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Model S price increase looming?

From "Top Speed"
http://www.topspeed.com/cars/tesla/index423.html

Here is the article text in case the link does not work.....

Currently, prices for the Tesla Model S range from $57,400 to $77,400 — $49,900 to $69,900, if you add the $7,500 federal tax credit. However, we are all well aware of the fact that the Model S is being sold at, or even possibly well below, the cost to build it. This means that it is only a matter of time before a price hike is in order.

Tesla has now lifted the veil of silence on this topic and announced that there will be a price increase in the near future. Surprise! Well, not really, since the rumors have been floating around about a price increase for a while. There is no information on just how much of an increase we are looking at, but we would guess that it will be significant. It may even push the upper end of the Model S toward the base price of the Fisker Karma. One bit of information that Tesla let us in on is that some features that are now standard equipment will later become option packages, which means that we will not only see a price hike, but also a decrease in standard features.

This price increase will not apply to the existing reservations. Those customers who have placed a reservation will receive an email from Tesla where they will be advice to finish their configuration and order within a "fair, predefined time frame."

For those of you who do not remember, the Model S has a variety of battery and motor choices. Depending on the version, the Model S can sprint from 0 to 60 mph in in 4.5 seconds and can hit a top speed of 126 mph.

Full details on the price increase will be announced in the next two to three weeks.

Yeah, they guessed based on earlier start of deliveries (I think 2011 was the original target) and slightly lower inflation rates. This adjustment is quite modest and helps make sure the >25% margin promise to the present and prospective shareholders is met.

Looking at it from another perspective, we all have a vested interest in the success of TM. Imagine the resale market in four years if they go out of business in three. It behooves us all to be show off our new rides and become part of the TM Sales Team. I'm already trying to sign people up.

@Volker.Berlin,

I totally agree with everything you said...so why couldn't Telsa say the same thing? I guess my beef is more with how, instead of why. Gotta love marketing!

I think that's why the battery options cost 10 and 20K. I was first hearing 5 and 10K two years back.

I am unhappy for several reasons:

This car has barely hit the road yet. This three year statement is misleading and incorrect.
When this price was announced three years ago, any rational economist knew what the equivalent dollars would be.

This is a price correction, which admittedly is not very large. However ....

It puts pressure on the current reservation holders to push them not to defer - my guess is that this is a large part of the rationale.

The price on the Tesla needs to come down NOT go up for mainstream acceptance.

Does anyone know if a current reservation holder who can take delivery in March will get the heated seats without the price increase ?

R

@Rhyalus - it seems clear that the textile heated seats are only available after the price increase.

I don't have a problem with the price increase, and if anything it is a reward for reservation holders -- they people who have funded the development and put down money long before they could get the car get a bonus relative to late-comers.

Bonus = no heated seats and loss of ability to defer without cost increase?

R

I can't go into a dealership and say "Here's a $5k deposit, I'll take that car but I want it some time in the future at exactly the same price." you buy it now or live with the vagaries if the market. Tesla has offered all reservation holders the chance to purchase at current pricing if they finalize their order (actually buy the car). It's unreasonable to expect them to honor unlimited deferrals on a fully refundable deposit. They have the right to increase pricing and, in my opinion, are handling it in a very professional and customer sensitive manner.

The price on the Tesla needs to come down NOT go up for mainstream acceptance. (Rhyalus)

Yes an no. Yes, it is Elon's stated goal to offer a Tesla at a more mainstream price in the not too distant future (GenIII aka 3-series competitor). No, the price for the Model S should not go down. Based on the rules of supply and demand, the price seems still fair, to say the least, and it is no secret that the Model S has to fund the development and ramp-up of GenIII (just as the Roadster funded the Model S, albeit more in the way of building Tesla's public image and collecting invaluable experience with the electric drive train, rather than in generating monetary funds).

R;
'mainstream' acceptance was never the aim, or in the cards, or possible for the Model S. You are thinking of, and possibly part of, a different market and buying demographic than TM can yet address. As for reducing prices, you only get to do that AFTER you achieve 'economies of scale', and TM didn't ever have those with the MS, and will only have (a small measure of) them AFTER full production. They would go broke real fast, and nearly did, trying to low-ball the market.

P.S. Just saw VB's post after a Validation refresh. Same point, different angle.

"If wishes were Porsches then beggars would drive."

I think the price increase is perfectly fair and reasonable. Instead of viewing it as a price increase, I take the viewpoint that this car is supposed to cost more than it currently does. So those who have been reservation holders and put down the money, many of them years ago, should consider they are getting the car at a discount. Since we put money into a company that was going to go under (just read any of Peterson's and many others blogs and reviews, lol), we are being rewarded for the risk and sometimes frustrations of being early adopters. But sooner or later the early adopter label wears off, and apparently that has been defined as Jan 1, 2013. With the availability to configure Sunset Red, there is no cause from Tesla's side for reservation holders to defer anymore, so it is fair and resonable for them to make everyone configure within a reasonable amount of time or lose out on the discount. My two cents.

@JohnQ

Deferral of more than three weeks was a condition of my interest free loan to Tesla.

In fact, the ground rules changed once the price increase was announced.

The care dealership in your scenario had a car...Tesla did not when I put my money down.

R

To Volker and Brian H...

I see your points but the problem is that the luxury car segment is very small compared to the overall market.

The ASP for the Model S is probably around 70k, considering the typical configuration.

