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I obviously don't know the full scope of why Tesla did increase the price, but turning a huge chunk of your potential happy customers and advocates into possible Tesla haters can't be good. Not to mention these people will hit Tesla where it hurts the most, on their reliability as a company.
Mind you, not the product, as the Roadster can usually stand on it's own on it's technical merits. Just look at all the bad press an icon like Top Gear got for attacking the technical aspects of the Roadster. Now imagine that same Top Gear review shown in 2 weeks if this case isn't resolved properly.
The third part is this is supposedly done to show they are viable as a company. But as someone that could potentially invest a few thousand in a Tesla IPO, this scares the *sugar* out of me. Either the margins Tesla got now are so bad that they need to pull a stunt like this with all the obvious down sides for a few measly millions (400 buyers x $6700 = $2.68mill), even risking possible litigation. Or someone in the management is so lost they thought this would be a good idea. In either case I would surely not have faith in any investment in this company.
Actually looking at the sums involved, 2.68 mill this just looks incredibly dumb. They got what 40 mill in the last round of financing, they couldn't have tried to get 43 mill?
I'm definately curious what will be said in the town hall meeting on monday
Cobos
Mind you, not the product, as the Roadster can usually stand on it's own on it's technical merits. Just look at all the bad press an icon like Top Gear got for attacking the technical aspects of the Roadster. Now imagine that same Top Gear review shown in 2 weeks if this case isn't resolved properly.
The third part is this is supposedly done to show they are viable as a company. But as someone that could potentially invest a few thousand in a Tesla IPO, this scares the *sugar* out of me. Either the margins Tesla got now are so bad that they need to pull a stunt like this with all the obvious down sides for a few measly millions (400 buyers x $6700 = $2.68mill), even risking possible litigation. Or someone in the management is so lost they thought this would be a good idea. In either case I would surely not have faith in any investment in this company.
Actually looking at the sums involved, 2.68 mill this just looks incredibly dumb. They got what 40 mill in the last round of financing, they couldn't have tried to get 43 mill?
I'm definately curious what will be said in the town hall meeting on monday
Cobos
I don't think its about whether Elon or anyone else could have thrown in another $3m, but about showing ongoing profitability on a per unit basis. I'm not an economist, but this is my understanding of their explanation.
I think that is exactly correct. They need to show that the Roadster business is profitable per unit by some percentage. Even if 50 Roadsters are cancelled, that likely is worth the short term pain to get to profitability. Those people at $92,000 would be replaced by owners at $109,000.
They have previously said that the battery/drivetrain business is already profitable based on the work they were doing since 2007 for Daimler. I am sure Daimler paid Tesla some amount of money for the R&D of dong their feasibility study.
But that is my point! The first cars will never be profitable for any company. If they can show that all 2009 models are profitable then they show that they are profitable. Doing the first 1-3 years of production at a slight loss or barely braking even is pretty normal for a new company or new product line, just look at the Prius.
And if this goes down as I'm fearing this is NOT a short term pain. Loosing 50 sales is not really a big deal, turning a huge chunk of their fanatics into someone that actively speaks up against them IS. Look at me, I really want the Model S, because I want to support Tesla as a company (or I did anyway). For me that support is worth paying $10 000 - $15 000 more than I feel is sensible for a car. I'm pretty sure that money is going to be a dealbreaker for me buying a Model S in contrast to something more sensible like a Volt.
Really crappy PR is really expensive to repair. Currently Tesla is spending about nothing on PR. If they need a few tens of millions just to drown out all the negative PR and reach the zero point, this can easily get very costly....
Cobos
Cobos, I understand what you are saying.
I made this argument to Tesla via email.
Think of all the deposit money as an interest free loan to Tesla Motors.
Let's estimate that the deposit for the sedan is about $25,000.
Before this recent crisis, I think Tesla Motors might have been able to get 3,000 pre-orders with deposits. With the total cost of the Sedan at around $57,000 that makes it much more affordable to a wider customer base.
3,000 deposits X $25,000 = $75 million
Let's say that Tesla Motors has to pay about 10% on money.
That $75 million in the bank as an interest free loan is worth about $7.5 million per year to Tesla Motors. The Sedan is esimated for 2011 (which really means 2012 with delays), so Tesla could have saved at least over $22 million in interest with those deposits.
