Tesla Increases Prices for Existing 2008 Orders

[TEG]

Tesla nears profitability; Musk explains '07 ouster of CEO

An audit by one of the Series D investors in the summer of 2007 found that the true cost was closer to $140k, which was obviously an extremely alarming discovery and ultimately led to a near complete change in the makeup of the senior management team. Over the past 18 months, observers will note that Tesla has transformed from having a senior team with very little automotive experience to one with deep automotive bench strength.

So is this suggesting that old Detroit has more experience keeping costs under control and being realistic? Doesn't the current situation for the "big 3" suggest that this premise is flawed?

Hasn't the Tesla story included the idea that Silicon Valley is the right place to rebirth the auto industry using fresh eyes?

Tesla: A Carmaker With Silicon Valley Spark

So what makes Tesla think it has a chance? The very fact that it has been built by outsiders. After all, Detroit is hardly a model of corporate efficiency. Tesla bills itself as Silicon Valley's version of a car company. ... "Silicon Valley is the best in the world at everything it does," boasts Elon Musk

Elon Musk - Entrepreneur of the Year - Tesla Motors -SpaceX

"I'm a Silicon Valley guy," Musk said at the time. "I just think people from Silicon Valley can do anything." Musk's comment was hardly surprising: Tesla Motors, and, indeed, everything about Musk, has been consistently packaged, presented, and explained as Silicon Valley come calling on old-line industries.

Opinion: Funds for clean car tech should not be diverted to Big 3 bailout - By Elon Musk

The Detroit Three say they need cash to avoid firing millions of workers. But mortgaging the future to cover up the auto industry's mistakes would have dire consequences for the next generation.

Why shut down the Michigan office if you think more auto industry experience is what is needed?

Obviously this is a difficult business to grow in a terrible climate, but to say that more auto industry experience is the answer seems out of step with what I thought was part of the company message.

 

[doug]

This article finally includes some comment from Rachel Konrad. I do not envy her position right now.

Greentech Media: Green Light Blog Archive Tesla Jacks Price on Roadster Options

“We need to improve the margins on the car for the next round of investors,” Tesla spokeswoman Rachel Konrad said Tuesday. “They could be venture capitalists, they could be public shareholders after an IPO, or it could be the federal government.”
...
Because all the 2008 Roadsters to be produced from now until October are sold already, adding charges for newer customers only wasn’t an option for immediately improving the company’s margins, Konrad said. About 150 Roasters have been delivered so far, she said.

“We did not do this lightly,” Konrad said. “But it’s a decision we think helps ensure the viability of the company going forward.”

Again, some better communication would have made this less of a fiasco.

 

[stopcrazypp]

This article finally includes some comment from Rachel Konrad. I do not envy her position right now.

Greentech Media: Green Light Blog Archive Tesla Jacks Price on Roadster Options

Again, some better communication would have made this less of a fiasco.

Gizmodo picked it up:
Tesla Motors: Tesla Jacks Up Prices On Customers Who Already Ordered a Roadster

So did Wired:
Tesla Raises Prices To 'Guarantee Viability' | Autopia from Wired.com

As mentioned, if they had the explaination BEFORE they moved to increase the prices, this wouldn't have been as huge an issue. I'm sure most of the customers would understand (even though there are still questions if this move is a breach of contract). Now it's all over the blogosphere and might reach some mainstream news soon.

 

[Tdave]

This article finally includes some comment from Rachel Konrad. I do not envy her position right now.

Where was she when the wording of this price increase was vetted BEFORE it was disseminated?

 

[doug]

Where was she when the wording of this price increase was vetted BEFORE it was disseminated?

Yeah. good question.

The Wired quotes appear identical to the those in the Greentech Media article. Likely she's sending out emails trying to get ahead of the story. The Tesla message at this point appears to be, "this was a really tough decision, but we felt we had to do it to keep the company viable." Of course the real issue is that customers feel disrespected, and Wired seems to get that:

Tesla risks angering 400 people for the sake of a few million dollars, and the announcement has brought lively discussion over at the Tesla Motors Club website. Although those customers have only placed deposits on their cars, in their mind they've already bought them, so Tesla's move amounts to a retroactive price hike, says Eric Noble, president of the auto-industry consulting firm The Car Lab.

"That's ill-advised," says Noble. "Your first buyers are your emissaries. Treat them wrong and all the advertising in the world won't cure it. It's just bad marketing."

