Some one crunch the numbers! It throws the whole " you have to spend 40k on a new battery" argument out the window.

stephen.kamichi... | November 30, 2012

Invest the $12k in TM stocks. In eight years the stocks will probably pay for a new TM vehicle.

David Trushin | November 30, 2012

Technically speaking, the banana peels didn't go into the Flux Capacitor. They went into the Mr. Fusion to power the Flux Capacitor.

Anthony H | November 30, 2012

@David Trushin

Correct. +1

hyjyljyj | November 30, 2012

@lajollan

+1

Schlermie | November 30, 2012

$12,000 at 5% compounded annually for 8 years is $17,729.
$12,000 at 10% compounded annually for 8 years is $25,723.

When Tesla priced the 4-year prepaid maintenance cost ($1900) vs. the $600 annual maintenance cost, the breakeven point was at 10% compounded annually, so if they used the same metric in pricing the prepaid battery option, they may be figuring on a $25,000 battery in 2020.

"Specifically, Argonne wants the Battery Hub to be able to make a battery with five times the energy storage capacity as the upper limit of current technologies, at one-fifth the cost, within five years, the so-called “5-5-5” plan."

The “5-5-5” plan sounds way to optimistic to me. But if they can do it, anybody who purchased the prepaid battery option would look very foolish.

jchangyy | December 1, 2012

How about "9-9-9" plan...I prefer 9 times the energy, at 1/9th the cost within 9 years. I think it would take more than 5 years. Sometims, tech doesn't improve as fast as one would like.

Got Amped | December 1, 2012

It's the Herman Cain battery plan!

Captain_Zap | December 1, 2012

I do want to know what would happen to the pre-paid battery situation if the car were "totalled" or otherwise ceased to exist.

(Knock on wood, dashboard or insert any other ritual of your choice to protect oneself from tempting fate or creating a self-fulfilling prophecy in order to diminish the odds of this actually occurring.)

pvenkate | December 1, 2012

Here's an idea.

Since they are not committing to a minimum level of battery capacity over the 8 years in their warranty, and there is no concrete evidence of how much battery prices will come down in that time, I think It makes sense to price it like a stock option (the underlying entity being the Batteries), that the owner can buy at any time.

Let the market (i.e.. battery prices each year) decide the option pricing for them. That way, I can at least buy the option with an earlier (than 8 years) expiry, if my batteries start to degrade faster than expected say after 2 years or so.

dtesla | December 2, 2012

I want to take Schlermie's previous calculations to the next level. (And sorry for the very, very long post).

As Schlermie points out, by giving up your money today I give up the opportunity for my money to grow (This is called opportunity cost). But we (or at least I) also expect the cost of batteries to decrease over time. So the question is will the future cost of the money be worth more/less then the future cost of the battery.

We can create an equation to describe this question (note I'm using ^ to denote raising to a power). We can ask is $12k * x^8 < z * y^8, where x is your personal annual % expected investment money growth, z is the current cost of the batter (in dollars), and y is the annual change of battery cost. Lets rewrite the equation to simplify to ask is $12k * (x/y)^8 < z.

To help people I will poke in my personal numbers (as an example), but some of these are very personal... so I expect they will differ widely among the board. (Yes, you should do you own analysis)

x = 1.09: When doing my investment I try to have a mix of stocks, bonds, and cash to generate a 9% annual rate of return. Someone who invests in CD's would use 1.01, all stocks 1.1.
z = $40K: I am going with what I believe is the board consensus for the 85 KW battery.
x = 0.95: I expect batteries to decrease about 5% per year. Elon has claimed 8-10% decrease per year (i.e. .92 to .9). John Petersen of Seeking Alpha (anti-EV guy) expects 3% per year (i.e. .97).

Now we plug n' chug.
$12k * (1.09/.95) ^ 8 < $40k,
36k < 40k

So for the above case I should buy the prepaid battery option. Two more things. 1) Nobody likes to call the plan insurance, but this is what it is. You are paying you money today to reduce you risk tomorrow. That is what insurance is all about. The question is: Is the premium worth it. So even if your numbers say you shouldn't, but you don't like the risk you are taking, buy the insurance. 2) To take the analysis one step further (using the Monte Carlo method). x, y, and z will follow a probability distribution. So if you feel batteries will decreasing at .95 is twice as likely as a .93 decrease. Then take 2 times the .95 result + one of the .93 result and divide by 3.

I bet by now ThomasN wished he never asked someone to crunch the numbers.

dtesla | December 2, 2012

I have a question about the battery replacement plan. Lets say my battery gets to a personally unacceptable range limit after 7 years (i.e. not warranty issue). Will I be able to pay an additional amount to get my replacement battery early?

