Early one morning in October 2020, Brent Estes turned insomnia into $35,500.
The Californian was in bed scrolling through Hummers on his phone — specifically the GMC Hummer EV, one of the rarest and most sought-after machines in a parade of all-new electric vehicles.
Mr. Estes, 39, happened to be awake during a small window where a $100 deposit reserved the right to buy one of the first models off the assembly line. Within 10 minutes, all the first editions were read out, including the one he reserved.
Two years later and Mr. Estes, vice president of a commercial heating and air conditioning contractor, got his Hummer. He spent about $125,000 under strict instructions from his wife: don’t let her drive it or she might want to keep it.
So, Mr. Estes drove the Hummer straight to his father’s garage, where it sat for three weeks. On September 28, he sold it at auction for $160,500.
“It’s kind of like winning a mini lottery,” he said. “It’s a great truck, but to me it’s not worth what other people are willing to pay.”
In the automotive world, flipping a brand new vehicle is a practice as old as seat belts, and a practice historically limited to small-batch sports cars. However, the rise of electric vehicles has led to a kind of flipping frenzy.
Demand is at an all-time high for both mass-market and high-end models, and factories are scrambling to keep up.
That means EV owners who are savvy or lucky enough to have ordered an early edition of a highly sought-after car often choose an instant sale — and a handsome profit — over the street cred of being an early adopter.
And the practice is picking up, as the sales numbers entice newer buyers to immediately list their cars.
“The collective car market and the enthusiast market has expanded and appreciated so rapidly over the past two years and this fits right into it,” said Brian Rabold, vice president of automotive intelligence at Hagerty.
“If you wanted an electric pickup truck, you literally had no option until now.”
Rabold mentions several factors that prepare the market for short-term selling. First, electric cars are still a relatively new phenomenon, a step change in technology that is probably unlike any before.
Second, these battery-powered cars and pickups are arriving in partnership with a host of online peer-to-peer sales platforms such as Facebook Marketplace, Bring a Trailer and Cars & Bids. These sites have created a much more liquid market for used cars, and especially sought-after collector cars.
Finally, there is a dearth of new cars across the industry, and especially of battery-powered models that are just entering production.
General Motors spokesman Mikhael Farah said those who reserve early versions of the company’s hottest new cars — such as the Hummer that Estes flipped — generally intend to drive them.
There’s no evidence that bots or other digital shenanigans are aggregating car reservations like concert tickets, and Americans are keeping their cars longer than usual these days — the average age of a car in the U.S. is just over 12 years, according to S&P Global Mobility .
Still, for many new EV owners, the potential profit outweighs the actual benefit. “My sense is that it’s very opportunistic,” Rabold said. “I expect a lot of these people will get back on the waiting list.”
Consider Ford Motor’s new electric pickup truck, the F-150 Lightning. In the first half of the year, Ford made about 2,000 Lightnings and at least 31 of them have been auctioned online.
The Lightning has a starting sticker price of just $40,000 and fancier versions have sold at dealers for around $80,000, but the vehicles fetched an average of $97,000 on the secondary market.
The turnaround is even more frenetic with Rivian Automotive, which assembled nearly 5,000 of its R1T pickup between January and June. In March, Rivian raised the price of the truck by 17 percent to nearly $80,000, essentially locking in a profit margin for early customers who bought at the original price. At least 51 of the trucks have been auctioned online, for an average of $106,000.
“It’s just kind of the reality of the automotive world,” says Doug DeMuro, the founder of Cars & Bids and host of a popular YouTube series that reviews 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 hang on to their cars, in part because the company’s fine print said it will cancel any order from a suspected flipper. However, Mr. DeMuro expects that Tesla’s long-promised Cybertruck will be well suited for quick profits if and when it arrives.
Tesla isn’t alone in frowning on flippers: Mr. DeMuro’s website and its rash of Hummers and Lightnings provoke no shortage of heartburn in Detroit’s C-suites. Not only do automakers miss out on a large chunk of potential profit when a new car is resold, but customers waiting for their own opportunity to buy are happy to see rich drivers jump the queue.
This friction came to a head in 2017, when Ford sued actor and wrestler John Cena for selling his Ford GT supercar a few months after delivery.
Ford’s filing said Cena was among 500 handpicked buyers contracted to keep the vehicle for at least two years. The case was settled when Cena paid an undisclosed sum, which Ford reportedly donated to charity.
GM, for its part, recently rolled out a policy that voids the warranty on any Hummer resold within six months. At the dealer level, stores often blackball flippers from future orders, but there’s not much more they can do.
“It’s definitely not something that we encourage,” Farah said. “This is to protect the brand, protect the customer and protect the retailer.”
Car flipping usually goes fast. The new, new in the automotive industry usually lasts no more than 12 months, until the next model year arrives. But EV fever is hotter than many auto executives expected, and it will likely be years before assembly lines catch up with order books.
Likewise, those hoping to pay anywhere near the sticker price for one of the new electric cars are waiting.
Ford, for example, hopes to have the capacity to make 150,000 Lightnings per 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 only 1,510 of them.
The shortage is even more noticeable among newly launched electric cars. Rivian said this summer it has more than 98,000 orders for its debut pickup and SUV, but aims to screw together just 25,000 vehicles this year as it scrambles for parts.
Around the same time, Lucid Group halved its production target for the year to between 6,000 and 7,000 vehicles.
The dealer who sold Estes his Hummer offered to buy it back on the spot for $150,000, but he declined, believing he could do better on the open market. He was right.
The winning bid went to Brett Jensen, a real estate developer who lives just outside of Houston. Jensen recently bought a souped-up 2022 Cadillac Escalade-V, which came with a contract that says the warranty would be void if resold within six months, a provision he described as “kind of silly.” His new Hummer has no such limitations.
Updated: October 16, 2022, 3:30 am