Tesla Increases Prices for Existing 2008 Orders

[DDB]

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.

What do you want to bet it's the right to put down the first deposits on Model S (with price subject to increase without notice or rationale). How anyone here can think it's actually a good thing to lose 400-odd customers is wrong in my opinion, regardless of how it may appear to speed up delivery and profitability. Alienating a customer is not a solid business model for a fledgling company.

And those government loans may very-well be tied to profitability--but on the backs of consumers should be a red flag to government that this isn't a loan that will be paid back.

 

[Palpatine]

Oh please! Don't even go there! A business plan of "get big loan, pay bonuses, go bankrupt" is unthinkable. I have to believe they would never even consider such a thing.

I agree. Elon Musk is a young guy at the age of 37. He doesn't want to be labeled as the next Delorean who flamed out building a sports car. Tesla Motors is trying to build a long term successful company.

Low interest government loans can help a lot. Also, Tesla has a lot of deals already with the state of California and the city of San Jose. So if anyone can make an electric Sedan feasible, it is Tesla Motors.

 

[DDB]

Oh please! Don't even go there! A business plan of "get big loan, pay bonuses, go bankrupt" is unthinkable. I have to believe they would never even consider such a thing.

TEG, you misconstrued what I wrote. EM would be at risk of fraud and other charges white collar crimes if the intent were to embezzle 400 m; let's be clear I didn't say that. But let's also be straight here--he doesn't give a rat's ass about the customers that canceled their orders within the last week, especially if the real motivation was a low interest loan. How the Big 3 were criticized for excactly what Tesla appears to be doing now, and by that I mean whatever it takes to secure the funds. And Tesla doesn't have a tenth of the issues with that the Big 3 have (e.g., the UAW, health care, pensions, bigger credit woes and the list goes on). I tend to go scortched earth when the little guy gets drilled and that's what I'm seeing with these price increases.

I vaguely remember that Tesla was supposed to be different; open. I'm a realist and know a business has to stay profitable to stay a going concern; wonder what Martin thinks?

 

[TEG]

...wonder what Martin thinks?

Well, he did say a bit here:

I think cutting features and options from cars for which customers put down large deposits months, even a year before delivery, is excruciatingly poor form and shows lack of appreciation for what these early customers mean to a young company. The deposits if these customers - both the cash itself and the faith the cash represents - is a big part of what generated all the excitement about Tesla.

------------------------------------------

"...should be a red flag to government that this isn't a loan that will be paid back."

TEG, you misconstrued what I wrote.

What did I misconstrue? It sounded like you were suggesting that they want a loan they don't plan to pay back...

 

[Yanquetino]

No harm in asking, right?

I sure hope that one of you who attends the Town Hall meetings will have the cojones to ask the CEOooh point blank just how much his failed lawsuit against Fisker cost the company. I suspect that the customers whose locked-in prices he has arbitrarily unlocked would really like to know the answer.

 

[TEG]

http://blogs.edmunds.com/greencarad...-million-after-losing-trade-secrets-case.htmlTesla Ordered To Pay Fisker $1.14 Million After Losing Trade Secrets Case

 

[Yanquetino]

Fiscal responsibility

Oh, my...! I would like to know what those customers think of that figure! Of course, I am no corporate accountant, but it seems to me that $1.14 million = a helluva lot of options!

 

[vfx]

DDB,

While my lawyering is limited to a TV and movie education, I was wondering when owners decide to sue for breach of contract (or if) won't a judge take into consideration, "precedence"? That is,200 owners got cars with HPCs, window tint, wheels, etc, does that not make those parts standard by definition?

