&w=1024&resize=1024,0&ssl=1 "Tesla sells 3 million of Prime Auto Lease secured debt to investors | world news")
Tesla sold more than $783 million in leases to investors in the second asset-backed securities transaction this year.
The electric car maker last week began the initial marketing phase of a loan sale led by Societe Generale SA. The sale closed on Wednesday with the highest-rated part of the securitization with a coupon of 4.827%.
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By comparison, the top tranche of a $1.72 billion auto loan ABS deal for Hyundai Motor Co. paid a 4.75% coupon on Tuesday, and a $1.29 billion auto loan deal for General Motors Co. with a coupon of 4.74%. The highest coupon on Tesla's March $750 million deal was 5.53 percent.
The sale of the electric car maker is the latest in a string of asset-backed deals struck in the auto sector as issuers rush to close deals ahead of disruptions in credit markets caused by the U.S. election. So far in October, automakers have used the securitization route for $13.6 billion, looking to sell their debt or leases to institutional investors.
Tesla's offering hit the market ahead of CEO Elon Musk's scheduled unveiling of the long-awaited Robotaxi on Thursday, as the company grapples with slowing sales of electric vehicles.
Tesla's ABS issuance reached a record high of nearly $4 billion last year, with the pipeline slowing through 2024 and transactions to date totaling $1.5 billion. Since the securitization program began in 2018, the electric vehicle company has entered the market at least 10 times, but not as often as many of its competitors. Ford Motor Co. and GM have sold $13 billion in asset-backed bonds this year.
Buyers of such loans are exposed to the risk of losses due to the decline in the resale value of the vehicle, which may occur after a large depreciation. A lower residual value of a vehicle may force lessors to charge customers more, making leasing less attractive.
Tesla's vehicles have faced particular challenges as the value of used electric cars has suffered from falling sticker prices for new electric vehicles. According to an iSeeCars survey, the company's 25 percent price cut for the Model 3 is the largest reduction among electric vehicles so far this year. Leasing as a percentage of Tesla sales is also declining, a trend analysts have linked to weak resale values.
“Tesla's price reductions, mainly affecting the Model S and repayment. “The magnitude of the impact was mitigated by structural protection and Fitch's conservative loss estimates.”
Tesla's latest deal comes from its active leasing platform and includes more than 26,000 leases with a weighted average FICO credit score of 764, according to contract documents.
Tesla and Societe Generale did not immediately respond to requests for comment.
Problems on the ABS market are growing. In 2024, more than $292 billion worth of transactions have entered the market so far, which has already exceeded last year's total. The next milestone is expected to be $313 billion in 2021, according to data compiled by Bloomberg.