 

[TEG]

..."There is one additional point that relates to the government loans that Tesla is seeking for the Model S program, a much more affordable sedan that we are trying to bring to market as soon as possible. A key requirement is that any company applying be able to show that it is viable without the loans. If we allow ourselves to lose money on the cars we are shipping today, we place those loans at risk. Mass market electric cars have been my goal from the beginning of Tesla. I don't want and I don't think the vast majority of Tesla customers want us to do anything to jeopardize that objective."

It seems that this "additional point" is actually a very key point. The need to get to some level of profitability ASAP or else the loan guarantee falls apart and their plans for 'Model S' could dry up as well. I gather an IPO was supposed to fund 'Model S', but this is not a good time for any kind of IPO. I think there is a lot of sympathy for why they want (and need) to do this, but the 'how' is what has been brought into question.

So, this isn't just about funneling more investor money into the company - it is about showing that their current business model is viable, and that the government will back them up for the next step.

Apparently the immediate time-line made this awkward - it would have been more sensible if they could have left the 2008 pre-orders alone and made a more logical changeover starting with the 2009 model year changes.

 

[Palpatine]

Since I'm more of an outsider looking in, i.e., not actually buying or know anyone personally buying a Tesla Roadster, I got a quick question. Was the destination charge increased to $1,000 or was there an extra $1,000 added? If I recall, I saw the destination charge was $950. Is it now $1,950 or $1,000? Just wanted some clarification.

It was $950, it has now been raised to $1,950.

My company transports cars half way across the USA all the time. It costs about $400 to $500 to ship a car via open transport exposed. Shipping via enclosed transport, the way Tesla is doing it, costs about $1,000.

 

[shark2k]

Thanks for the response James.

-Shark2k

 

[TDA]

It was $950, it has now been raised to $1,950.

My company transports cars half way across the USA all the time. It costs about $400 to $500 to ship a car via open transport exposed. Shipping via enclosed transport, the way Tesla is doing it, costs about $1,000.

I believe the $1,950 Destination Fee is to ship your car to your nearest Tesla Store and then to you if you live within 200 miles of it. If you live more than 200 miles from a Tesla Store then you're on the hook for picking up the car yourself or having someone pick it up for you. At one point Tesla was charging something like a flat $5,000 to ship your car to you from California but then later dropped that.

 

[Palpatine]

I believe the $1,950 Destination Fee is to ship your car to your nearest Tesla Store and then to you if you live within 200 miles of it. If you live more than 200 miles from a Tesla Store then you're on the hook for picking up the car yourself or having someone pick it up for you. At one point Tesla was charging something like a flat $5,000 to ship your car to you from California but then later dropped that.

That might be what Tesla Motors is charging. But that is not the cost Tesla Motors is paying to the shipping company.

Shipping pristine collector cars in an enclosed transport is quite common. It costs about $1,000 for shipping a top quality car with fully protected enclosed transportation. I just today asked my general manager of our store what she typically pays.

If you don't mind the car arriving dirty, it can be via open transport for $500. 99% of the time they arrive needing a good wash, but no exterior damage at all.

 

[dpeilow]

To bring the cost of the car down, we have reengineered the entire drivetrain, which is now at version 1.5 and will be at version 2 by June.

Is this the first confirmation of a version 2.0 drive train on the the Roadster? If the target is to reduce costs (I'm assuming), do we know where there is scope to do this?

 

[Michael]

Has anyone gotten the notice yet that the battery pack specs are changing? The new standard battery will have 27 kw and an aptional battery with 53 kw will be added to the options list for an additional 20k.

If "anything can change", then what else will be removed from the standard vehicle content?

Although the above is only speculation, is there any reason we can point to that would make it not possible to happen?

 

[DrTaras]

Abusus non tollit usum

I was an ideologue for Tesla awaiting a car that I had put down a 50% deposit 2 years ago with no interest & then ‘locked-in’ the remainder of the price and options in November, 2008 for a car that had been delayed until April, 2009. Now they pull the rug up from underneath me and want to charge nearly $10,000 in options? Shady is an understatement! I hope there is a mutiny! Go here for more info: Tesla Increases Prices on Locked-In Orders - Tom Saxton's Blog

A few years ago I opened escrow on a house on a Friday. That next Monday they wanted $10K more and through a loop hole they were able to ask for it & had another buyer lined up (remember those days when the housing market was riding sky high?). Though the house was "worth" the extra $10K and we were emotionally attached, I told my broker & my wife, that on principal I could not continue with the deal. The $10K I thought was just the beginning of something nefarious and not the end. After we walked away we found out that the blue prints for the pool that they had displayed when we walked in to see the house for the 1st time and that were going to be given to us for free so that we could use them to build a pool were useless as the city had determined that the soil was unfit to build any pool there!

