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REUTERS is reporting that Tesla is in damage control and working to rebuild relations with some European leasing companies after its repeated retail price cuts tanked the resale value of their fleets. 

Leasing companies are also reported to be concerned at Tesla’s slow service and expensive repairs alienating corporate rental and leasing customers.

Rental operator Sixt told Reuters that the price cuts by Tesla and other brands had cost it $A65 million in lost profits with one fleet operator warning Tesla that it was “shooting itself in the foot” by making such harsh price cuts.

In an exclusive report, Reuters said that Tesla is offering unofficial discounts on purchases of new cars and is aiming to address widespread service, repair and ordering complaints after years in which fleet managers and leasing firms say Tesla ignored those problems.

Reuters compiled its report after interviews with nine executives from major leasing and rental-car firms, along with about a dozen corporate fleet managers.It said that Tesla cut retail prices in order to boost sales in response to softening electric-vehicle demand globally as well as rising competition, especially from Chinese EV makers such as BYD.

“But that damaged the bottom lines of its biggest customers in Europe — where fleet purchases represent nearly half of auto sales,” Reuters said.

“Leasing companies buy new cars and arrange leases calculated on how much they believe they can sell them for at the end of the lease. Sudden drops in price undercut those residual values, costing leasing firms money.”

Richard Knubben, the director general of Brussels-based Leaseurope, a leasing and rental industry group which represents national groups across 31 countries, said there was “nothing worse” than continuously dropping the value of a fleet buyer’s assets.

“Tesla is now actively telling our members: We can give you discounts and compensate you,” Mr Knubben said.

“But Tesla’s residuals have dropped so fast, I’m not sure the discounts they’re offering are enough,” he said.

Reuters said that Tesla did not respond to requests for comment.

Reuters said Tesla’s falling resale values and tensions with fleet customers are known but its damage-control campaign to address them has not been previously reported.

A top executive at a large European car-leasing firm, who spoke to Reuters on condition of anonymity because he did not have permission to comment publicly on Tesla, said that, starting in mid-2023, Tesla offered unofficial end-of-quarter discounts on its Model 3 and Model Y by up to 2000 euros ($A3270) for leasing-company purchases, if those vehicles were in stock.

Since late last year, he said, those discounts have been available all the time.

Tim Albertsen, CEO of Ayvens  — Europe’s largest auto-leasing company with a fleet of 3.4 million cars, about 10 per cent of which are EVs — said Tesla’s service has improved but its falling resale values have been damaging.

“Tesla has understood that and is coming with solutions that help us with that,” he said.

Mr Albertsen declined to elaborate on what Tesla has done to mitigate Ayvens’ losses on EVs.Reuters found that Arval, the car-leasing unit of BNP Paribas, is now talking to three Chinese automakers about buying EVs after taking losses tied to declining Tesla values. 

When Tesla first started cutting prices last year, Arval told it: “You are really shooting yourself in the foot,” according to Arval deputy CEO Bart Beckers.

Arval leases about 170,000 EVs as part of its 1.7 million-vehicle fleet, Mr Beckers said. 

He said Tesla is working to fix repair-and-service problems but added that its “new challengers” — Chinese EV makers — seem to be avoiding Tesla’s mistakes by focusing on maintaining strong resale values for cars.

Tesla faces the same resale-value problem with rental-car companies. 

Hertz has been selling off Teslas in the US market, while German rival Sixt has stopped buying them. 

Asked about the impact of Tesla’s price cuts, Sixt said lower residual values on EVs from Tesla and other brands reduced its 2023 earnings by 40 million euros ($65 million).

According to Reuters interviews with about a dozen corporate fleet managers the wire service said that slow and expensive Tesla service has been another sore point with European leasing companies and their customers, 

Most declined to be identified because they are actively seeking to resolve problems with Tesla but Reuters reported complaints that Tesla repairs take too long and cost far more than other vehicles, partly because of pricey parts.

UK energy firm National Grid’s fleet manager Lorna McAtear told Reuters she has been compiling data on repair costs and found Tesla’s to be triple the industry average.

Other problems, Ms McAtear told Reuters, include a cumbersome ordering system and cars arriving with defects. For instance, she said, Tesla delivered a number of EVs with warped windshields and declined to fix them under warranty.

National Grid has more than 500 Teslas in its company-car fleet of 2000 vehicles. Ms McAtear said she has planned to propose her company drop Tesla from its fleet unless the problems are addressed. 

Meanwhile, Tesla’s chief Chinese rival, BYD, is starting to deliver cars to National Grid.

However, not all Tesla fleet customers were negative.

Octopus Electric Vehicles, the car-leasing arm of UK energy firm Octopus Energy, has about 5000 Teslas among about 15,000 EVs. 

CEO Fiona Howarth said that Tesla, as an EV pioneer, needed time to figure out service operations and that legacy automakers now face similar challenges with their own EVs. She said Tesla resale values were artificially high during the coronavirus pandemic and needed to come down.

“We’ve had a really good working relationship with Tesla,” she told Reuters.

By Neil Dowling

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