How many preorders will Tesla Motors get now for the sedan model? I have no idea, but I am sure the number is lower than it was about a week ago.
I made this argument to Tesla via email.
Think of all the deposit money as an interest free loan to Tesla Motors.
Let's estimate that the deposit for the sedan is about $25,000.
Before this recent crisis, I think Tesla Motors might have been able to get 3,000 pre-orders with deposits. With the total cost of the Sedan at around $57,000 that makes it much more affordable to a wider customer base.
3,000 deposits X $25,000 = $75 million
Let's say that Tesla Motors has to pay about 10% on money.
That $75 million in the bank as an interest free loan is worth about $7.5 million per year to Tesla Motors. The Sedan is esimated for 2011 (which really means 2012 with delays), so Tesla could have saved at least over $22 million in interest with those deposits.
How many preorders will Tesla Motors get now for the sedan model? I have no idea, but I am sure the number is lower than it was about a week ago.
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I persoanlly think this "crisis" will all blow over with the unveiling of the sedan model.
If that car is really amazing, that is what we will all be talking about next month.
Tesla will be delivering Roadster #200 and the Sedan will be revealed and available for pre-order.
Just my opinion.
If that car is really amazing, that is what we will all be talking about next month.
Tesla will be delivering Roadster #200 and the Sedan will be revealed and available for pre-order.
Just my opinion.
No way James. There will always be the cloud overhead of this price increase. Tesla now have a reputation for raising thier price on customers who put down a third to half of the car's price. And they also did it after the customers were forced to lock in price and accessories.
No one would consider a down payment on Tesla's next car without seriously considering that they will be bent over after tying up $25,000 for two years.
Add to that the "company fail" possibility, the bad juju that will will fester over the internet and mainstream press, the next two bonehead moves (they average about one every 6 months) and the possible problems the Roadsters might have after 2 years.
A new car company with a terrible track record with customers will keep them away in droves.
I don't know about that. Originally I was thinking that this is a stupid move on the part of Tesla and it will hurt them. It might cost them 50 to 100 refunds. But the more I think about this topic, the move I understand why it likely was a necessary risk for Tesla Motors to take.
If 100 customers demand refunds, it actually just moves more units into the $109,000 category sooner, which is likely fine with Tesla Motors. Their current backlog runs through the end of 2009 and they have not even really done much in Europe or Asia.
By the end of 2009 this recession should be ending and all of this stimulus and low interest rates will be having an impact on the global economy. And once people don't have to wait 12 months for a Roadster, there is an entirely different market of people who will come off of the fence.
I am a Tesla customer and I am impacted by the price increase. But I still love this car. I am enough of a realist to understand the reasons for the price increase. Yes it is bad customer service and poor form. But a few thousand $$$ extra is not going to kill me.
Let's say that 100 people cancel their order. The other 1,000 take their Roadster. This will all be forgetten once we have our Roadsters and have that much fun on a daily basis driving around in the coolest electric car on the planet. Time has a way of healing this crap. The amount of enjoyment I will get from having the Roadster will outweigh the frustration I feel now from the delays.
Elon Musk is NOT an idiot. I am sure he realizes the danger of doing this. It likely really was necessary for reasons that we are not fully aware of.
If 100 customers demand refunds, it actually just moves more units into the $109,000 category sooner, which is likely fine with Tesla Motors. Their current backlog runs through the end of 2009 and they have not even really done much in Europe or Asia.
By the end of 2009 this recession should be ending and all of this stimulus and low interest rates will be having an impact on the global economy. And once people don't have to wait 12 months for a Roadster, there is an entirely different market of people who will come off of the fence.
I am a Tesla customer and I am impacted by the price increase. But I still love this car. I am enough of a realist to understand the reasons for the price increase. Yes it is bad customer service and poor form. But a few thousand $$$ extra is not going to kill me.
Let's say that 100 people cancel their order. The other 1,000 take their Roadster. This will all be forgetten once we have our Roadsters and have that much fun on a daily basis driving around in the coolest electric car on the planet. Time has a way of healing this crap. The amount of enjoyment I will get from having the Roadster will outweigh the frustration I feel now from the delays.
Elon Musk is NOT an idiot. I am sure he realizes the danger of doing this. It likely really was necessary for reasons that we are not fully aware of.
