Elon's demand "secret weapon" ...what is it?

[jerry33]

Did you have to pay CA tax with that arrangement? Seems like Tesla would love that approach (no delay in recognizing sales during shipping).

If the car is shipped out, you don't pay sales tax. If it's picked up you do. The justification, as I understand it, was that too many people who had part time residences in neighbouring states picked up the car, registered it in another state and paid the lower sales tax rate, and then brought it back to California.

 

[adiggs]

And all buyers using this method would have to pay CA sales tax regardless of the state they are from.

It's easier just to buy online and have it delivered locally, which people can do in every state.

I've wondered now and again why California doesn't create a new kind of temporary registration, something that would effectively enable Tesla to sell cars from Fremont, but be useless to the dealerships, so that they maintain the spirit of the "everybody pays sales tax" while also supporting their big native car maker in drawing vacationers to the state. If I could do Fremont pickup wihtout paying the sales tax (I'll be registering in Oregon), that would be a no brainer.

 

[Lloyd]

Yes, California has some of the highest tax and registration in the US. They dont want to give that up, or let any adjacent states get it.

My MSRP $115,520.
State Tax $8,664.
Registration $837
Total Taxes $9,501

 

[eciti.com]

I think Hogfighter is on the right track. Tesla does not have to own a "captive" dealer franchise. It could be a standalone private or even public company that exclusively sells Tesla cars. Musk would likely be chairman but not CEO.

 

[Wshowell]

I had a thought today about the secret weapon that'll spur demand. Why do we have car loans that are 3-5 years in length? That's a remnant from when cars just wore out after 5-8 years of use and make ownership of a vehicle like the Model S unattainable for millions of would be buyers. We don't have 3-5 year home mortgages but our homes do wear out right? We preserve our investment with new paint, new roof, carpet, appliances etc. So, why not offer a Model S with a 15 year payment plan and service, warranty, replacement battery could all be rolled into it. Purchase price $95k, $85k financed at 2% is $550/month. Free fuel means average driver would save $200/month. Effective cost would be $350/month for 15 years. I don't know of any other car company that could even propose something like this because most of the cars on the road are a wasting asset by design. If you had an opportunity to do this would you buy another Model S, X or the 3?

 

[30seconds]

I had a thought today about the secret weapon that'll spur demand. Why do we have car loans that are 3-5 years in length? That's a remnant from when cars just wore out after 5-8 years of use and make ownership of a vehicle like the Model S unattainable for millions of would be buyers. We don't have 3-5 year home mortgages but our homes do wear out right? We preserve our investment with new paint, new roof, carpet, appliances etc. So, why not offer a Model S with a 15 year payment plan and service, warranty, replacement battery could all be rolled into it. Purchase price $95k, $85k financed at 2% is $550/month. Free fuel means average driver would save $200/month. Effective cost would be $350/month for 15 years. I don't know of any other car company that could even propose something like this because most of the cars on the road are a wasting asset by design. If you had an opportunity to do this would you buy another Model S, X or the 3?

Thats kind of interesting. Because tesla has a different financial structure than other automakers, namely sale recognition at time of customer (not dealer) sale and direct ownership of CPO vehicles, they may be able to use different techniques to bring financing to end customers. I'm not sure how much demand this would stimulate as the monthly payments will likely be similar to lease payments but still interesting.

 

[vinnie97]

I had a thought today about the secret weapon that'll spur demand. Why do we have car loans that are 3-5 years in length? That's a remnant from when cars just wore out after 5-8 years of use and make ownership of a vehicle like the Model S unattainable for millions of would be buyers. We don't have 3-5 year home mortgages but our homes do wear out right? We preserve our investment with new paint, new roof, carpet, appliances etc. So, why not offer a Model S with a 15 year payment plan and service, warranty, replacement battery could all be rolled into it. Purchase price $95k, $85k financed at 2% is $550/month. Free fuel means average driver would save $200/month. Effective cost would be $350/month for 15 years. I don't know of any other car company that could even propose something like this because most of the cars on the road are a wasting asset by design. If you had an opportunity to do this would you buy another Model S, X or the 3?

I don't own a Tesla due to being an indigent (or close enough), but this would actually make it possible for me to buy in!

 

[neroden]

I had a thought today about the secret weapon that'll spur demand. Why do we have car loans that are 3-5 years in length? That's a remnant from when cars just wore out after 5-8 years of use and make ownership of a vehicle like the Model S unattainable for millions of would be buyers. We don't have 3-5 year home mortgages but our homes do wear out right? We preserve our investment with new paint, new roof, carpet, appliances etc. So, why not offer a Model S with a 15 year payment plan and service, warranty, replacement battery could all be rolled into it. Purchase price $95k, $85k financed at 2% is $550/month. Free fuel means average driver would save $200/month. Effective cost would be $350/month for 15 years. I don't know of any other car company that could even propose something like this because most of the cars on the road are a wasting asset by design. If you had an opportunity to do this would you buy another Model S, X or the 3?

This is definitely a possibility. I'm not sure how the crash rate is handled, though; you need to make sure that people have a situation they're happy with if the car crashes with 10 years left to go on the loan, and that's a complicated dance with the insurance.

Elon knows about a bunch of "more exotic" financing schemes from SolarCity. How about one where you pay only what you would have paid on your old car (including gas), each year, until you've paid for the Tesla? Comparable to some of the SolarCity financing schemes...

Now that you've suggested this, I'm betting the secret weapon *is* a financing scheme of some sort.