Michael23 | December 2, 2012

Interesting, but I'm not paying for this. No have 110k into this car already so not paying even more just to get a better price on a battery that might be cheaper in 8 years anyway. Is rather just get a new tesla with 120k battery.

DouglasR | December 2, 2012

The analysis by dtesla is interesting and helpful. I have a few additional thoughts.

First, when you buy insurance, you want to look at the financial strength of the insurer. TM is far from a AAA credit. In addition to the risk that TM will be unable to perform in eight years, there are other risks that the formula does not take into account (your car gets totaled, for example).

Second, different people have different attitudes about insurance. I generally do not buy insurance unless the event I'm insuring against will make a material difference in my life. For example, when I rent a car, I don't pay an additional $20/day to insure against having to pay the $500 deductible that my regular insurance doesn't cover. Insuring my house against fire is a different matter. When my Model S battery gets to the point where it needs to be replaced, I will weigh the cost of replacement and the value of the car at that time in deciding what to do. But the cost of a replacement battery will probably not be so high as to affect my lifestyle.

Another way to look a this question is to ask yourself: if TM today were to offer you an eight-year battery standard, and a 16-year battery as a $12,000 option, would you buy the option?

RDoc | December 2, 2012

Then there's the question of how much will you want a new battery in 8 years?

If an 85 kwh battery has 80% of its capacity at that point, it will still have an over 210 mile range. You're paying $12K today for an extra 55 miles of range in 8 years. If superchargers or other fast chargers, e.g. the SAE combo, become more available, the extra 17 kwh will be less valuable.

lolachampcar | December 2, 2012

Tesla took a complete unknown and put brackets around it while pulling cash forward. Sure its not great, but it is one less unknown.

I love the stock idea (depending on valuation). The upside is better with the exact same downside.

portia | December 2, 2012

+1 lajollan,
I am also not certain how to read that, I don't see any reason to prepay for a battery now, especially when mine is good for unlimited miles in 8 years, I would only need it AFTER 8 years!

Captain_Zap | December 2, 2012

I think that this might be another part of Tesla's EV myth busting campaign.

Range and charging time were major obstacles for EV adoption. Tesla took care of that objection with the Model S and the Supercharging network.

Another objection that the public had was the big unknown entity when it comes to battery life and the cost of battery replacement. Some feared that it would cost almost as much as the car itself when the time came. This pricing move eliminates that barrier.

There are many other myths, objections, rumors and stigmas that Tesla has wiped off the face of the earth. I bet there are more to come as well.

nickjhowe | December 2, 2012

+1 @Captain_Zap. I posted something similar before. Think this is more about trying to settle potential buyer anxiety than expecting people to buy the option.

dtesla | December 2, 2012

All good points above. I also like the option pricing idea.

When crunching the numbers these comments should be additional variables in the equation. For example if you feel Tesla < AAA rating may cause Tesla to never give you a new battery, you simply modify your personal equation to include this consideration:

And ask; Is (1/f)* ($12k * (x/y)^8) < z, where f is the probability that Tesla will be able to fulfill the contract (say 90% or .9????). This just means the amount you are willing to pay, to make this a good deal, will be less.

One variable mentioned prior to my original post (and I meant to add it to my original post) is the core/residual old battery charge. This must be considered since you are giving this credit/value to Tesla along with your $12k.... so

Is ($12k * (x/y)^8) + r < z, where r is the residual/core value of the old battery, other variable the same as before.

Personally after adding variables to account for the above comments, which mostly have negative impact to the value to pay for the contract. I think I will invest my money wisely and buy a new battery when (and if) the time every comes.

DouglasR | December 2, 2012

I would be very interested to know what it would cost to replace the battery today. I know we've kicked around the number $40k, but what's the basis for that estimate? Labor costs to make the swap should not be too much (compared, for example, to the Roadster). But what if we are wildly off in one direction or the other?

Since you don't really know "z," the current cost of the battery, you might want to consider a confidence interval around your estimate. Say, for example, the average estimate of the current cost of the battery is $40k, but the standard deviation of that estimate is $10k. That means there is something like a 2.2% chance that the battery is $60k or more. If I thought a replacement battery might cost $40 (even if there were only a small chance of that happening, I might be much more willing to purchase insurance against that eventuality.