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I'm with vfx on this one. I'd forget about even a deposit on the Model S, because I don't want to pay $92,000 for a car that is supposed to be in the ball park of $55-60K. Cobos (maybe) and I may shell out some deposit money for a Volt because GM understands bad PR when Tesla has shown what it can do to it's core customers (early adopters willing to risk it all). No chance I'd put any money down without driving away in a Model S. Okay, start GM bashing--but perhaps they were smarter to wait to take deposits if they do?
James, I think you last sentence sums things up well. What's to keep Tesla from doing this same thing in the future to the $109,000 owners, or the $125,000 owners, or the future sedan owners. Yes, perhaps they needed to show profitability on their current cars to get the loan, but why weren't the current locked in owners included in on that decision? Why did musk's explanation/repair email come after everyone lost their cool, not before. This may blow over, but unless tesla fixes this, I doubt it will be for a very long time. And to add to the situation, unless there is a fix to the problem, I don't see how litigation can be avoided.
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graham
Active Member
This might work out well for Tesla.
1) They get rid of the 400 or so customers of which they are selling the car for less than they would like. (they may or may not decide to refund their deposit).
2) They immediately get to the 2009s who are paying them more, and because they started out at a higher price, are less unhappy.
3) They use this window of time while they are working through the 2009 backlog to secure 400m from the Govt because they are currently profitable.
4) They live off of those loans until they can produce the Model S, or have ready-to-buy Roadsters in the showroom.
If that works for them, great. Bad PR on this may dry up a lot of potential new orders for the Roadster... so worst case scenario is they will have to just live on Govt loans until they have products people can buy from the show room instead of trusting that the price / features / performance will not change on them between purchase and delivery. They no longer need happy customers or advocates if the government will float them for long enough for the scandal to blow over.
1) They get rid of the 400 or so customers of which they are selling the car for less than they would like. (they may or may not decide to refund their deposit).
2) They immediately get to the 2009s who are paying them more, and because they started out at a higher price, are less unhappy.
3) They use this window of time while they are working through the 2009 backlog to secure 400m from the Govt because they are currently profitable.
4) They live off of those loans until they can produce the Model S, or have ready-to-buy Roadsters in the showroom.
If that works for them, great. Bad PR on this may dry up a lot of potential new orders for the Roadster... so worst case scenario is they will have to just live on Govt loans until they have products people can buy from the show room instead of trusting that the price / features / performance will not change on them between purchase and delivery. They no longer need happy customers or advocates if the government will float them for long enough for the scandal to blow over.
Tdave
Member
I have an answer to this direct from Tesla. The $5k initial deposit from us 2009 owners that locked in price did indeed lock in price, but only the base price, not the options. This is the reason they didn't actually raise base prices, but did all the price adjustments on the options.
The problem, as has been stated, with that logic is that some standard items were turned into optional items. You thought the now optional wheels were coming with your locked in price. You thought you would be getting that SolarPlus Windshield, the HPC and the Homelink too. With this logic they can turn anything into an option at will and change what you actually get. It may be more about expectations than legality, but still I can see why this ended up upsetting many. Unfortunately this also turned into an opportunity for the Tesla naysayers to pop back out of the 'woodwork' and start taking potshots again.
Tdave
Member
TEG, you're exactly right. I didn't say I agree with the reasoning and logic of the statement. I was simply reporting more info that came from a Tesla representative. It's more info to fill in the puzzle. I remain most puzzled by the company's audacity and arrogance.
I will add this, though. After my phone call with the company, I will certainly hold final judgment until after the town meeting. There was a hint that Tesla will bring some sort of compromise to the table at the town meeting. I'll believe it when I hear it.
I will add this, though. After my phone call with the company, I will certainly hold final judgment until after the town meeting. There was a hint that Tesla will bring some sort of compromise to the table at the town meeting. I'll believe it when I hear it.
stopcrazypp
Well-Known Member
Tesla admits to underpricing Roadsters, still hopes profitability is near - Engadget
Another article on this. Notice all the naysayers popping up. Besides from addressing this issue with the customers, Tesla also has to deal with a lot of negative press now.
Hopefully they can work something out with the customers which doesn't ruin the reputation of Tesla and can still provide revenue for Tesla.
Another article on this. Notice all the naysayers popping up. Besides from addressing this issue with the customers, Tesla also has to deal with a lot of negative press now.
Hopefully they can work something out with the customers which doesn't ruin the reputation of Tesla and can still provide revenue for Tesla.
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