Tesla Increases Prices for Existing 2008 Orders

[Palpatine]

I think the price increase is about Tesla becoming cash flow positive. They need to make a little more per unit off of the 2008 models that are being delivered right now. They have about 390 units that are being affected by this.

They are on the verge of producing 20 per week and they need to capture this revenue and generate some profit.

Tesla Motors likely is close to breakeven right now, but not quite there.

It looks bad to do this to owners that have locked in their options. But Tesla might really need that extra $7,000 per vehicle.

Selling a few hundred cars where they lose money on every unit is a lousy formula for a long term future. Just look at GM, Ford and Chrysler.

That having been said, I am not happy about giving more money to Tesla. But also I have not locked in my options yet and I have nothing to gripe about.

The owners could just take ownership of a base model Roadster and a mobile recharging unit (110 V 15 A) that will recharge at 6 or 7 miles per hour. That would still be the original price.

We can always ask for a refund if we are really that upset.
I won't be asking for a refund. I WANT MY TESLA ROADSTER !!! It is still the most awsome car on the planet.

 

[DDB]

So what happens when Tesla introduces Model S and takes deposits? There are plenty here at this forum that may think twice simply because it could end up costing 20-30% more. That could really hurt Tesla

 

[vfx]

... Tesla could be forced to increase the roadster prices soon in order to get cash flow positive. They can only arrive to that, if the costs of the roadster are now 100% covered by the selling prices.

You don't know this. Or more accurately, you don't know if they are not already covered.

It's about being true to your word.
Tesla has raised their prices. Three and a half times. (92K, 98K, and 109K now 125K)

Raising prices is not uncommon. But there are hundreds of people who have already made a deal or "locked in". Reneging on the deal creates a lot of bad blood.

What if you waited an hour to get in a popular diner, sat down and ordered a burger and fries. Then while you can smell it cooking the waiter informs you that you have to pay extra for salt and catchup, and the bun will now be white bread unless you pay more and it will be served on a piece of notepaper unless you buy the plate upgrade.

Would you eat there again?

 

[Palpatine]

So what happens when Tesla introduces Model S and takes deposits? There are plenty here at this forum that may think twice simply because it could end up costing 20-30% more. That could really hurt Tesla

That is a very good point. But the base price of the Roadster is still being honored. Those people that paid $92,000 or $98,000 or $109,000 are still only being charged that amount.

This is only the options that have been jacked up. Tesla likely regrets not charging more to those early customers, but that is still the price of the car for those early numbers. Any owner at $92,000 or $98,000 could purchase a base model for that price. The premium leather upgrade price has not changed at $1,800. That is the major upgrade item. I think many people could find most of the other upgrades aftermarket (electronics group, wheels, etc).

If you really wanted to, you could even ship the vehicle yourself at about $800 and avoid the $1,900 delivery fee.

I would be more concerned about putting down big money for a Model S. I wouldn't pay a $30,000 deposit, but I might do a $5,000 deposit. It really depends on if it is truly an incredible sedan.

I would be more worried about the long term health of Tesla Motors surviving till the Sedan is produced. I don't know if they are selling any more Roadsters in this market. They might complete their backlog in late 2009 and not have anything to do. That is one reason I am not doing the extended warranty ($5,000) or the replacement battery ($12,000). I am not sure Tesla Motors will be around 4 or 5 years from now. I hope they are still operating, but we cannot be sure in this market.

 

[vfx]

This is only the options that have been jacked up.

What about the wheels?

 

[graham]

That is a very good point. But the base price of the Roadster is still being honored. Those people that paid $92,000 or $98,000 or $109,000 are still only being charged that amount.

This is only the options that have been jacked up.

I have been avoiding saying much more publicly on this until I get more official confirmation from Tesla. I will say this: The original option prices are actually listed in line-by-line detail in my original paperwork with Tesla. They always made a big deal that the HPC "comes as part of the price of the car..."

I would not be unhappy with them at all about this if I had not been an early adopter. If I had purchased a 2009 with my options already unbundled I would have gone into knowing full well what I was paying for. This is about agreeing to a price, making a big deal about getting in early to lock in a price (including options) before it goes up, and then at the last minute breaking that promise.

