Navigating the Future of Automotive: Tesla’s AI Ambitions, European Residual Values, and Inventory Recovery

 


As the automotive industry continues its rapid evolution, staying ahead of the latest trends and developments is critical for purchasing professionals, fleet managers, and procurement specialists. Today, we take a deep dive into three key stories shaping the future of automotive: Tesla’s focus on AI and its impact on profitability, European residual value trends for used vehicles, and the recovery of new vehicle inventories across major automakers.

Tesla’s Profitability vs. AI Ambitions: Walking a Tightrope

Tesla has always been at the forefront of innovation, particularly in electric vehicles (EVs). However, in 2024, the company faces a delicate balancing act between maintaining profitability in its core EV business and funding its ambitious AI and autonomous driving projects.

In Q3 2024, Tesla’s gross margin slipped to 16.6%, down from 27.9% in Q1 2023. This decline is primarily due to price cuts on its popular models and rising production costs. At the same time, Tesla's investment in AI research and development has surged to $1.35 billion, up from $750 million in early 2023.

These figures highlight the tension between profitability and innovation. While AI could be a game-changer for Tesla in the long term, especially with autonomous driving, the pressure to maintain healthy margins remains. For purchasing professionals, this could mean potential opportunities to negotiate better deals on current Tesla models, as the company may continue to adjust pricing strategies to stay competitive.

Pro Tip: Monitor Tesla’s quarterly financials for margin fluctuations. As Tesla invests more heavily in AI, there may be windows where cost savings on current models could benefit fleet purchases.


European Residual Value Trends: What’s Driving the Market?

In Europe, residual values for used vehicles, particularly light commercial vehicles (LCVs), are projected to face further declines through the end of 2024. The data shows that LCVs are expected to see a 5% drop in residual value, while passenger cars may decrease by 3%. Interestingly, electric vehicles (EVs) are bucking the trend, with a 2% increase in residual value as demand grows for more eco-friendly options.

For purchasing and procurement professionals, understanding residual value trends is essential for fleet management. LCVs and diesel-powered vehicles are seeing diminishing value, while EVs are maintaining strong resale performance due to favorable regulations and lower operational costs.

Pro Tip: If you're managing fleets, consider transitioning to EVs. The stable residual value and lower running costs make them a financially viable choice, especially as traditional combustion engine vehicles face stricter regulations and declining value.


New Vehicle Inventory Levels: Signs of Recovery

After years of inventory shortages caused by global supply chain disruptions, automakers are finally seeing some recovery in 2024. Hyundai, Kia, and Subaru are among the manufacturers reporting significantly improved inventory levels:

  • Hyundai Tucson: 113-day supply with 52,308 units available.
  • Kia Sportage: 103-day supply with 37,706 units available.
  • Subaru Forester: 100-day supply with 33,593 units available.

These improved supply levels are good news for buyers. With greater availability, purchasing professionals have better leverage in negotiations, and pricing pressure may ease, especially as the year progresses. Inventory recovery also signals potential price stability for many popular models, allowing for more strategic procurement planning.

Pro Tip: With inventory levels stabilizing, now is a good time to negotiate fleet deals. As automakers have higher days' supply, discounts or incentives may be available for bulk purchases, especially on popular SUV models like the Hyundai Tucson and Kia Sportage.



Actionable Steps for Purchasing and Procurement Professionals:

  1. Monitor Tesla’s Pricing: As Tesla balances profitability and innovation, there could be further price adjustments on its vehicles. Stay updated on their financial performance to capitalize on potential cost savings.

  2. Shift Focus to EVs: With residual values holding strong, consider transitioning more fleet purchases to EVs. The long-term savings on fuel and maintenance, combined with better resale values, make them an attractive option.

  3. Leverage Improved Inventory: With automakers reporting better stock levels, purchasing managers should actively seek out discounts or fleet deals. Higher inventory means more room for negotiation and potential savings on bulk orders.


Conclusion

The automotive landscape is shifting quickly, and staying informed on key trends can give purchasing professionals the competitive edge they need. From Tesla’s AI ambitions to Europe’s residual value trends and rising new vehicle inventories, each of these developments offers actionable insights that can drive smarter procurement decisions. By understanding these market movements, you can better position your organization for success in 2024 and beyond.


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When it comes to electric vehicles (EVs) with the best residual values in 2024, several models stand out due to their ability to retain a higher percentage of their original value after five years:

These vehicles are noteworthy not only for their cutting-edge technology but also for their ability to hold value better than many of their competitors in the EV space. For fleet buyers or individual purchasers considering EVs, focusing on these models can help minimize depreciation losses in the long run.

Location: Alabama, USA

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