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Shareholder Reactions to Model S Pricing, Functionality and Options

As a potential customer (P #2124) and a shareholder I've rather sensitve to both the value I'll are receive from the Model S and the market opportunity for the car.

In this forum I'd like Tesla to hear from shareholders and their reaction to Tesla's product communications as they've sold stock to the public. Have the product and pricing announcements met the expectations set for the market and shareholders?

A wonderful thing about capital markets is that the answer to questions like yours, Dan, is measurable. TSLA closed at $27.90 on Dec. 20 (before the pricing and options was released; it closed at $28.56 today. Volumes traded have been basically flat. There was a one-day dip in the stock on the 21st, to $27.57 (down 1.2%), but the NASDAQ was also down 1.0%, and Tesla is a high-beta stock, so it's not clear that this is a news-related event or just market-tracking.

On the other hand, since Dec. 20, TSLA is up 2.4%, while the NASDAQ is up 0.1% and the DJIA is is up 0.9%. Given TSLA's greater volatility, it's hard to read too much into these numbers, I'll grant you, but overall the market seems to be neutral to positive about recent TSLA news.

Personally, I agree with the market on this. Tesla came in squarely in line with my personal expectations, exceeding them in some places and falling a bit short in others. On aggregate, I think my investment is still well placed, as is my reservation.

Sheesh Dan. You're railing here, you're volunteering to join lawsuits on Tesla's facebook page. Either give it a rest or go get a lawyer.

Agree with RB
Since P&O release the stock price is rebounding from the JP Morgan downgrade. Signature reservations have accelerated to a blistering pace not seen prior to P&O release. So it would appear expectations have been met. I do believe some aspects of the release could have been handeled better but is seems, as a whole, the market and customers are satisfied.

+1 with RB. Both as a stockholder and prospective owner of a Signature Performance Model S, I'm very happy with the way things are progressing.

In my opinion, the vast majority of the sales of 160 mile cars will be perfectly fine without "supercharging". They'll just be glad to have a car like the Model S at that price.

@DanD...keep going since it's good to get your thoughts out. I know you are on the fence, so way to hang in there! After an hour long discussion with a good friend tonight, who is a gearhead and not a believer in the "value" of EV's yet but did feel that the options pricing was good as he uses online "build yours" configurators more than I do, I know how diffucult it might be for some to see this through. Once we get the full details you'll either get a great car or all your money back + your appreciated stock holdings if you decide to realize profits.

and +1 to MyCroft...

I was hoping for more of a "bump" from options, but anticipated getting more details, so in short, happy with the current appreciation.

But, any money I make from the stock is going back into the car so it's a win win for TM.

So if the stock hits $44 when I get the call to place my final order I'll be getting Carbon Fibre...if ya know what I mean!

Disco;
Your gains from stock price increases won't make any difference to TM, as you were going to pay for the car anyhow. They don't much care where you sourced the $$!!

;)

@Brian H: I think some people are planning on spending TSLA capital gains on buying upgrades to their Model S, in which case Tesla does stand to gain. We know, however, that Tesla management has much more tangible reasons for wanting to see high TSLA values.

I also agree with Robert. I'm s sig res and stockholder. I'm pleased with Tesla's responses and stock stability/projected growth.

BTW, I'm hoping to hold onto my stock until at least after the model x production roll out and then re-evaluate. So, i hope to be in for at least a few years. Of course, if the bottom falls out my plans will change! But, that's not going to happen...right Elon?!

In light of recent criticism, I've been reviewing formal communications from Tesla to investors. There're some interesting nuggets that we didn't spot at the time:

  1. Presaging the power differences among the batteries, slide 10 of the Aug 23 Company Overview has an interesting footnote qualifying the statements regarding the battery module, power electronics, and motor: "Planned. Metrics reflect 230-mile range Model S." http://files.shareholder.com/downloads/ABEA-4CW8X0/1596840991x0x494001/d...
  2. Same presentation, slide 14: "0-60 in ~6 seconds." "Up to 300 mile range." Truth in advertising; all 3 packs do 0-60 in 6 seconds +/- 0.5 seconds.
  3. p.37, 10-Q for Q3 2011: There can be no assurance that we will be able to design future models of performance electric vehicles that will meet the expectations of our customers or that our future models, including the Model S, will become commercially viable. To the extent that we are not able to build the production Model S to the expectations created by the early prototypes and our anticipated specifications, customers may cancel their reservations, our future sales could be harmed and investors may lose confidence in us. Sounds like any investor was forewarned about the risk that production vehicles might not match expectations.

I didn't find in any investor document specific representations about all packs having a particular performance characteristic, although it's certainly the case that various representations were made in the numerous interviews.

Not sure where this leads me, except that again, I don't think Tesla was out to mis-represent its product, but may have talked about the prototypes a little too loosely and freely. The benefit of their having done so is that they got a lot of direct consumer feedback. The downside is that some reservation holders (and some investors) now see a gap between their expectations and Tesla's delivery.

All those shareholder documents say is Tesla has competent corporate form lawyers.

@Robert
Thanks for the link. I think I've read it before but I'm reviewing it again. One quick observation is that page 8 clearly shows that the 300 mi range is from the EPA 2-cycle test, answering that question that had been floating around the forums.

@Robert

" One quick observation is that page 8 clearly shows that the 300 mi range is from the EPA 2-cycle test, answering that question that had been floating around the forums."

