As electric car production falls short, Flippers ramps up


The long wait for some new electric vehicles is creating a resale frenzy.

In the early morning of October 2020, Brent Estes turned his insomnia into $35,500.

The 39-year-old Californian was in bed, checking out Hummers on his phone—specifically, the GMC Hummer EV, one of the rarest and most coveted machines in a parade of all-new electric vehicles. Estes was awake during a small window where a $100 deposit reserved the right to buy one of the first models off the assembly line. In 10 minutes, he talked about all the first editions, including the one he managed to secure.

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

“It’s like winning a mini lottery,” he says. “It’s an amazing truck, but to me it’s not worth what other people are willing to pay.”

In the automotive world, flipping a new vehicle is a practice as old as seat belts, and historically limited to sports cars made in small batches. However, the appearance of electric vehicles has given rise to something of a craze. Demand is at an all-time high for both mass-market and high-end models, with factories struggling to keep up. That means savvy EV owners or those lucky enough to have gotten their hands on an early edition of a highly coveted car often choose an immediate sale (and a handsome profit) over the street credibility of being one of the first to drive. to adopt. And the practice is accelerating, as staggering sales numbers entice newer buyers to immediately list their cars.

“The group car market and the enthusiast market has been expanding and appreciating very rapidly in the last two years and this fits the bill,” says Brian Rabold, vice president of automotive intelligence at Hagerty Inc., an insurer that specializes in autos. collectibles. . “If you wanted an electric truck, you literally had no choice until now.”

Rabold cites several factors that prepare the market for short-term selling. For one thing, electric cars are still a relatively new phenomenon, a sea change in technology arguably unlike any other to date. Second, these battery-powered cars and trucks are coming in concert with a multitude of peer-to-peer online sales platforms like Facebook Marketplace; Bring a Trailer (released 2007) and Cars & Bids (released 2020). These sites have created a much more liquid market for used cars and, in particular, coveted collectibles. Finally, there is a shortage of new cars across the industry, and in particular of battery-powered models that are just entering production.

General Motors Co. spokesman Mikhael Farah says those who reserve early versions of the company’s most popular new cars, say the Hummer that Estes rolled over, generally intend to drive them. There’s no evidence of bots or other digital shenanigans killing car bookings like concert tickets, and Americans actually keep their cars longer than ever these days – the average age of a car in the US. it’s just over 12 years old, according to S&P Global Mobility. . Still, for many new electric vehicle owners, the potential gain outweighs the actual utility. “My opinion is that it is very opportunistic,” says Rabold. “I hope that many of these people will be back on the waiting list.”

Consider Ford Motor Co.’s new electric pickup truck, the F-150 Lightning. In the first half of the year, Ford built about 2,000 Lightnings, and at least 31 of them were sold at online auctions. The Lightning has a starting sticker price of just under $40,000 and fancier versions have been selling at dealerships for around $80,000, but the vehicles averaged $97,000 on the used market.

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

“It’s kind of the reality of the automotive world,” says Doug DeMuro, founder of Cars & Bids and host of a popular YouTube series that analyzes vehicles. “You can spend $100,000 and get a Rivian today or $91,000 and get one in two years. It just makes sense.”

Tesla buyers tend to hold on to their cars, in part because the company’s fine print says it will cancel any orders for an alleged flipper. However, DeMuro hopes that Tesla’s long-promised Cybertruck will be suitable for quick profits when it arrives.

Tesla isn’t alone in frowning at fins: DeMuro’s siege and his flurry of Hummers and Lightning incites a great deal of heartburn from Detroit’s high-level executives. Not only do automakers lose out on a huge chunk of potential profits when a new car is resold, but customers waiting for their own buying opportunity are thrilled to see wealthy drivers skip the line.

This friction reached its most famous point in 2017, when Ford sued actor/wrestler John Cena for selling his Ford GT supercar a few months after taking delivery. Ford’s filing said Cena was among 500 carefully selected buyers who had a contract to keep the vehicle for at least two years. The case was settled when Cena paid an undisclosed sum, which Ford allegedly donated to charity.

GM, meanwhile, recently implemented a policy that voids the warranty on any Hummer resold within six months. At the distributor level, stores often dump future orders, but there’s not much else they can do. “It’s definitely not something we encourage,” says Farah. “This is to protect the brand, protect the customer and protect the dealer.”

Car makeovers typically run their course quickly: What’s new in the auto industry typically lasts 12 months at most, until the next model year rolls around. But the EV rush is more intense than many auto executives expected, and it will likely be years before assembly lines hit order books. Similarly, those hoping to pay close to sticker price for one of the new electric vehicles should wait.

Ford, for example, hopes to have the capacity to make 150,000 Lightnings a year by the end of 2023, but by December 2021 it had more than 200,000 orders. GM just stopped taking orders for its Hummer EV at 90,000; by July, it had produced just 1,510 of them.

The shortage is even starker among electric vehicle startups. Rivian said this summer that it has more than 98,000 orders for its debut truck and SUV, but aims to put together just 25,000 vehicles this year as it looks for parts. Around the same time, Lucid Group cut its production target for the year in half to between 6,000 and 7,000 vehicles.

Knowing full well the slow pace of shipments, the dealer who sold Estes his Hummer offered to buy it back on the spot for $150,000, but Estes declined, thinking he could do better on the open market. He was correct. The winning bid went to Brett Jensen, a real estate developer who lives outside of Houston. Jensen recently bought an upgraded 2022 Cadillac Escalade-V, which came with a contract that said the warranty would be void if it was resold within six months, a stipulation he described as “a little silly.” His new Hummer has no such restrictions.

“I knew it would take forever to order one,” says Jensen. “The whole car market is crazy right now.”


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