 

[dpeilow]

I wondered when we would see this take on it: Electric car maker Tesla struggling to make a profit | TECHNOLOGY Blog | The Dallas Morning News

Good point in the comments:

None of these companies are going to be in business to sell these cars if they do not get their Section 136 Dept. of Energy Loans within a week or so. That money was supposed to have been given out last year and it is being delayed by Bush hold-overs still in office. The PR lady there at DOE is the top Republican mouthpiece and a bunch of other people there are from oil companies. Call your Senator and tell them to tell DOE to release that money NOW!! They are making a mint off of the interest on the $25B they have in the bank. If they wait/delay any longer the EV industry in America will be killed off. The venture capital market is gone, maybe forever, this money is the ONLY way electric cars are going to come and the people who DON'T want electric cars know it.

 

[DDB]

Well, he did say a bit here:
------------------------------------------



What did I misconstrue? It sounded like you were suggesting that they want a loan they don't plan to pay back...

I'm just a little careful about accusing Tesla management about taking the $400 m. and paying execs bonuses and pocketing it. If the Company does not survive, I agree, bankruptcy is the only option even with bridge or low interest loans. But my point is the early adopters got used for Tesla to achieve a certain status requiring it show profitability at any cost. But I do not think EM is going to defraud the Feds nor do I think he ever had any intent to. EM may be a lot of things, but I doubt he is a criminal.

 

[DDB]

DDB,

While my lawyering is limited to a TV and movie education, I was wondering when owners decide to sue for breach of contract (or if) won't a judge take into consideration, "precedence"? That is,200 owners got cars with HPCs, window tint, wheels, etc, does that not make those parts standard by definition?

I'd call that evidence, for sure. It shows a pattern and practice of providing the product as promised to one group to the exclusion of another. Simply because Tesla underestimated costs does not alleviate their obligation to perform as promised. I was just glancing at some consumer statutes in CA, and it's similar to Ohio's. The Motor Vehicle Act looks applicable which is below. It'd take some research to guess whether Tesla's letter to buyers would provide the requisite notice. I'd bet not, as the product had been delivered as promised to prior customers as VFX pointed out.

CA Civil Sec. 2981.5 sates:

(a) Prior to the execution of a conditional sale contract, the seller shall provide to a buyer, and obtain the buyer's signature on, a written disclosure that sets forth the following information:

(1)(A) A description and the price of each item sold if the contract includes a charge for the item.

(B) Subparagraph (A) applies to each item in the following categories:

(i) A service contract.

(vi) A vehicle contract cancellation option agreement.
---------------
The legal theories aside, I hope it doesn't lead to more lawsuits. Tesla does not need anymore bad PR or judgments against it.

 

[bill]

Survival Loans

<None of these companies are going to be in business to sell these cars if they do not get their Section 136 Dept. of Energy Loans within a week or so.>

I think dpeilow hit the nail square on. They need the money to survive. Auto sales are flat everywhere. Tesla appears to be in good shape because of a large backlog, however, orders aren't pouring in, and later this year they will be close to an empty plant.

If they haven't funded the model S by then and have operating capital to tide them over, I doubt they will survive. Elon has options, but they all appear bad right now. I admire his bold approach to try to fix the problem. Too bad his PR skills don't match. Look for a compromise solution at the town hall.

For a few months now, I have felt that if Tesla can get into 2010 in good shape, they will be a viable company. It's turning into a real struggle though. I do plan to buy a roadster, but until this plays out, I'm waiting and watching.

 

[Yanquetino]

Audit, anyone?

In his e-mail explanation, the CEOooh asserts these figures:

When the initial base price, for cars after the Signature 100 series, of $92k was approved by the board a few years ago, it was based on an estimated vehicle cost of roughly $65k provided by management at the time. This turned out to be wrong by a very large margin.

An audit by one of the Series D investors in the summer of 2007 found that the true cost was closer to $140k

Yet six months ago the Fortune Magazine article, "Tesla's Wild Ride," stated:

In Tesla's own prospectus for its most recent round of funding, dated April 12, 2007, it had estimated the cost of building the car at $65,000, dropping as production ramped up. But just two months later, the VCs now believed the average cost was going to be well north of $100,000 for the first 50 cars and would decrease only slightly as more cars were built.