 

[dalalsid]

I had a thought today about the secret weapon that'll spur demand. Why do we have car loans that are 3-5 years in length? That's a remnant from when cars just wore out after 5-8 years of use and make ownership of a vehicle like the Model S unattainable for millions of would be buyers. We don't have 3-5 year home mortgages but our homes do wear out right? We preserve our investment with new paint, new roof, carpet, appliances etc. So, why not offer a Model S with a 15 year payment plan and service, warranty, replacement battery could all be rolled into it. Purchase price $95k, $85k financed at 2% is $550/month. Free fuel means average driver would save $200/month. Effective cost would be $350/month for 15 years. I don't know of any other car company that could even propose something like this because most of the cars on the road are a wasting asset by design. If you had an opportunity to do this would you buy another Model S, X or the 3?

This would probably get me into a Tesla before the Model 3.

 

[cantdecide]

Cars in general halve in value in 3 years, so loans should match that... Is the reason loans tend to be no more than 6 years.
So far second hand prices of Teslas seem to match that.
In my opinion electric cars should depreciate slower... A 60kwh battery is worth more than half a 85kwh battery and an 85 will take more than 3 years to become a 60, so the battery should depreciate slowly. So Elon could do something like this combined with a stronger resale value guarantee

 

[dalalsid]

The more i think about this, what I would like is it to have a declining payment for 10 years until it reaches 0. Start with 8-900 then adjust down every 2/3 years until it reaches 0.

 

[ggies07]

I'm lovin this new idea. That would allow me as well to not have to wait until the Model 3. But imagine what type of demand that would cause....would be bad right now with all the production backlog they have already.

 

[vinnie97]

Maybe it won't be introduced until the Model 3 (though I selfishly would like it to be offered sooner). The only caveat in my mind is how well would the battery hold up over the course of a 15-year term. That has to be pushing the limits of longevity.

 

[Ocelot]

Most people do not hold cars that long, and I feel would be very hesitant to sign onto a fifteen year lease. I really do not feel this would increase demand. When you look at the numbers in 10 years you have 5 years remaining at 550/month which is 33 000 dollars. People will abandon their cars/leases just as they did their homes, as they will be paying more for a lease/mortgage than the object is worth. Take a look at a 2004-2005 Mercedes S -class, new they would have ranged from 75g-over 100. Today you can pick one up for high single digits. Add the unknown (maybe all Tesla's will completely fall apart after 6 years) and I do not see this happening.

 

[jhm]

http://www.streetinsider.com/Analyst+Comments/SunPower+(SPWR)First+Solar+(FSLR)+YieldCo+is+Like+Duke+and+UNC+Partnering...+Huge+-+Raymond+James/10305398.html

This big news for SunPower and FirstSolar today is a JV to form a yieldco. The yieldco would hold solar installations and PPAs produced by the two companies and pass income to shareholders as dividends. This new entity could IPO this year. It would provide JV owners with capital and simplify their income and balance sheets.

So this got me thinking. What if SolarCity and Tesla formed a yieldco of their own? Both companies produce income generating assets: solar installations with PPAs and leases, stationary storage installations with leases, and cars with leases. Bundle these income streames together a sell shares to investors seeking income. This could remove all the customer lease complexities from finacial statements. So investors in Tesla or SolarCity would have a pure growth play and clearer visability into profitability.

For Tesla's customers this could open a way to longterm leasing. Used Teslas could be re-leased until such time as they need to be recycled. Batteries, both stationary and automotive, could be leased indefinitely as well. I think this could work even better than longterm loans which expose both lender and borrower to the potential to negative equity.

A longterm lease on a $100,000 car look something like this $10,000 at signing, $1000/month for first year, with option to renew lease each year for 6% reduced monthly rate. Thus, your monthly rate declines each year from $1000, to $940, to $883.60, to $830.58, to $780.75, and so on.

 

[macpacheco]

I don't know about this secret weapon. I know the public weapon which is paid ads. Its such a powerful weapon that if Tesla resorts to it before they get up to 1500 cars/week, its bad news, means Tesla is no longer demand constrained without ads. Above 1500 cars/week, or 80000 cars / yr, I would fully expect Tesla to resort to ads (assuming at that point the plant is already tooled for 2500 cars/week and suppliers are ready for a big uptick in demand). It will be the catapult through 100k cars/yr. Maybe dip their toes with localized ads in pro Tesla states first to measure the waters.

One question, how many formal test drives per week could Tesla handle today in North America ? 10000 ? Assuming 10% immediate orders, 10000 weekly test drives = 1000 extra weekly orders (plus delayed orders).

 

[Lerxt]

Still looks to me like battery leasing is the idea. Pay $50-55k for your model S ( much like other cars ) and then replace your fuel bill with a battery lease of a few hundred a month.

 

[Trev Page]

This would probably get me into a Tesla before the Model 3.

10 years to pay would get me into one right-quick. The only problem is that cars are a depreciating asset and I've always been told to pay off depreciating assets as quickly as possible since it considered bad debt.

 

[Trev Page]

Still looks to me like battery leasing is the idea. Pay $50-55k for your model S ( much like other cars ) and then replace your fuel bill with a battery lease of a few hundred a month.

That's a possibility and might shut up the ignorants I encounter every day on the Internet who constantly spout that we'll need to replace the battery after 8 years because it will be totally bricked. Or maybe not, haters gonna hate.

 

[CHGolferJim]

Is there some legal or institutional reason to prevent Tesla setting up a captive finance subsidiary (a la GMAC) that offers loans and leases with prescribed principal payments per year that mimic expected depreciation, and add in a variable interest charge based on LIBOR or prime rate?