Investor's Corner
The ‘Tesla Effect’ is wrecking Europe’s luxury brands in the 2nd-hand market
There was once a time when plush leather seats, chrome-trimmed knobs, metal buttons, and a loud, grumbling engine were the hallmarks of a luxury vehicle. That was the status quo for a very long time, but with the emergence of Tesla and its tech-focused approach to cars, these age-old definitions of luxury in the automotive industry are getting disrupted.
In a recent article, American bank holding firm Capital One opted to examine a phenomenon in the second-hand luxury car segment that it dubs as “The Tesla Effect.” According to the financial firm, the influx of sales generated by Tesla consumers’ reaction to the brand amid the release of more attainable vehicles like the Model 3 has pretty much wrecked the pre-owned luxury segment. And the biggest victims of the Silicon Valley-based electric car maker are some of Europe’s strongest brands.
A key vehicle in this transition is the Tesla Model 3, which went from zero to 140,000 units sold faster than any other luxury car before. The market’s interest with the electric sedan has been consistent, to the point where it is now a driving force in the US’ used luxury car segment. As more and more luxury car owners trade in their vehicle for a Tesla, traditional high-end brands like BMW and Mercedes-Benz are getting the short end of the stick.
Capital One notes that Tesla currently gets European vehicles as trade-ins 22.2% of the time, over two times the industry average of 10.9%. The result of this is the second-hand market getting flooded with luxury vehicles — vehicles that are so far not seeing an increase in demand. These conditions create a perfect storm for veteran luxury automakers.
Data from the Manheim Market Report reveals that a 2018 BMW 320i lost almost 20% of its value in the first half of 2019 alone, dropping from $37,700 to $30,700. One could say that this is the case considering that the new 320i is a new vehicle, and new cars depreciate at a steeper rate, but Capital One maintains that the decline is usually not as prominent. A Mercedes-Benz B-Class also dropped nearly 30% in the first six months of the year, from $18,500 to $13,250.
A rather surprising result of The Tesla Effect is that customers in the market for pre-owned luxury vehicles could see lower prices for cars like BMW’s 3-Series. With their depreciation being so steep, customers could acquire a three-year-old BMW or Mercedes-Benz sedan at a lower price than a brand new Honda Accord or Toyota Camry.
A key driving force behind The Tesla Effect is the apparent change in priorities among luxury car buyers. While buyers of luxury cars in the past valued the exclusivity of materials used in their vehicles’ accents, consumers today appear to be more focused on how much convenience is offered by a car. In this light, a vehicle that can pull itself out of a parking spot and pick up its passengers seems to be a more preferable purchase over a car that just happens to have exclusive leather seats.
Overall, Tesla seems to be lucky enough to hit its stride at a time when consumers care most about tech and convenience. With its silent, stealthy power and its zero-emissions nature, Tesla’s electric cars are starting to become the preferred vehicle for buyers who grew up in a world where tech moves at an incredibly fast pace, and those that cannot catch the most recent update risk getting left behind.
Tesla stock (NASDAQ: TSLA) has landed an elusive “must own” status from Wall Street firm Melius, according to a new note released early this week.
Analyst Rob Wertheimer said Tesla will lead the charge in world-changing tech, given the company’s focus on self-driving, autonomy, and Robotaxi. In a note to investors, Wertheimer said “the world is about to change, dramatically,” because of the advent of self-driving cars.
He looks at the industry and sees many potential players, but the firm says there will only be one true winner:
“Our point is not that Tesla is at risk, it’s that everybody else is.”
The major argument is that autonomy is nearing a tipping point where years of chipping away at the software and data needed to develop a sound, safe, and effective form of autonomous driving technology turn into an avalanche of progress.
Wertheimer believes autonomy is a $7 trillion sector,” and in the coming years, investors will see “hundreds of billions in value shift to Tesla.”
A lot of the major growth has to do with the all-too-common “butts in seats” strategy, as Wertheimer believes that only a fraction of people in the United States have ridden in a self-driving car. In Tesla’s regard, only “tens of thousands” have tried Tesla’s latest Full Self-Driving (Supervised) version, which is v14.
Tesla Full Self-Driving v14.2 – Full Review, the Good and the Bad
When it reaches a widespread rollout and more people are able to experience Tesla Full Self-Driving v14, he believes “it will shock most people.”
Citing things like Tesla’s massive data pool from its vehicles, as well as its shift to end-to-end neural nets in 2021 and 2022, as well as the upcoming AI5 chip, which will be put into a handful of vehicles next year, but will reach a wider rollout in 2027, Melius believes many investors are not aware of the pace of advancement in self-driving.