And just two months ago in a "Science & Tech" article for MailOnline, reporter Ben Oliver wrote:

But as the publicity stretched the waiting list, it was clear the car was going to miss its planned production start date the following month, and the costs had spiralled from $55,000 per car to at least $80,000.

Yes, nebulous phrases like "closer to," "well north of," "only slightly," and "at least" allow some "wiggle room" here, but nonetheless the discrepencies among those various top figures are too large to simply shrug off. The difference between $140,000 and $80,000 is not pocket change! And which Roadsters are we really talking about? The "first 50 cars" or "after the Signature 100 series"? Did those reporters just jot down the wrong information on their notepads when conducting their interviews of the key players?

I hope that someone who attends the Town Hall meetings will quote those various figures and ask point blank which one is truly accurate.

I'm sure that the customers who are now expected to help finance the claimed deficit with their unlocked prices would like to know. Indeed, they should ask to see a copy of the actual audit.

 

[TEG]

There are a lot of ways to calculate a cost number. Is it based on just raw materials? Does it include all the shipping, assembly, advertising budget, warehouse costs to stage parts, costs to fix defects, salaries of all those involved, etc? There are so many other ongoing expenses related to regulation, litigation, testing, certification, etc, etc that may or may not be considered part of the cost.

The cost of the battery pack has danced around as well. At first it was supposed to cost around $20K (with or without markup?), and it was supposed to drop over time, estimated around $16K now, but then we hear it is really more like $30K, but $12K guarantees (assuming they are around to oblige) that you get a replacement in 7 years.

The fact is we (random people out here on the internet) don't really know. We can take their word for it that they need to raise prices to satisfy the DOE. How does the DOE know? Are they auditing all the costs to calculate their own profitability index?

 

[WiredChuck]

Hello everyone -

My name is Chuck Squatriglia; I'm a staff writer at Wired.com and I wrote the piece that was linked to earlier in this thread. (Link here, too: Tesla Raises Prices To 'Guarantee Viability' | Autopia from Wired.com ) I have been writing about Tesla Motors since joining Wired a little over a year ago (before that I was a staff writer at the San Francisco Chronicle for eight years), and have been following the latest developments with interest. This forum, and this thread in particular, have been very informative.

I had hoped to attend the town hall meeting in Menlo Park on Tuesday, but Tesla spokeswoman Rachel Konrad has told me the meeting is not open to the media. I had hoped to hear Elon Musk's side of this story directly from him - so far all communication has been through Rachel - as I feel it is important to present his side. I am not interested in "burning" Tesla; I'm only interested in presenting as full a story of what's happening as possible. If anyone at TMC attends the meetings in LA and/or Menlo Park and would like to offer me their thoughts and perspectives on the meeting (or anything else happening at Tesla), I can be reached at [email protected]

Thank you.

 

[TEG]

Clean Tech - GigaOM - Salon.com

 

[Tdave]

There's no call in for the Monday LA town hall meeting. That one will only be in person, with no recording. Anyone here going to attend on Monday and can report back here Monday night?

I'll be calling in for the Tuesday meeting. Tesla says they'll record Tuesday's meeting and post it on the website afterwards at some point.

By the way, are there recordings of previous town hall meetings available somewhere to listen to?

 

[TEG]

By the way, are there recordings of previous town hall meetings available somewhere to listen to?

There were, but they seem to have been removed now.

Tom Saxton has a summary here:
Tesla Motors Seattle Road Show - Tom Saxton's Blog
Tesla Owners Town Hall #2 - Tom Saxton's Blog

And Tony Belding on an older one here:
http://www.teslamotorsclub.com/news-articles-events/776-my-town-hall-notes-2.html#post4452

 

[dpeilow]

Hi Chuck, glad the site is useful for your work.

I would however remind people to be aware of any Ts&Cs or NDAs they might have signed up to.

 

[Tdave]

I would however remind people to be aware of any Ts&Cs or NDAs they might have signed up to.

Can you elaborate? Do normal owners waiting for their cars have restrictions on what they can say?