ChasF | December 2, 2012

@DouglasR -

I think we can get within reasonable proximity with a rough analysis of the knowns:

Some quick math (7,000 x 18650 cells => 85kWh) says Telsa may be using 3000 - 3200 mAh Li-on cells in it's battery packs.
Using online cost to regular folks like us (and a little interpolation), I would estimate volume pricing to be about $7 per 18650 Li-on cell.
I would assume Tesla can get those at half that cost, or $3.50 per, leading to an estimated cell cost per 85kWh pack at $24,500.
Throw in about $3K for the enclosure with temp control system, another $7K for profit and we are sitting at about $34K per 85kWh battery pack.

The $40K estimate was, I think, based on a Roadster pack from several years ago when it was less mature and much more expensive.
Seems reasonable that we can estimate today's replacement cost for the 85kWh pack at about $34,500

Brian H | December 3, 2012

dtesla;
+1 Well thunk.

dtesla | December 4, 2012

Blog (Pro-EV site) on what we have been typing about here.

Here's another option; suppose a 40kWh owner prepays an 80kWh battery? I don't see it specified that you must prepay the same size battery as you've got!

Brian H | December 11, 2012

typo: "... prepays an 85kWh battery?"

stephen.pace@ka... | December 19, 2012

Quick question: does anyone know if the prepaid Roadster battery replacement program allowed you to transfer the battery to A) a future owner or B) to another Roadster if you totaled your current car and bought a new one?

Scenario 1) I sell the Roadster at 7 years, can subsequent owner get the new battery in 1 year?

Scenario 2) I wreck Roadster at 4 years. Insurance buys me a new (used) Roadster close in age and mileage to current Roadster. In 4 years, can I get a replacement battery?

TeslaOwnerBlog | December 19, 2012

Here are the details of the programs that were available for the Roadster.

I chose to not buy the battery or the extended warranty. I was planning to sell the Roadster and replace it with the Model S, which I am currently in that process. I figured the new owner would not value the extended warranty or battery replacement enough to justify the cost. The Roadster is still under the original warranty so the new buyer has nothing to fear.

In your Scenario 1 for the Roadster, the subsequent owner would get the new battery.

In your Scenario 2 for the Roadster, the battery replacement is tied to the car so it would not be transferred to another Roadster if you totaled the first one.

I think I have the same feelings about the battery replacement for the Model S but will probably get the extended warranty as I plan to keep this car longer.

Superliner | December 19, 2012

Don't know about anyone else but I don't plan on still driving my "original" M/S eight years from now. By then we "should" have the Model X and Model ?? who knows what else, and what their capabilities will be as far as battery storage / range etc.

In all likelyhood an eight y/o Model S will be like a 5 year old smart phone lol!! almost useless today when compared to the current capabilities of smart phone offerings. Assuming of course, battery technology improves ;-)

We are all familiar with the term 'Range Anxiety'. Tesla has solved this with the superchargers, but has created a related anxiety: 'Supercharger Anxiety'....

We love our Model S so much we are getting a second one. One of our favorite parts is using the App for the iPhone. Does anyone know how this will work with...

Invest the $12k in TM stocks. In eight years the stocks will probably pay for a new TM vehicle.

Technically speaking, the banana peels didn't go into the Flux Capacitor. They went into the Mr. Fusion to power the Flux Capacitor.

@David Trushin

Correct. +1

@lajollan

+1

$12,000 at 5% compounded annually for 8 years is $17,729.

$12,000 at 10% compounded annually for 8 years is $25,723.

When Tesla priced the 4-year prepaid maintenance cost ($1900) vs. the $600 annual maintenance cost, the breakeven point was at 10% compounded annually, so if they used the same metric in pricing the prepaid battery option, they may be figuring on a $25,000 battery in 2020.

(from http://idealab.talkingpointsmemo.com/2012/11/energy-department-launches-... about http://www.anl.gov/)

"Specifically, Argonne wants the Battery Hub to be able to make a battery with five times the energy storage capacity as the upper limit of current technologies, at one-fifth the cost, within five years, the so-called “5-5-5” plan."

The “5-5-5” plan sounds way to optimistic to me. But if they can do it, anybody who purchased the prepaid battery option would look very foolish.

How about "9-9-9" plan...I prefer 9 times the energy, at 1/9th the cost within 9 years. I think it would take more than 5 years. Sometims, tech doesn't improve as fast as one would like.

It's the Herman Cain battery plan!

I do want to know what would happen to the pre-paid battery situation if the car were "totalled" or otherwise ceased to exist.

(Knock on wood, dashboard or insert any other ritual of your choice to protect oneself from tempting fate or creating a self-fulfilling prophecy in order to diminish the odds of this actually occurring.)

Here's an idea.

Since they are not committing to a minimum level of battery capacity over the 8 years in their warranty, and there is no concrete evidence of how much battery prices will come down in that time, I think It makes sense to price it like a stock option (the underlying entity being the Batteries), that the owner can buy at any time.