I want Tesla to succeed. I want them to get cash flow positive. But do it by offering services I want to buy at a price I can afford. Or at least politely asking would I mind paying more for a service I have already paid for to help a brother out. I am good with that. Keeping my money for 2 years and then saying "pay 12 grand more, or you get no car " at the last minute is just not cool.

 

[vfx]

This is only the options that have been jacked up.

They always made a big deal that the HPC "comes as part of the price of the car..."

That too.





.

 

[j-g]

It was my understanding from the beginning that the battery pack in today's dollars was ~$20,000, not the $30,000 quoted in Elon's letter. Am I remembering this inaccurately? Also, with normal use, it was to have lost ~20% of its charge in 5 years. Does that mean it will be useless in 7 years?

I also expected that the replacement battery pack that would ultimately be purchased in the future would be significantly different than the current one due to technological advancements. This would translate into greater energy storage or lower cost or both. Given these expectations, it sounds very unreasonable to plunk down $12,000 right now.

It is like buying roof replacement insurance for my house.

Jeff

 

[Palpatine]

What about the wheels?

I am willing to wager that you could buy those same Tesla wheels (or better) for about $1,500. Then you could sell the basic wheels that come with the car.

You are correct that this is lousy switch made by Tesla Motors. The basic wheels are clearly less attractive.

 

[Palpatine]

I have been avoiding saying much more publicly on this until I get more official confirmation from Tesla. I will say this: The original option prices are actually listed in line-by-line detail in my original paperwork with Tesla. They always made a big deal that the HPC "comes as part of the price of the car..."

If the early owners have that level of paperwork signed and in a contract, then I think that the HPC issue is going to be very difficult for Tesla Motors to deal with. They might have to keep that included in the package. I know there are lawyers who are in that group.

I was not following the Tesla universe back then so I don't know what was promised. I made my deposit in September 2008 and I am at the $109,000 level. It was made clear to us that the HPC is $3,000 extra. So I don't have the same anger.

But I fully understand the anger of owners that took a VERY early risk by making large deposits to Tesla, interest free loans, with nothing being safe in an escrow account. If Tesla Motors had failed, then the money would have been lost in bankruptcy.

 

[Bradleybang]

I put down my deposit in March 2008 and was told that HPC was included.

 

[Palpatine]

I put down my deposit in March 2008 and was told that HPC was included.

If the early owners have that in writing, then I don't see how Tesla Motors will be able to make that stick. They will have to include the HPC for those early buyers.

That may be the compromise that Tesla Motors offers to repair this PR mess.

 

[doug]

That is a very good point. But the base price of the Roadster is still being honored. Those people that paid $92,000 or $98,000 or $109,000 are still only being charged that amount.

I suppose some might attempt to make that claim, but changing what's included as standard is effectively the same as changing the base price.

I hope that Tesla can get this taken care of to the affected customers' satisfaction before it becomes a PR nightmare. At this point this issue is still within the relatively small (and forgiving) space of this forum and ABG. But by Tuesday it could be in the New York Times, and it will be much harder to undo the damage.

What's worse is that some of those affected are the biggest cheerleaders for the company. Tom Saxton is often the first person to post a correction or clarification when a negative article shows up about the Roadster or Tesla Motors. It really is unfortunate.

Again, I hope Tesla Motors can get this straightened out because I really want them to be able to succeed.


(Sadly this may have a new double meaning for some customers.)

 

[WarpedOne]

So what happens when Tesla introduces Model S and takes deposits? There are plenty here at this forum that may think twice simply because it could end up costing 20-30% more. That could really hurt Tesla

I'd say this is a worry for Mr. Musk not for us.
His credibility was just downgraded for yet another notch.

 

[TEG]

It was my understanding from the beginning that the battery pack in today's dollars was ~$20,000, not the $30,000 quoted in Elon's letter. Am I remembering this inaccurately?

SiliconBeat: The Tesla Roader taken for a spin; and its "gut-wrenching" VC roadshow

Harrigan: The expected battery life is 5 years or 100,000 miles. We consider the battery's end of life is when it reaches 80 percent of original capacity when recharged. The batteries are quite expensive. Today they cost $20,000. Over the next four or five years, we expect prices to come down substantially -- to the $12,000 range. They're coming down 8 percent a year recently. The cells we use in the battery packet are used in lots of different things, like laptops and power tools.

