I guess by this math it means if I have 100,000 miles on my P85 (actually, less due to 1% per month and however long it takes me to get that many miles) at some point i'll reach a $0 value for my "trade-in". At the rate that I'm racking up miles, I'll have 100,000 miles in < 3 years. So my 30 month (2.5yr) old car will be "worth $0 on trade in". I think they need to rework the formula a little bit. By his own saying, expect to see their new battery tech is every 4-5 yrs, so I don't expect a 500-mile range Tesla Model S to come out for another 4 years at least. A 2.5yr old P85 Tesla with 100k miles (still just a "baby") should still be worth at least $40k on trade in.
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Tesla's new Strategy?!?!?
- Thread starter ElSupreme
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I guess by this math it means if I have 100,000 miles on my P85 (actually, less due to 1% per month and however long it takes me to get that many miles) at some point i'll reach a $0 value for my "trade-in". At the rate that I'm racking up miles, I'll have 100,000 miles in < 3 years. So my 30 month (2.5yr) old car will be "worth $0 on trade in". I think they need to rework the formula a little bit. By his own saying, expect to see their new battery tech is every 4-5 yrs, so I don't expect a 500-mile range Tesla Model S to come out for another 4 years at least. A 2.5yr old P85 Tesla with 100k miles (still just a "baby") should still be worth at least $40k on trade in.
Yep, I just did that math on that, too. Using $85k as a ballpark value, delivered in Dec '12, and driving 1,000 miles/month, my car has zero return value (to Tesla) after Oct '16. Yikes! That's a world different than the guaranteed buy-back rate under the financing program. In Dec '15, the 43% residual value is $36,550 in Dec '15, but the formula value is only $18,400. Therefore I'm guessing that the loaner-swap program will only be used by people trading in fairly new cars.
Zzzz...
Member
Service center network still had to be expanded. And $600 annual fee would have paid for network expansion. One thing as to why it was a smart move- Model S not exactly targets price sensitive customers. Another one - seeing service department actually brings in profits would have ensured high quality of customer service, helping with Tesla brand build up.
Making $600 commitments optional do help to lower true cost of S ownership. But will make service expansion investments come from money that would have otherwise spend on faster X/Gen3/... introductions.
JRP3
Hyperactive Member
I wonder if the value floor tied to the Mercedes depreciation that they use for the loan program would come into play here.
Johann Koeber
Happy Owner
The math (1% per month and 1$ per mile) only in the short term. Do not extrapolate for
the term value of used car. Unless you are unter the personal guarantee given by Elon, price will depend on supply and demand.
Unless I missed something the above formula applies only to the purchase price of the loaner car. The trade in value of your used MS is unknown.
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lolachampcar
Well-Known Member
I think it is a simple way for Tesla to stock cars for immediate delivery without being a stocking dealer (at the same time they provide nice "demo" loaners on the service side). There is no desire to have inventory on the lot but loosing a loaner every now and then in a sale is not a problem and is not inventory carried on the books (service books maybe but not sales).
I think you are right on that Johann. I believe in the Q&A session of the conference call, Elon mentioned something that the value of the trade-in car would be determined by an industry standard pricing guidebook. I'll see if I can listen to the replay and find the section where he talks about how Tesla will value the cost of the car someone is trading in. I also believe it was different from the formula they will be using the value the loaner cars.
This is correct. Elon is referring to the "Automotive Leasing Guide" (ALG). I believe he said that in the Tesla Guarantee video as well.
ALG has a blog post about the Tesla Guarantee:
On Teslas Guarantee - ALG
It will be interesting to see the curves to see if there is a cashless trade-in intersection, though I somehow doubt it.
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lolachampcar
Well-Known Member
I wonder what percentage of MS owners opt'd for the four or eight years of on site maintenance. I did to remove an unknown. If most have (and new owners continue in that direction) this change will not cost Tesla much of anything.
I think the point is that the loaners become an increasingly good value, and Tesla believes the point at which they become an attractive enough proposition to buy is only at about 3 months old. By this formula they eventually become a ridiculously good value, but they'll get sold long before then.
adiggs
Well-Known Member
My question for Tesla - if I get a loaner while my Roadster is in, and I take somebody out for a drive, can that somebody keep (buy) the loaner? In a related question - could somebody swing by the local service center, see what's lying about, and drive off in their new Model S? Or is this "keep the loaner" method of acquisition only available to current owners?
On the one hand I think that making this available to third parties could be a very smart move - spontaneous purchases without the inventory. On the other hand: If a guy drives off with the loaner car, what are they going to give to the next guy coming in for service?
lolachampcar
Well-Known Member
adiggs
Well-Known Member
I'm thinking the solution to this problem (the loaner car was bought and now it isn't available the next day) is a problem that Tesla will enjoy solving
One approach I can think of is to consistently have 1 more car than you need (or 2). Then people will have some choice about which loaner ("did you want the multi-coat red, or the grey, loaner?"). And of course, each time one of the loaners gets bought, that turns into a new factory order immediately so that the car is replaced in a few weeks. If the sales rate is faster than that - just gotta keep 2 or 3 extras! Methinks I'm helping the Portland service center expand into a bigger location.
mitch672
Active Member
Who have been instructed by their CEO, to "not make a profit, the customer is king". How does that sound ANYTHING like a traditional dealership? This precise model will have all of the traditional dealers who wanted to sell Teslas running for the hills, and that's Elons brilliant strategy in a nutshell
JRP3
Hyperactive Member
mitch672
Active Member
Yes, most likely true, considering the "just keep it" upgrade is likely to cost you $20-30K (for many of us), or more...
Not at all. The depreciation algorithm ensures they will never grow old. So either someone buys it on impulse for close-to-full price, or it gets picked up within a few months when the discount becomes too tempting. Assume that the average loaner turns around in 1 month, that means annual sales of 800 loaners. That is 4% of annual production, thus not insignificant. And of course there will be much more than 80 loaners as new service centers open.
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