Many people think that Tesla won't be able to get the volume that they need at this price point. The big rush now is comprised of early adopters with high incomes.

Push this price higher, and you lose people (like me) who are on the fence about funding this kind of effort. So if they do sell 10-20,000 cars, they better figure out a way to maintain margins - hopefully through technologies becoming less expensive AND some economy of scale.

R

@bobinfla.... there are a thousand potential reasons to defer.

Waiting to see if the newly released cars have issues, waiting for the new features (colors, heated seats, software changes, etc.), waiting for the "kinks" to work out, etc...

I am glad for you that you are in the segment of people who think that the pricing for the Model S is good... not everyone thinks this.

R

@Rhyalus

I'm with you. The $50K car quickly became 70K for me, and that doesn't include the maintenance programs. I'd love to have the 85kwh battery, but I just can't afford it. So I settled for the 60kwh. Sure there are some that can afford the fully loaded Model S, but many can't.

R;
Go over the site teslarumors.com ; it asks the question, "Can you afford NOT to buy a Tesla?"

The answer is, "Yes, if you're OK with a Leaf. Otherwise, No."

The Total Cost of Ownership is comparable to cars costing (MSRP) 40% less, give or take.

pay now or pay later

I am in the fortunate position of not being able to finalise before q2 or q3 next year since right hand drive vehicles won't be available til then, when most kinks will be worked out and early issues solved. Also, since i reserved in April 2011, I will NOT be subject to the increase - have had an official email stating this from the Australian rep.
However, it must be said that when a car like the Lexus LS 400 was originally introduced, the price was astoundingly low - to launch a new brand. If I recall AUD 120000.00 against the equivalent Mercedes at AUD 185000 - yes, cars in Australia are astronomically priced. Our dollar is at USD 1.04. Lexus took off like a rocket. The cars now are approaching the Merc in price, and service costs also now match Merc, when originally they were almost at standard Toyota prices.
A car costing this much should be fitted with all the high end luxuries - nothing to do with the excuse of "early adopter". Standard technology such as parking sensors, folding mirrors, heated and cooled seats, guide lines on reversing camera, and even HUD should be a given. They simply had to be speced and the third party suppliers would provide, and the wiring harness designed to take the features. It is not as though Tesla had to design and develop these features!! The door handles are way cool, but the older "cool" technology should be there too, for "the best car in the world".
Yes, market forces will dictate the price of the car, but let people feel that they are getting a really good deal for their dough as well. Wholesale these "luxuries" cost very little to the manufacturer. GPS in virtually any mobile phone, for example.

dborn;
The cost is not the only consideration. Timing, QC, and other issues have to be balanced. It is also worth keeping in mind that TM is prioritizing vertical integration, minimizing 3rd party supply dependencies and "inherited, built-in costs" as much as possible.

I'm ok with them offering more luxury options as long as they are in a package or separate extras and not standard. Many of us are buying the Model S for it's EV and/or performance properties and have no interest at all in "luxocrap" stuff like cooled massage seats, HUD, lane departure, adaptive cruise etc. More stuff to break is what I'm thinking.

I'd get manual seats if they were offered, I adjust my seat once and then I'm done. Electric adjustable seats offers me nothing more, exept higher weight and cost.

'Massage' seats! Sounds sexy.

jkirkbo;
Here's your opportunity to use English better than most native speakers. It's "its EV".
"It" is not a noun. It behaves like a (and is) a "personal pronoun".

His, hers, its;
He's, she's, it's.

"It's" is a contraction, IOW. It means "it is" or "it has", depending on context.

Corr: It behaves like (and is) a "personal pronoun".

I am always in favor of our languages "behaving"

:o)

KJR;
If you like perfectly behaved languages, learn Esperanto. As a bonus, you'll get enthusiastic personal guides anywhere in the world you happen to visit.

Takes a week or two to learn; a weekend if you're dedicated.

Brian H: You are of course correct. "its" is not a word I use very often, so my fingers probably typed "it's" (which I use far more) on autopilot.

At least I never miss on lose/loose and brake/break ;)

Brain H

Dankon

@Brian H

I haven't been to teslarumors yet to read what you suggest. Does it take into account $600/year of maintenance? Please note that I'm not complaining about it. But the way I see it, all my savings in gas is off-set by the $600/year. I have a 2yr old Prius and have not spent a penny in maintenance (Toyota even covers the oil change).

IIRC, Prius is still operating as a loss leader for Toyota. It can afford to urinate currency down the outflow pipe for quite a while at Prius' volume.

TM, not so much.

+1 bobinfla

I see your points but the problem is that the luxury car segment is very small compared to the overall market. [...] Many people think that Tesla won't be able to get the volume that they need at this price point. (Rhyalus)

There are certainly people out there who think so, but I'm not one of them. You are right that the luxury car segment is small compared to the overall market -- however, it is gigantic compared to the 20k units per year that Tesla intends to sell. Look up some numbers from Mercedes, BMW, Porsche, but make sure that you do not mix up "per month" and "per year". 20k is nothing. And keep in mind that they actually only need to sell 8k to break even (which is not enough in the medium to long term, but it's not like Tesla is doomed if they do not get to the entire 20k).

It seems there's a lot that you guys are missing. Very quietly, I've been given an $8, 000 price increase over the last few weeks. Since the model I'm set on is the performance, that's a $2500 base increase, plus $3500 for the wheels which were previously standard, plus $2000 for the warranty/maintenance. Am I missing something here?


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