So I put to those of you who have "locked-in..." what is Tesla not telling us? And those who have yet to "lock-in" and don't seem affected... what might happen to you when they call your name early because others have dropped out? And those of you who think that $100K is a lot for any car and can't ever dream of spending that kinda dough on a car, ever... How about if it was a $10K car and you were in a similar situation and they told you the price was the same as you had locked it in with that $5K deposit, but the steering wheel was a $1K option?

"All that is needed for evil to succeed is that decent human beings do nothing." -Edmund Burke
"Abusus non tollit usum" - Translation: "Abuse is no argument against proper use"

 

[Tdave]

Has anyone gotten the notice yet that the battery pack specs are changing? The new standard battery will have 27 kw and an aptional battery with 53 kw will be added to the options list for an additional 20k.

You're joking, right?

 

[Michael]

You're joking, right?

I seriously hope so, but how can we be sure it won't happen?

 

[dpeilow]

I seriously hope so, but how can we be sure it won't happen?

OK - so you were laying flamebait. With the current stories circulating, I don't think we need to be courting any more controversy.

 

[Tdave]

OK - so you were laying flamebait. With the current stories circulating, I don't think we need to be courting any more controversy.

Indeed. Folks, please identify sarcasm appropriately.

 

[vfx]

First off I would like to take back many of my thoughts and statements about Daryl Siry. This new idiocy still went down even with a new PR team so it's obvious that the spokes-people cannot handle the CEO.

This bodes poorly for the company's future. Elon clearly knows technology but is clueless about people. These actions are exactly oppostite of what they should have done. [New Elon mantra. "What would Apple do?"] Better yet, Hire Guy Kawasaki and let him run the company.


A smart team would suck it up and embrace the early evangalists not anger them. Even if this move was absolutely required to keep the company from going under (more Elon money notwithstanding) then approach the problem with a you-scratch-my-back solution.
State your case (FIRST) and then offer something later in return. Those that put down money have been waiting a long time. Why not do it again on a much smaller scale? Offer an equivalent discount on the next car, or a rebate check in 2 years, a new battery upgrade etc. There are many delayed ways of getting money now and amortizing it into the next season's profits.

The locked in buyers have already shown their support. They are your friends. Friends help each other. Go for the pat on the back not the stab.

 

[Palpatine]

I honestly believe that if Tesla Motors had simply presented the new options as exactly that... new options to improve your Roadster, most owners would have likely bought a few of them.

I think many of us were mentally preparing to purchase a hardtop, either painted or clear carbon fiber. That was a $3,200 or $5,000 upgrade in revenue.

Many 2008 VINs that had an HPC included, were likely planning to purchase a mobile charger at $600 or $1,500.

Many of the other new upgrades are really cool and do raise the quality of the Roadster. There are more carbon fiber options, a Sport option, etc.

If Tesla Motors had just kept the current locked in 2008 VINs at the current level of quality (HPC, wheels, windshield), and then offered the options in addition, then Tesla might have averaged $10,000 in additional revenue per Roadster. Tesla might have even sold a bunch of prepaid replacement batteries at $12,000 and gotten more interest free loans.

But the way this has been done, by downgrading the quality of the Roadster for locked in customers, just has a lot of 2008 customers upset, and rightfully so.

I don't think it is too late to fix this. Perhaps Tesla Motors could reconsider and backup a bit. It is never too late to say, "oops, sorry we weren't thinking this through logically because of the rush going on at the Detroit Auto Show. Here is the fix."

 

[lbaroody]

Why the High Delivery Charge?

I had heard that in order to get some speed and momentum on deliveries given all of the delays, gliders were being transported by air from the UK to California. This may explain the extra $1,000 delivery charge. It's one more way to pass on their higher costs (which Tesla by itself chose to incur). Tesla is behaving very naively and stupidly - that somehow the risks of starting the business need to be passed on to their early customers who helped get them started.

The increase in $25 for the floor mats says it all. This is the ultimate nickel and diming.