As the production of electric cars declines, the fins are rising

As the production of electric cars declines, the fins are rising

The long wait for some new electric cars caused them to be resold.

In the early morning hours of October 2020, Brent Estes turned his thinnest at $35,500.

The 39-year-old California native was in bed, scrolling through Hummers on his phone—specifically, the GMC Hummer EV, one of the rarest and most coveted cars in a parade of all-new electric cars. Estes happened to be awake during a small window in which a $100 deposit held the right to purchase one of the first models off the assembly line. Within 10 minutes, all the first versions were talked about, including the one he managed to secure.

Nearly two years later, Estes, the vice president of a commercial heating and air conditioning contractor, finally got the truck. He paid about $125,000 under strict instructions from his wife: Don’t let her drive it, or you might want to keep it. So Estes drove a Hummer straight to his father’s garage, where it stayed for three weeks. On September 28, he sold it at auction for $160,500.

“It’s like winning a small lottery,” he says. “It’s a great truck, but to me it’s not worth what others are willing to pay.”

In the automotive world, flipping a brand new car is as old a practice as seat belts, and has historically been limited to sports cars made in small batches. However, the advent of electric cars has led to a kind of fickle madness. Demand is at an all-time high for both high-quality and mass-market models, and factories are struggling to keep up. This means that owners of electric vehicles who are lucky or lucky enough to get an early version of a highly desirable vehicle often choose an instant sale (and a great profit) over street credibility for being an early adopter. And the practice is picking up speed, as impressive sales numbers attract new buyers to list their cars right away.

says Brian Rabould, vice president of automotive intelligence at Hagerty Inc, an insurance company that specializes in collectible cars. “If you want an electric pickup, you don’t have a choice yet.”

Rabold cites several factors as the market’s smoothing of short-term sales. For example, electric cars are still a relatively new phenomenon, and it can be argued that a change in technology is unprecedented. Second, these battery-powered cars and trucks arrive in concert with a swarm of online selling platforms like Facebook Marketplace; Bring a Trailer (launched 2007), and Cars & Bids (launched 2020). These sites have created a more liquid market for used cars, especially those that are desirable for collectible. Finally, there is a dearth of new cars on a large scale, particularly battery-powered models that are only entering production.

General Motors spokesman Michael Farah says that those who keep early versions of the company’s hottest new cars — say, a Hummer that flipped over — generally intend to drive them. There’s no evidence that bots or other digital bottlenecks are taking over car reservations like concert tickets, and Americans are already keeping their cars longer than ever these days — the average car life in the US is just over 12 years, according to S&P Global. Mobility . However, for many new electric vehicle owners, the potential profit outweighs the actual benefit. “My opinion is very pushy,” says Rabold. “I expect a lot of these people will be back on the waiting list.”

Consider Ford Motor Company’s new electric pickup, the F-150 Lightning. In the first half of the year, Ford made about 2,000 Lightnings and at least 31 of them were sold at an online auction. The Lightning has a starting sticker price of shy of $40,000, and fancier versions sold at dealerships for about $80,000, but the cars fetched an average of $97,000 on the second-hand market.

Flipping is even crazier with Rivian Automative Inc. , which assembled nearly 5,000 R1T pickups between January and June. In March, Rivian raised the truck’s price by 17% to nearly $80,000, essentially locking in a profit margin for early customers who bought at the original price. At least 51 trucks were sold in an online auction, for an average of $106,000.

“It’s just a fact of the car world,” says Doug DeMuro, founder of Cars & Bids and host of a popular YouTube series for car review. “You could spend $100,000 and have a Rivian today or $91,000 and have one in two years. It makes sense.”

Tesla buyers tend to stick with their cars, in part because the company’s fine print says it will cancel any order from a suspected fin. However, DeMuro expects the long-promised Cybertruck Tesla to be well suited to making quick profits if it arrives.

Tesla isn’t alone in frowning fins: DeMuro’s location and rashes from Hummers and Lightnings instigate no shortage of heartburn in Detroit’s C-Wings. Not only do automakers miss out on a large portion of potential profits when reselling a new car, but customers waiting for their buying opportunity get fed up watching wealthy drivers skip the line.

This most famous friction came to a head in 2017, when Ford sued actor/wrestler John Cena for selling his Ford GT supercar a few months after receiving it. Ford’s filing said Senna was among 500 carefully selected buyers who were under contract to keep the car for at least two years. The case was settled when Cena paid an undisclosed amount that Ford reportedly donated to charity.

General Motors, for its part, recently introduced a policy that voids the warranty on any Hummer that is resold within six months. At the dealer level, black ball fins are often stored from future orders, but there’s not much they can do. “It’s definitely not something we would encourage,” Farah says. “This is to protect the brand, protect the customer and protect the merchant.”

Car flips usually run their course quickly: Something new and new in the auto industry usually lasts 12 months at most, until next year. But the electric car fever is getting hotter than many auto executives have predicted, and it will likely be years before assembly lines catch up with order books. Likewise, those hoping to pay anywhere close to the sticker price for one of the new batch of electric vehicles are waiting.

For example, Ford hopes to have the capacity to produce 150,000 Lightnings annually by the end of 2023, but by December 2021, it has more than 200,000 orders. GM just stopped taking Hummer EV orders at 90,000; By July, it had produced only 1,510 of them.

The shortage is more pronounced among electric car startups. This summer, Rivian said it had more than 98,000 orders for its first pickup and SUV, but it aims to assemble just 25,000 vehicles this year as it searches for parts. Around the same time, Lucid Group cut its production target for this year in half to between 6000 and 7000 vehicles.

Fully aware of the slow pace of shipments, the dealer who sold his Estes Hummer offered to immediately buy it back for $150,000, but Estes refused, thinking he could do a better job on the open market. He was right. The winning bid went to Brett Jensen, a real estate developer who lives outside of Houston. Jensen recently bought a 2022 Cadillac Escalade, which came with a contract that said the warranty would be void if it was resold within six months, a condition he described as “a bit foolish.” There are no such restrictions on his new Hummer.

“I knew it would take a long time to order one,” Jensen says. “The entire auto market is crazy right now.”

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