How does Tesla buy-back "set the market"?

[jerry33]

My gut feels differently. The batteries have an estimated 8-10 year life span, are worth zero (or close to that with recyclables) at their death, and will cost ~$10K to replace.

Given that the warranty on the batteries is eight years and Tesla has said the design life is double the warranty, and that they will use retired batteries at Solar City for many years before recycling, it seems to me they won't be worth zero--or even close.

Bear in mind that the batteries will have 50% to 70% of their life left when they are retired from automotive service.

 

[Shumdit]

I believe in Tesla's success. I also believe what Elon has said about the program.
1) Tesla is on the hook to buy back the car should you want to sell it in after the three year 'lease term' is up (if not, you just continue to pay off the car
2) If Tesla Motors Co is bankrupt and can't afford to buy all the cars, then Elon is personally on the hook for ALL his assets, not just Tesla Motors assets
3) Even if Elon dies, his estate is on the hook
4) Elon's buyback guarantee is for a minimum buy back price. He has said on conference calls that when the time comes for this program and people sell, he guarantees the minimum, but if the car is actually worth more than that, he will pay 'fair market value'

So, I guess the decision is do you believe in Tesla Motors success? Do you believe in Elon? and more practically, do you really think you're going to want to resell the car in three years?

I believe in Tesla Motors and Elon. That being said, I know there are people in high places that would love to kill the company. I doubt I will want to resell in three years (unless Tesla comes out with something even better), but I have yet to see where this guarantee states all you listed above. Can you point me to where this contract with these stipulations is listed?

 

[brianman]

Given that the warranty on the batteries is eight years and Tesla has said the design life is double the warranty, and that they will use retired batteries at Solar City for many years before recycling, it seems to me they won't be worth zero--or even close.

Bear in mind that the batteries will have 50% to 70% of their life left when they are retired from automotive service.

Nice, succinct capture at what I would have tried to say.

 

[rjcbox]

My gut feels differently. The batteries have an estimated 8-10 year life span, are worth zero (or close to that with recyclables) at their death, and will cost ~$10K to replace.

That prediction is not playing out in the wild: http://www.teslamotorsclub.com/showthread.php/26330-Rated-Range-at-20-500-miles-on-60kW-battery-pack

 

[lorih]

I believe in Tesla Motors and Elon. That being said, I know there are people in high places that would love to kill the company. I doubt I will want to resell in three years (unless Tesla comes out with something even better), but I have yet to see where this guarantee states all you listed above. Can you point me to where this contract with these stipulations is listed?

Elon has said this on conference calls. My interpretation of what he said is it in not in the financial papers you signed but rather in his own estate planning. I personally think this is moot.

Tesla Motors calculated the "worst posible case" for the financial offerings and if they can cover this. As a business person you do calculations of "best case", "worse case", and "realistic" before you initiate major business decisions in a company. Managers do this for short term ~1 quarter to 1year, medium term 3-5 years and longer term 10 years. Elon has a long term plan to be part of Tesla until he he completes his goal to change transportation. He has calculated the risk and his likelihood of success and stands behind the company.

If this is so important to you, ask him on twitter. I know it sounds like I "drank the cool aid", and that is true, but I have also heard Elon speak many times, and I do believe he is sincere.

I also think if anyone is so worried about the difference in 1.5% vs 2.5% financing, that they really need to question the CEO about his own estate planning, perhaps getting a Model S right now is not the right financial move at this time. Wait 2-3 years to see how the "resale market" holds or wait and buy Gen 3 with cash.

 

[Jace_91]

i guess this is the part I'm missing. How, or why, exactly?

Not sure if you got quite the answer you were looking for, but also didn't read through the entire thread. The theory is that, if say 50% of buyers financed through Tesla, and 50% of those sell their car back after 3 years. Tesla will most likely not sell these cars for a loss, so we have a pre-set price of what 25% of the used 3yr old cars will be selling for. This will generally set a baseline for what other dealers and private sellers will be able to sell their car for.

Theres always the chance that the other 75% of used Teslas on the market will be selling for less but one would guess majority of people are going to sell their cars for right around what they are selling for at a dealership.

Hope this helps.

 

[tomp]

Thanks - your point about how Tesla would presumably not sell the cars they bought-back for a loss is a good one - assuming people are buying them, of course! I can see how that would somewhat help set them market.

Not sure if you got quite the answer you were looking for, but also didn't read through the entire thread. The theory is that, if say 50% of buyers financed through Tesla, and 50% of those sell their car back after 3 years. Tesla will most likely not sell these cars for a loss, so we have a pre-set price of what 25% of the used 3yr old cars will be selling for. This will generally set a baseline for what other dealers and private sellers will be able to sell their car for.

Theres always the chance that the other 75% of used Teslas on the market will be selling for less but one would guess majority of people are going to sell their cars for right around what they are selling for at a dealership.

Hope this helps.

 

[sranger]

Here are my thoughts...

1) If Tesla goes under the buy back is more or less worthless...

2) If Tesla does not go under the car will probably be worth more on the open market than the buy back program.

3) The interest lost in financing with Tesla vs a direct pay off or better interest loan is $1,000 - $6,000

In the end I just see little value in the program. It might make you feel better, but I do not really see how it alters your true risk much...

 

[HHHH]

How, may I ask, did you arrive that these conclusions based on this thread?

 

[Shumdit]

Elon has said this on conference calls. My interpretation of what he said is it in not in the financial papers you signed but rather in his own estate planning. I personally think this is moot.

Tesla Motors calculated the "worst posible case" for the financial offerings and if they can cover this. As a business person you do calculations of "best case", "worse case", and "realistic" before you initiate major business decisions in a company. Managers do this for short term ~1 quarter to 1year, medium term 3-5 years and longer term 10 years. Elon has a long term plan to be part of Tesla until he he completes his goal to change transportation. He has calculated the risk and his likelihood of success and stands behind the company.

If this is so important to you, ask him on twitter. I know it sounds like I "drank the cool aid", and that is true, but I have also heard Elon speak many times, and I do believe he is sincere.

I also think if anyone is so worried about the difference in 1.5% vs 2.5% financing, that they really need to question the CEO about his own estate planning, perhaps getting a Model S right now is not the right financial move at this time. Wait 2-3 years to see how the "resale market" holds or wait and buy Gen 3 with cash.

It's not that I doubt his sincerity (even though I think he does have a habit of putting a spin on some of his claims to make them sound better than what reality really is). I really respect him and what he is trying to do. That being said, it does not change my feeling that all of us owners (including those with the guaranteed buy back) are taking a risk. If Tesla were to go under for any reason (and if you think it's just impossible to see that happening then I feel for you since it's certainly a possibility) then Elon's worth would also take a big hit. You can't squeeze blood from a turnip. Honestly, I don't think putting it in the written contract would make that much difference, but it would be a vote of confidence if he did. There have been too many verbal promises that have not happened already so those of us who did not drink the Kool Aid would be more likely to feel some confidence that it was not just part of the showmanship. Again, I love the car and believe in the man and the company, but Tesla has a lot of enemies with deep pockets and the media has shown us time and time again they know where their bread is buttered and they have no problem sensationalizing anything negative as a result.

 

[sranger]

How, may I ask, did you arrive that these conclusions based on this thread?

Just applied common sense... Nothing else...

 

[llstringfield@at]

I think he is referring to worst case scenario. What if Tesla fails, and there is no service nor any new parts; AND what if your Tesla were to become immobilized and need one of those parts that no longer exist. This would mean you have a very large brick sitting your driveway.