Carter Driscoll - Capstone Investments
That kind of leads to my next question. It’s the relationship you have with Wells. And because of what you just stated, you believe the battery pack’s going to last twice what it’s currently warrantied for, I’m assuming that the residual value of that price point, given there just aren’t a whole lot of comparable vehicles to be able to set what the residual value is going to be, and therefore the leasing terms. But you feel comfortable that’s not a sticking point, as you suddenly saw people wanting to lease the vehicle, even though you don’t expect that to be the case for probably 12-18 months at the minimum.
Elon Musk - Chairman, Product Architect, and CEO
Right. We don’t need to lease a single car until maybe the second half of next year at the soonest. We could just be all sales. But we have had many discussions about residual value. The thing that supports residual value is just to make sure that the depreciation of the battery pack essentially matches that of the rest of the car. And if you had a gasoline car, after 10 years, it’s on the order of 10-15% of its original value. So it’s depreciated down to almost nothing.
Carter Driscoll - Capstone Investments
Do you expect that to be comparable? Or do you expect residual value to be higher?
Elon Musk - Chairman, Product Architect, and CEO
I actually think it will be higher. Because the other thing is once you put a new pack into the car, it will actually be better than new from a range standpoint.
Deepak Ahuja - Chief Financial Officer
Because you continue to recognize the savings versus fueling your car with gas for the next 10 years, or whatever. So you get huge benefits of that.
Elon Musk - Chairman, Product Architect, and CEO
Gasoline’s probably not getting cheaper in the long run. I mean, the price of gasoline is an upward sloping sine wave.
Carter Driscoll - Capstone Investments
I agree with that. Have you guys actually booked any warranty expense in anticipation of having to replace any of the batteries?
Elon Musk - Chairman, Product Architect, and CEO
Yeah, with each car there’s a warranty reserve.
Deepak Ahuja - Chief Financial Officer
We’re booking a warranty reserve for each of the cars, and that’s related to the entire vehicle, not just to the battery. And just to clarify your other point, with Wells Fargo, we’re not offering lease financing. It’s traditional retail financing. So residual values or leasing is not really an issue in our present offering with Wells Fargo.
Elon Musk - Chairman, Product Architect, and CEO
With Athlon it is.
Deepak Ahuja - Chief Financial Officer
Athlon is offering their own lease program in Europe for corporate clients.
Elon Musk - Chairman, Product Architect, and CEO
Yeah, we did sign our first Model S leasing deal in Europe.
Carter Driscoll - Capstone Investments
Have you seen the mix of reservations change as 2012 has unfolded? Are you still seeing a similar rate of the signature series versus the other range models? Or has that stayed fairly consistent? Can you talk about your expectations about how that may change over time as well?
Elon Musk - Chairman, Product Architect, and CEO
I think it’s fortunate that the signature series has been sold out for several months now. Not only is the signature series is sold out, we have a long waiting list for people to get on [unintelligible], and arguments about what place they are on the wait list.
Carter Driscoll - Capstone Investments
[You were sold out in year two.]
Elon Musk - Chairman, Product Architect, and CEO
And we’re sold out in the EU on the signature series as well.