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.
Investor's Corner
Tesla enters new stability phase, firm upgrades and adjusts outlook
Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.
Tesla is entering a new phase of stability in terms of vehicle deliveries, one firm wrote in a new note during the final week of October, backing its position with an upgrade and price target increase on the stock.
Dmitriy Pozdnyakov of Freedom Capital upgraded his outlook on Tesla shares from “Sell” to “Hold” on Wednesday, and increased the price target from $338 to $406.
While most firms are interested in highlighting Tesla’s future growth, which will be catalyzed mostly by the advent of self-driving vehicles, autonomy, and the company’s all-in mentality on AI and robotics, Pozdnyakov is solely focusing on vehicle deliveries.
The analyst wrote in a note to investors that he believes Tesla’s updated vehicle lineup, which includes its new affordable “Standard” trims of the Model 3 and Model Y, is going to stabilize the company’s delivery volumes and return the company to annual growth.
Tesla launches two new affordable models with ‘Standard’ Model 3, Y offerings
Tesla launched the new affordable Model 3 and Model Y “Standard” trims on October 7, which introduced two stripped-down, less premium versions of the all-electric sedan and crossover.
They are both priced at under $40,000, with the Model 3 at $37,990 and the Model Y at $39,990, and while these prices may not necessarily be what consumers were expecting, they are well under what Kelley Blue Book said was the average new car transaction price for September, which swelled above $50,000.
Despite the rollout of these two new models, it is interesting to hear that a Wall Street firm would think that Tesla is going to return to more stable delivery figures and potentially enter a new growth phase.
Many Wall Street firms have been more focused on AI, Robotics, and Tesla’s self-driving project, which are the more prevalent things that will drive investor growth over the next few years.
Wedbush’s Dan Ives, for example, tends to focus on the company’s prowess in AI and self-driving. However, he did touch on vehicle deliveries in the coming years in a recent note.
Ives said in a note on October 2:
“While EV demand is expected to fall with the EV tax credit expiration, this was a great bounce-back quarter for TSLA to lay the groundwork for deliveries moving forward, but there is still work to do to gain further ground from a delivery perspective.”
Tesla has some things to figure out before it can truly consider guaranteed stability from a delivery standpoint. Initially, the next two quarters will be a crucial way to determine demand without the $7,500 EV tax credit. It will also begin to figure out if its new affordable models are attractive enough at their current price point to win over consumers.
Investor's Corner
Bank of America raises Tesla PT to $471, citing Robotaxi and Optimus potential
The firm also kept a Neutral rating on the electric vehicle maker, citing strong progress in autonomy and robotics.
Bank of America has raised its Tesla (NASDAQ:TSLA) price target by 38% to $471, up from $341 per share.
The firm also kept a Neutral rating on the electric vehicle maker, citing strong progress in autonomy and robotics.
Robotaxi and Optimus momentum
Bank of America analyst Federico Merendi noted that the firm’s price target increase reflects Tesla’s growing potential in its Robotaxi and Optimus programs, among other factors. BofA’s updated valuation is based on a sum-of-the-parts (SOTP) model extending through 2040, which shows the Robotaxi platform accounting for 45% of total value. The model also shows Tesla’s humanoid robot Optimus contributing 19%, and Full Self-Driving (FSD) and the Energy segment adding 17% and 6% respectively.
“Overall, we find that TSLA’s core automotive business represents around 12% of the total value while robotaxi is 45%, FSD is 17%, Energy Generation & Storage is around 6% and Optimus is 19%,” the Bank of America analyst noted.
Still a Neutral rating
Despite recognizing long-term potential in AI-driven verticals, Merendi’s team maintained a Neutral rating, suggesting that much of the optimism is already priced into Tesla’s valuation.
“Our PO revision is driven by a lower cost of equity capital, better Robotaxi progress, and a higher valuation for Optimus to account for the potential entrance into international markets,” the analyst stated.
Interestingly enough, Tesla’s core automotive business, which contributes the lion’s share of the company’s operations today, represents just 12% of total value in BofA’s model.
Elon Musk
Tesla analyst: ‘near zero chance’ Elon Musk’s $1T comp package is rejected
“There is a near-zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting.”
A Tesla analyst says there is “zero chance” that CEO Elon Musk’s new compensation package is rejected, a testament to the loyalty and belief many shareholders and investors have in the frontman.
Tesla investors will vote on November 6 at the annual Shareholder Meeting to approve a new compensation package for Musk, revealed by the company’s Board of Directors earlier this month.
The package, if approved, would give Musk the opportunity to earn $1 trillion in stock, an ownership concentration of over 27 percent (a major request of Musk’s), and a solidified future at the company.
The Tesla Community on X, the social media platform Musk bought in 2023, is overwhelmingly in favor of the pay package, though a handful of skeptics remain.
Nevertheless, the big pulls of this vote are held by proxy firms and other large-scale investors. Two of them, Institutional Shareholder Services (ISS) and Glass Lewis, said they would be voting against Musk’s proposed compensation plan.
Tesla CEO Elon Musk’s $1 trillion pay package hits first adversity from proxy firm
Today, the State Board of Administration of Florida (SBA) said it would vote in favor of Musk’s newly-proposed pay day, making it the first large-scale shareholder to announce it would support the CEO’s pay.
One analyst said that Musk’s payday is inevitable. Gary Black of the Future Fund said today there is a “near-zero chance” that shareholders will allow Musk’s pay package to be rejected:
“There is a near-zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting.”
He added an alternative perspective from Wedbush’s Dan Ives, who said that he had a better chance of starting for the New York Yankees than the comp package not being approved.
There is a near zero chance that $TSLA shareholders will vote down Elon’s new proposed comp plan at the Nov 6 shareholders’ meeting. As Wedbush analyst Dan Ives (@divestech) colorfully put it in a Yahoo Finance interview on October 23rd: “I have a better chance of starting for…
— Gary Black (@garyblack00) October 27, 2025
Black’s the Future Fund sold its Tesla holdings earlier this year. He explained that the firm believed the company’s valuation was too disconnected from fundamentals, citing the P/E ratio of 188x and declining earnings estimates.
The firm maintained its $310 price target, and shares were trading at $356.90 that day.
Shares closed at $452.42 today.
The latest predictions from betting platform Kalshi have shown Musk’s comp package has a 94 percent chance of being approved:
— Kalshi (@Kalshi) October 20, 2025
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