Let the market (i.e.. battery prices each year) decide the option pricing for them. That way, I can at least buy the option with an earlier (than 8 years) expiry, if my batteries start to degrade faster than expected say after 2 years or so.

I want to take Schlermie's previous calculations to the next level. (And sorry for the very, very long post).

As Schlermie points out, by giving up your money today I give up the opportunity for my money to grow (This is called opportunity cost). But we (or at least I) also expect the cost of batteries to decrease over time. So the question is will the future cost of the money be worth more/less then the future cost of the battery.

We can create an equation to describe this question (note I'm using ^ to denote raising to a power). We can ask is $12k * x^8 < z * y^8, where x is your personal annual % expected investment money growth, z is the current cost of the batter (in dollars), and y is the annual change of battery cost. Lets rewrite the equation to simplify to ask is $12k * (x/y)^8 < z.

To help people I will poke in my personal numbers (as an example), but some of these are very personal... so I expect they will differ widely among the board. (Yes, you should do you own analysis)

x = 1.09: When doing my investment I try to have a mix of stocks, bonds, and cash to generate a 9% annual rate of return. Someone who invests in CD's would use 1.01, all stocks 1.1.

z = $40K: I am going with what I believe is the board consensus for the 85 KW battery.

x = 0.95: I expect batteries to decrease about 5% per year. Elon has claimed 8-10% decrease per year (i.e. .92 to .9). John Petersen of Seeking Alpha (anti-EV guy) expects 3% per year (i.e. .97).

Now we plug n' chug.

$12k * (1.09/.95) ^ 8 < $40k,

36k < 40k

So for the above case I should buy the prepaid battery option. Two more things. 1) Nobody likes to call the plan insurance, but this is what it is. You are paying you money today to reduce you risk tomorrow. That is what insurance is all about. The question is: Is the premium worth it. So even if your numbers say you shouldn't, but you don't like the risk you are taking, buy the insurance. 2) To take the analysis one step further (using the Monte Carlo method). x, y, and z will follow a probability distribution. So if you feel batteries will decreasing at .95 is twice as likely as a .93 decrease. Then take 2 times the .95 result + one of the .93 result and divide by 3.

I bet by now ThomasN wished he never asked someone to crunch the numbers.

I have a question about the battery replacement plan. Lets say my battery gets to a personally unacceptable range limit after 7 years (i.e. not warranty issue). Will I be able to pay an additional amount to get my replacement battery early?

Interesting, but I'm not paying for this. No have 110k into this car already so not paying even more just to get a better price on a battery that might be cheaper in 8 years anyway. Is rather just get a new tesla with 120k battery.

The analysis by dtesla is interesting and helpful. I have a few additional thoughts.

First, when you buy insurance, you want to look at the financial strength of the insurer. TM is far from a AAA credit. In addition to the risk that TM will be unable to perform in eight years, there are other risks that the formula does not take into account (your car gets totaled, for example).

Second, different people have different attitudes about insurance. I generally do not buy insurance unless the event I'm insuring against will make a material difference in my life. For example, when I rent a car, I don't pay an additional $20/day to insure against having to pay the $500 deductible that my regular insurance doesn't cover. Insuring my house against fire is a different matter. When my Model S battery gets to the point where it needs to be replaced, I will weigh the cost of replacement and the value of the car at that time in deciding what to do. But the cost of a replacement battery will probably not be so high as to affect my lifestyle.

Another way to look a this question is to ask yourself: if TM today were to offer you an eight-year battery standard, and a 16-year battery as a $12,000 option, would you buy the option?

Then there's the question of how much will you want a new battery in 8 years?

If an 85 kwh battery has 80% of its capacity at that point, it will still have an over 210 mile range. You're paying $12K today for an extra 55 miles of range in 8 years. If superchargers or other fast chargers, e.g. the SAE combo, become more available, the extra 17 kwh will be less valuable.

Tesla took a complete unknown and put brackets around it while pulling cash forward. Sure its not great, but it is one less unknown.

I love the stock idea (depending on valuation). The upside is better with the exact same downside.

+1 lajollan,

I am also not certain how to read that, I don't see any reason to prepay for a battery now, especially when mine is good for unlimited miles in 8 years, I would only need it AFTER 8 years!

I think that this might be another part of Tesla's EV myth busting campaign.

Range and charging time were major obstacles for EV adoption. Tesla took care of that objection with the Model S and the Supercharging network.

Another objection that the public had was the big unknown entity when it comes to battery life and the cost of battery replacement. Some feared that it would cost almost as much as the car itself when the time came. This pricing move eliminates that barrier.

