vehicles will take over and even if they are themselves not ready to buy a new electric car, they will not buy a new gasoline car in fear of the resale value.
I predict most automakers won’t be ready for this.
This will create a cascading effect, and even without subsidies, the demand for electric cars will start to significantly outpace production.
I don’t know exactly when this is going to happen, but I predict it will be between 2022 and 2025.
What do you think? Let us know in the comment section below.
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