(That was from a 2006 story, so if you extrapolate, the pack theoretically should only be about $16K now... Assuming they were using accurate numbers and prices followed the expected trend.)

 

[doug]

Come on now, clearly the $30K battery replacement price includes a healthy margin. That's the price to the customer, not to Tesla. It also serves to make the $12K buy-in-now deal appear more attractive. The letter includes what I consider a pretty heavy sales pitch for the $12K deal. Btw, the talk about a 7 year battery life span could be hinting to what restrictions may apply.

 

[TEG]

"...But the base price of the Roadster is still being honored. ...
...only the options that have been jacked up...."

People have been mentioning that the wheels got switched around, so the previously standard wheels are now a costly option.

And the HPC turning into a $3K option.

Then there is the SolarPlus Windshield (previously included, now $400).

11 of 13 paint color choices are expected to cost more too. (Although the buy link on their web site still shows the old prices).

So, if you want to keep the base price intact you would need to:

• Pick Fusion Red or Racing Green color.
• Be willing to accept that you get different wheels now.
• Be willing to accept that you don't get the SolarPlus Windshield anymore.
• Be willing to accept that you don't get the HPC anymore.
• Be willing to accept that you don't get the Homelink door opener anymore.

On the other hand you now get a 120V/15A mobile cable for free.

Oh, and if any of those changes from the Sport model become standard that would be a bonus too. For instance, a new kW meter instead of "vestigial tach", and moving the VDS from the left side to the center are major improvement, IMHO.

 

[relliott]

My email to Elon Musk

If you had actually explained to locked-in owners the reason why you needed to raise prices was to be profitable so that you could get funding from the government for the Model S, I’m very sure that everyone would have understood and supported you.

Instead, you sent out a deceptive email about new options that made locked-in owners confused about it being a price increase or not. You’ve created a lot of anger. Personally, my anger at first was about the price increase. But now, it has morphed into the way you have done this. Mr. Musk, you are showing a lack of integrity in the way you have done this price increase. Unfortunately, you are the CEO of Tesla and have now shown to your employees that it’s o.k. not to have integrity, as long as the end justifies means.

You are also showing a lack of respect for your customers. We are not stupid. We would understand why you had to do this if you had actually given us enough credit for having the intelligence to do so. You need to send a second email that apologizes for the email you sent. Own up to the fact that locked-in owners will get a price increase and give the reason for the price increase. People have not given $50,000 as a deposit for 2 years because they need an electric sports car. They have done it because they believe in the dream of advancing us all to an electric future for the automobile. The dream, and the people who have bought into it, are taking a blind leap of faith in Tesla Motors. Faith is the operative word. You are destroying the faith by not acting with integrity. We are your fanatics. We will bring the masses you need to make the Model S successful. Don’t disrespect us and underestimate our intelligence.

You need to put your very large ego aside for a moment and write that second email. If you don’t, you will have a P.R. disaster much larger than any you have had in the past.

Sincerely,
Ron Elliott

 

[doug]

Oh, and if any of those changes from the Sport model become standard that would be a bonus too. For instance, a new kW meter instead of "vestigial tach", and moving the VDS from the left side to the center are major improvement, IMHO.

Those are certainly great improvements but will only be available on 2009 models. The issue at hand is the 2008MY customers that already had their options locked in. So far it appears that if 2008MY customers want these features, they need to forfeit their '08 reservations (locked in at a base price of either $92K or $98K) and pay more to cover the higher 2009MY base price of $109K, even though Tesla is currently selling later VIN 2008MY cars at a base price of $125K.
Again it would be nice to have clarification on this.

 

[cue]

Stay or Cancel?

I have not gotten any notifications from Tesla but if I have to change my locked order with the new options, I am going to likely cancel. It is not the price difference as I was clearly already overpaying to help Tesla, but the way this has been handled. There is nothing worse than feeling like a sucker and unappreciated customer. I would have happily spent more money for some options or even paid more if Tesla handled this properly. Instead, I feel like they must think I am stupid and willing to do anything to get the car.