There are many other myths, objections, rumors and stigmas that Tesla has wiped off the face of the earth. I bet there are more to come as well.

+1 @Captain_Zap. I posted something similar before. Think this is more about trying to settle potential buyer anxiety than expecting people to buy the option.

All good points above. I also like the option pricing idea.

When crunching the numbers these comments should be additional variables in the equation. For example if you feel Tesla < AAA rating may cause Tesla to never give you a new battery, you simply modify your personal equation to include this consideration:

And ask; Is (1/f)* ($12k * (x/y)^8) < z, where f is the probability that Tesla will be able to fulfill the contract (say 90% or .9????). This just means the amount you are willing to pay, to make this a good deal, will be less.

One variable mentioned prior to my original post (and I meant to add it to my original post) is the core/residual old battery charge. This must be considered since you are giving this credit/value to Tesla along with your $12k.... so

Is ($12k * (x/y)^8) + r < z, where r is the residual/core value of the old battery, other variable the same as before.

Personally after adding variables to account for the above comments, which mostly have negative impact to the value to pay for the contract. I think I will invest my money wisely and buy a new battery when (and if) the time every comes.

I would be very interested to know what it would cost to replace the battery today. I know we've kicked around the number $40k, but what's the basis for that estimate? Labor costs to make the swap should not be too much (compared, for example, to the Roadster). But what if we are wildly off in one direction or the other?

Since you don't really know "z," the current cost of the battery, you might want to consider a confidence interval around your estimate. Say, for example, the average estimate of the current cost of the battery is $40k, but the standard deviation of that estimate is $10k. That means there is something like a 2.2% chance that the battery is $60k or more. If I thought a replacement battery might cost $40 (even if there were only a small chance of that happening, I might be much more willing to purchase insurance against that eventuality.

@DouglasR -

I think we can get within reasonable proximity with a rough analysis of the knowns:

Some quick math (7,000 x 18650 cells => 85kWh) says Telsa may be using 3000 - 3200 mAh Li-on cells in it's battery packs.

Using online cost to regular folks like us (and a little interpolation), I would estimate volume pricing to be about $7 per 18650 Li-on cell.

I would assume Tesla can get those at half that cost, or $3.50 per, leading to an estimated cell cost per 85kWh pack at $24,500.

Throw in about $3K for the enclosure with temp control system, another $7K for profit and we are sitting at about $34K per 85kWh battery pack.

The $40K estimate was, I think, based on a Roadster pack from several years ago when it was less mature and much more expensive.

Seems reasonable that we can estimate today's replacement cost for the 85kWh pack at about $34,500

dtesla;

+1 Well thunk.

Blog (Pro-EV site) on what we have been typing about here.

http://www.plugincars.com/tesla-model-s-replacement-battery-packs-125571...

Here's another option; suppose a 40kWh owner prepays an 80kWh battery? I don't see it specified that you must prepay the same size battery as you've got!

typo: "... prepays an 85kWh battery?"

Quick question: does anyone know if the prepaid Roadster battery replacement program allowed you to transfer the battery to A) a future owner or B) to another Roadster if you totaled your current car and bought a new one?

Scenario 1) I sell the Roadster at 7 years, can subsequent owner get the new battery in 1 year?

Scenario 2) I wreck Roadster at 4 years. Insurance buys me a new (used) Roadster close in age and mileage to current Roadster. In 4 years, can I get a replacement battery?

Here are the details of the programs that were available for the Roadster.

http://teslaowner.wordpress.com/2010/03/05/extended-service-options/

I chose to not buy the battery or the extended warranty. I was planning to sell the Roadster and replace it with the Model S, which I am currently in that process. I figured the new owner would not value the extended warranty or battery replacement enough to justify the cost. The Roadster is still under the original warranty so the new buyer has nothing to fear.

In your Scenario 1 for the Roadster, the subsequent owner would get the new battery.

In your Scenario 2 for the Roadster, the battery replacement is tied to the car so it would not be transferred to another Roadster if you totaled the first one.

I think I have the same feelings about the battery replacement for the Model S but will probably get the extended warranty as I plan to keep this car longer.

Don't know about anyone else but I don't plan on still driving my "original" M/S eight years from now. By then we "should" have the Model X and Model ?? who knows what else, and what their capabilities will be as far as battery storage / range etc.

In all likelyhood an eight y/o Model S will be like a 5 year old smart phone lol!! almost useless today when compared to the current capabilities of smart phone offerings. Assuming of course, battery technology improves ;-)

@TeslaOwnerBlog Thanks!