Tesla’s lead in its self-driving efforts is expanding, Wertheimer says. The company is making strategic choices on everything from hardware to software, manufacturing, and overall vehicle design. He says Tesla has left legacy automakers struggling to keep pace as they still rely on outdated architectures and fragmented supplier systems.
Tesla shares are up over 6 percent at 10:40 a.m. on the East Coast, trading at around $416.
Investor's Corner
Tesla analyst maintains $500 PT, says FSD drives better than humans now
The team also met with Tesla leaders for more than an hour to discuss autonomy, chip development, and upcoming deployment plans.
Tesla (NASDAQ:TSLA) received fresh support from Piper Sandler this week after analysts toured the Fremont Factory and tested the company’s latest Full Self-Driving software. The firm reaffirmed its $500 price target, stating that FSD V14 delivered a notably smooth robotaxi demonstration and may already perform at levels comparable to, if not better than, average human drivers.
The team also met with Tesla leaders for more than an hour to discuss autonomy, chip development, and upcoming deployment plans.
Analysts highlight autonomy progress
During more than 75 minutes of focused discussions, analysts reportedly focused on FSD v14’s updates. Piper Sandler’s team pointed to meaningful strides in perception, object handling, and overall ride smoothness during the robotaxi demo.
The visit also included discussions on updates to Tesla’s in-house chip initiatives, its Optimus program, and the growth of the company’s battery storage business. Analysts noted that Tesla continues refining cost structures and capital expenditure expectations, which are key elements in future margin recovery, as noted in a Yahoo Finance report.
Analyst Alexander Potter noted that “we think FSD is a truly impressive product that is (probably) already better at driving than the average American.” This conclusion was strengthened by what he described as a “flawless robotaxi ride to the hotel.”
Street targets diverge on TSLA
While Piper Sandler stands by its $500 target, it is not the highest estimate on the Street. Wedbush, for one, has a $600 per share price target for TSLA stock.
Other institutions have also weighed in on TSLA stock as of late. HSBC reiterated a Reduce rating with a $131 target, citing a gap between earnings fundamentals and the company’s market value. By contrast, TD Cowen maintained a Buy rating and a $509 target, pointing to strong autonomous driving demonstrations in Austin and the pace of software-driven improvements.
Stifel analysts also lifted their price target for Tesla to $508 per share over the company’s ongoing robotaxi and FSD programs.
Investor's Corner
Tesla wins $508 price target from Stifel as Robotaxi rollout gains speed
The firm cited meaningful progress in Tesla’s robotaxi roadmap, ongoing Full Self-Driving enhancements, and the company’s long-term growth initiatives.
Tesla received another round of bullish analyst updates this week, led by Stifel, raising its price target to $508 from $483 while reaffirming a “Buy” rating. The firm cited meaningful progress in Tesla’s robotaxi roadmap, ongoing Full Self-Driving enhancements, and the company’s long-term growth initiatives.
Robotaxi rollout, FSD updates, and new affordable cars
Stifel expects Tesla’s robotaxi fleet to expand into 8–10 major metropolitan areas by the end of 2025, including Austin, where early deployments without safety drivers are targeted before year-end. Additional markets under evaluation include Nevada, Florida, and Arizona, as noted in an Investing.com report. The firm also highlighted strong early performance for FSD Version 14, with upcoming releases adding new “reasoning capabilities” designed to improve complex decision-making using full 360-degree vision.
Tesla has also taken steps to offset the loss of U.S. EV tax credits by launching the Model Y Standard and Model 3 Standard at $39,990 and $36,990, Stifel noted. Both vehicles deliver more than 300 miles of range and are positioned to sustain demand despite shifting incentives. Stifel raised its EBITDA forecasts to $14.9 billion for 2025 and $19.5 billion for 2026, assigning partial valuation weightings to Tesla’s FSD, robotaxi, and Optimus initiatives.
TD Cowen also places an optimistic price target
TD Cowen reiterated its Buy rating with a $509 price target after a research tour of Giga Texas, citing production scale and operational execution as key strengths. The firm posted its optimistic price target following a recent Mobility Bus tour in Austin. The tour included a visit to Giga Texas, which offered fresh insights into the company’s operations and prospects.
Additional analyst movements include Truist Securities maintaining its Hold rating following shareholder approval of Elon Musk’s compensation plan, viewing the vote as reducing leadership uncertainty.
@teslarati Tesla Full Self-Driving yields for pedestrians while human drivers do not…the future is here! #tesla #teslafsd #fullselfdriving ♬ 2 Little 2 Late – Levi & Mario
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