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The Price of admission

Discussion in 'Tesla Motors' started by Michael, May 14, 2008.

  1. Michael

    Michael Member

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    I'm sure we're all aware that Tesla is charging a fee of $60k to reserve a Roadster and that they are estimating that the 2009 model, reserved now, can be expected in ~ 15 months.

    I'm wondering how many of the folks that had put down a $5k deposit have decided to leave the reservation pool. I'm also wondering whether this is to be the norm if/when the Whitestar reservations start.

    I know that personally, I would not be interested in purchasing a Tesla if the reservation fee is so high and the wait is so long. Seems like potential customers are being treated more as investors that don't actually get any earnings on their investment.
     
  2. Chris H.

    Chris H. Member

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    Michael said:

    "Seems like potential customers are being treated more as investors that don't actually get any earnings on their investment."

    I say:

    BINGO!
     
  3. Chris H.

    Chris H. Member

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    I seem to recall Elon saying that the people who plonked down $100K for the signature 100 series were actually helping to pay for the development of the mass market vehicles. Now it seems that he wants to float a $250 million dollar IPO to help pay for the Whitestar, and then of course he'll want 75% (or maybe even 100%) upfront when people "reserve" a Whitestar.

    Is anybody here keeping track of TM's cash burn rate? I can tell you that I will not be buying shares in this company. Elon's house of cards will come tumbling down, and I for one, do not wish to be inside when it does.

    Caveat emptor,

    Chris H.
     
  4. pgwoosley

    pgwoosley Member

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    Return on investment from $60,000 unsecured loan to Tesla

    Michael said:

    "Seems like potential customers are being treated more as investors that don't actually get any earnings on their investment."

    The return on investment, should you choose to "invest," is the amount by which the car will be worth to you in excess of the sales price AT THE TIME YOU RECEIVE THE CAR. The "profit" should be tax free unless you actually sell the car.

    Presumably, the value over sales price of the early cars will generally be considerably in excess of list. What the situation will be a year or 15 months from now after 1,000 or so cars are produced is anyone's guess. Total production of the Ferrari Daytona and the Mercedes 300SL Gulllwing were less than 1500 each. Of course, each of them is worth a fortune now, but they could easily have been purchased near the end of their production run (or a few years thereafter) for very reasonable prices.

    Each person will have to make their assessment of the risk that they will neither get their money back* nor get a car, and the car's value over list at the time of delivery, presuming that they get a car. (*The deposit is refundable, but the "investor" has the risk that Tesla will not have the money to make a refund.)
     
  5. vfx

    vfx Well-Known Member

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    Which list? People who bought when the car sold for 92K or 98K have already "profited" from same the car that now sells for 109K. (If they whish to part with it!).

    That does not even count the possibility of selling the car for 50 to 100 percent more to an late-comer who does not want to wait two years for the Electric Dream.
     
  6. Kardax

    Kardax Member

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    I think the collector's value of any car past the signature 100 will be "average" at best. The Tesla Roadster is the only product of Tesla Motors right now; they're not just going to build 1500 and call it quits... they're going to build as many as they can sell, with updates and enhancements every model year.

    I expect that post-signature-100 Tesla Roadsters will be about as collectable as Corvettes. By that I mean that they'll be in-demand, but the original owner isn't going to "profit" from a sale, especially if inflation is considered.

    The one thing that could make post-100 Roadsters profitable is if Tesla Motor shuts down as a company. That changes everything. But spending $60k with the hope that Tesla fails--but not before you get your car--doesn't seem like a good investment idea to me.

    Honestly, I can't see any good logic to putting down $60k to get in line now. At current production rates, maybe you'll get your car in 2010, maybe never. What's the point? Tesla needs to get their production rates up to at least 10 cars per week before it makes any sense to write the check.

    -Ryan
     
  7. doug

    doug Administrator / Head Moderator

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    Unless you're in Europe.
     
  8. Chris H.

    Chris H. Member

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    I disagree Doug. TM said they would meet all their current U.S. delivery obligations before delivering cars to Europe. If they backed off on that now, it would be a disaster.
     
  9. doug

    doug Administrator / Head Moderator

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    I'm saying that the European Signature 250 cars will have a certain level of cachet that will give them more collectors value.
     
  10. Chris H.

    Chris H. Member

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    Sorry Doug,

    I thought we were talking about production rates.
     
  11. donauker

    donauker Member

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    Collector value or not, I would be willing to bet that any of the first few hundred cars would earn there owners a very handsome profit, if they were willing to sell them when they finally get them.

    As far as the deposit is concerned, if you want an incredible electric sports car before sometime after 2010 you really don't have a choice. Unless of course you go for a conversion car.

    I was hesitant about the 50K deposit also, but it turned out to be my best investment in the past few years. I got a 40% return so far in the protection from the price increases.
     
  12. pgwoosley

    pgwoosley Member

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    Which list price?

    I was thinking of list price at the time the car is delivered. Any increase in list goes to Tesla. The contract allows Tesla to raise the list.

    I find it easier to think of appreciation occuring after you take delivery of a car separately. (At the time of delivery, you make a decision to sell the car or keep it, and I think of that potential gain separately.)

    Returning to your example profit on the investment of the $60,000 deposit and taking your example of 50%-100% profit (on list price I presume) and $110,000 as the list at the time of delivery, a 50% profit on the list price would be $55,000. This would be 91.67% profit for the year or so that the $60,000 is invested. 100% profit on list at the time of delivery would be $110,000, or 183% on the investment. (Any transaction costs such as sales tax is not considered in the above. The final payment to Tesla is assumed to be at little or no risk and for a short period.)

    91.67% or 183% profit on investment is either good or bad depending upon how you evaluate the risk that you will lose your deposit because Tesla can neither repay you or deliver a car, the time period, and how sure you are of the estimate of profit.

    Assuming you assign no risk to the final payment to Tesla, with a $55,000 profit on a $60,000 investment, 57% probability that you will not lose your money (43% chance of losing your money) is about a break-even proposition ignoring the use of money. If the probability of NOT losing your investment is higher, the investment looks better from a financial point of view. A $110,000 profit is about a break-even if you think the the chance that you will not lose money is about 36% (64% chance of loss).

    To illustrate the calculation, assume that you judge the chance that you will get neither the car nor your deposit back at 50%. For a break-even investment your reward needs to be a 100% profit. If you make two $100 investments with a chance of success of 50% on each and a 100% reward if successful, statistically you should break even. Statistically you should win one investment and get $200 back (a 100% profit) on it and lose the other investment and get back zero. Result: invest a total of $200 and get back a total of $200, equals a break-even (ignoring time value of money).

    The probabilities used above for for illustration only.
     
  13. Kardax

    Kardax Member

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    Heh, I hadn't thought of that... maybe somebody should set up a futures exchange for Tesla Roadsters :)

    -Ryan
     
  14. pgwoosley

    pgwoosley Member

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    Futures Exchange

    While Tesla has decided not to raise the price of the "2008 model," their Roadster Club terms allow them to raise the price for the 2009 models at their discretion.
     

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