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2/ First, as a reminder, we see used Model 3 cars listed on Carvana at prices that exceed the price of a new Model 3.
3/ When last we checked, there were 67 $TSLA 2019 Model 3's listed. 49 of them had fewer than 1,000 miles. Another curious thing: almost all the listings happened in two concentrated batches. What does that mean?
4/ It means those cars likely came from a single source, rather than from various individual sellers. Was it $TSLA? Someone working closely with Tesla? Very likely one of those two. Probably these cars were returns. Tesla was caught selling returns as new & needed a Plan B.
5/ Now to the BMW Series 3. We found 990 listings with full data. They came in over time, with no obvious clusters in listing dates. How many had fewer than 1,000 miles on the odometer? Zero.
Also, none of the BMWs are 2019; they are all earlier model years.
Also, none of the BMWs are 2019; they are all earlier model years.
6/ The average BMW mileage was 34,835. The lowest was 1,264 miles. Only 16 of the 900 had fewer than 5,000 miles.
7/ So, yes, there is something truly odd & atypical about the $TSLA Model 3 listings at $CVNA. Especially when you consider Carvana is offering a used Model 3 for more than the price of a new one.
8/ As noted yesterday, it is possible that $CVNA is essentially looking for the desperate sub-prime buyer and, in effect, folding the usurious interest into the purchase price...
9/ But, as @ghost_scot asked, do car buyers during pandemics, with gas prices plunging, go in search of $40k+ used EVs, costing more than the new car?
10/ Plus, anecdotally, the prices for used cars typically sold to subprime borrowers with the interest, in effect, folded into a higher purchase price, are in the range of $10k to $20k.
11/ And what's with the endless "purchase pending" on several of these above-the-price-of-new $TSLA transactions?
12/ Typically, a one-year old car will sell for 10% - 20% less than a new car. None of this makes sense. Especially when one considers other truly strange Tesla - Carvana happenings ("seized" no doubt should be "ceased" - such quality people):
13/ Can you think of a better way to avoid evidence of a market transaction that could be used to peg a used car price than to offer such an absurdly low figure as to assure no transaction will happen?
14/ Tesla has increasingly resorted to fleet sales with generous RVGs. Is $TSLA basing its residual value estimates (the basis for its RVG liability) on the comically inflated numbers at $CVNA? I don't know. It's certainly a question the auditors should ask.
15/ Page 72 of the 10-K discusses the residual value estimates and how they affect $TSLA's financial performance. Bottom line: if Tesla is overestimating residual values, its margins & profits are overstated.
16/ Recall that @PwC identified the residual value issue (along with warranty reserves) as a "Critical Audit Matter" requiring "significant judgment by management."
17/ Combine $TSLA & $CVNA and you have two companies with questionable business practices & opaque financial reporting. This may simply be terribly sloppy business practices. Or, if the companies are working cooperatively, it may be something more inimical.
18/ I meant to note that most of the work here was done by @CovfefeCapital, @bgrahamdisciple, and a third who prefers to remain anonymous. Happy to have them or anyone else correct any errors I made or suggest alternate theories.