* - Estimated
+ - EPA 2-cycle city/highway test
† - EPA derived 5-cycle test

Sorry Robert,

but a closer look shows that the Model S range is *estimated, and it is the Roadster range that is from the EPA 2-cycle city/highway test .

However after I wrote this I looked at notes again, and saw both an * and a + by the Model S. Therefore I guess the 300 mile range is an "estimated" EPA 2 cycle city/highway test

I was hoping for more upside reaction. Nevertheless, I'm still long a few thousand shares.

Good Tesla piece published on Seeking Alpha earlier today:
http://seekingalpha.com/article/316974-electric-cars-tesla-leads-the-wav...

Cybercop -- haha, yep. It's form fodder (especially the last one).

@Peak...Seeking Alpha article was good and this might ring for folks on the fence as Model S is 6.5 seconds for only $900 more base price...

Compare it to the BMW 528i at $49,000 with acceleration 0-60 in 6.9 seconds and efficiency of 18.4 mpg. Tesla's Model S is the first mass production electric car to beat its competition on performance at the same price point.

I think TSLA can do significantly better than the $44 price target recently proposed by Morgan Stanley.

BUT, there are two major threats to TSLA price:

1) if TM misses its delivery date this July
2) if the Model S suffers from some (unknown) and publicized quality issue a la the Volt or Fisker

Ironically, a heroic attempt to meet delivery dates could lead to a quality issue, if TM isn't VERY careful.

The early quality and performance reports on the Model S are bet-your-business critical for TM. They get only one chance to get this right.

Soflauthor - I've actually been quietly stressing over the possibility of a Volt/Fisker type issue. I hope not.

The Roadster has been on the roads for a number of years, and as to be expected they've been in accidents. In that time there have been no reported safety issues with the batteries. Although anything is possible, I'm not too concerned about batteries issues.

I agree that achieving the release dates is critical, but I think that Tesla will do fine. My concern is that after the early adopters and EVanglists make their purchases will there be enough continued demand from the normal driving public for a relatively expensive car to sustain the target of 20,000 cars per year? I'm hoping that when people see the car and hear about it in the news, that there will be "cool factor" that will the automotive equivalent of the iPhone.

Larry

There are other, macro forces that could hurt Tesla's business model. Revocation of the $7500 federal tax credit, combined with a decline in gasoline prices, would hurt the demand for EVs.

@Robert.Boston: Good point about macro forces, but TM has little, if any, control over them. It does have control over on-time delivery, product quality and long-term support. If it does those things well, I believe it will succeed, even if macro forces align against it. For example, the Model S is being introduced during the worst economic downturn in multiple generations (a macro force) and yet, TM has 7,000 pre-orders. Go figure.

Sofl;
Total: 9,074 - January 2, 2012
Minus perhaps 5% dropped/shuffled/duplicate orders.

:)

...a decline in gasoline prices, would hurt the demand for EVs.

Hi Robert,

Likewise, if the demand for EVs is high it is likely that gasoline prices will decline anyway, at least in the short-term.

Larry

Maybe, but EV production is going to be too slow for some time to affect gas prices. But one day, I can dream.

I think the great thing in Tesla Model S is it that it is not just a great EV it is a great car. Even if it were a ICE Model S it would still be a great car if it had same interior, same performance and same trunk space. Being EV is just a bonus (a big one).

This is a car for normal people, not just treehuggers and green fanatics.

...thinking process interrupted.

I think that if Tesla manages to break the public preconception of EV being just for green people and them being glorified golf carts, it doesn't matter what gasoline prices do, Tesla EV:s would still sell very well. It is that preconception that is in the way, and it looks like it is getting weaker and weaker every day. Especially with enough fast chargers installed so that "range anxiety" gets removed.

Another point that hasn't been mentioned is insurance rates. Unlike ICE cars, parts are plentiful and easily replaced at many dealers and service shops.

The Model S is going to be a very technologically complex car, which even in "minor" accidents could end up being extremely expensive. Please note I'm not talking about Model S safety issues but rather replacement costs, especially if there happens to be any battery damage. This has not been factored in by the insurance companies at this time.

I know I pay less insurance for my Roadster than my Audi Q7 (you figure), but I'm honestly shocked at that. Its not as if you could easily replace any non-cosmetic damage.

I think Model S is actually technologically very simple car compared to modern ICE car. Way less parts in way less vulnerable positions. Only thing that could make it cost more is aluminum body which costs more to fix than traditional steel one.

@Jerry
I'm not in the insurance industry (and I'm sure someone will correct me if I'm wrong) but the costs that eat the insurance companies alive are the medical and liability components of the policy.

The hard thing for them to figure out will be the value of the car over time along with the rate at which cars will be "totaled" based on the repair costs and the residual value of the vehicle versus simply needing repairs. There will be plenty of arguments regarding the payout value of a damaged Model S that the insurance companies decides has been totaled.

Getting back to the thread, as we pour over the 3Q overview to stockholders, let's not forget the initial slide, "Forward Looking statements". That is standard boiler plate in the securities industry, and tells you (and your lawyers) not to take it as gospel. Basically it says these are our intentions but it may not work out, so don't expecct to hold us responsible if it doesn't.

Having said that, I am content with where Tesla is, where my reservation is (P2884), where the pricing is, and where my Tesla stock investment is.


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