Tesla Increases Prices for Existing 2008 Orders - Page 9

dba · 01-19-2009, 10:01 AM

Quote:

Originally Posted by graham

It is not a mistake to offer new services, nor to raise the price of existing ones. The mistake is in forcing those changes on people who are already locked in, and making substitutions to give them a lesser product than what they thought they were buying. These people have been waiting for 2 years and have invested a lot to pull a bait and switch now.

I agree that it would be a mistake to not offer new options. The mistake I am referring to is removal of over $5,000 worth of standard features and the doubling of prices on many options on the around 200 owners that have "locked-in." According to the agreement I have the lock-in took you from a refundable deposit to a contract to buy a vehicle as listed. My list clearly shows all the locked-in prices. Unless Tom is wrong and he was not required to accept the new terms and conditions for his car to enter production then someone has indeed made a terrible mistake

vfx · 01-19-2009, 07:39 PM

Tesla folks, take note. Over on the TTAC page the flamers are going on about a "3000 extension cord". There is no one defending you.

The people who can afford it least are the ones online singing your praises. Now in this thread and on ABG, 3 writers have canceled their car because of this bonheaded move.

Is it worth it?

vfx · 01-19-2009, 07:40 PM

I liked BlackbirdHighway's comment too:

Quote:

Now that all the celebrities, CEOs and billionaires have received their cars, it seems that Musk is now saying screw everybody else.

Asking people to put up a deposit and wait for more than a year to receive product requires that customers have tremendous faith in the company. I don't see how this business model works once you destroy that faith.

vfx · 01-20-2009, 08:28 AM

Over on Martin's blog "About" page he comments:

Quote:

Martin sez:

I think cutting features and options from cars for which customers put down large deposits months, even a year before delivery, is excruciatingly poor form and shows lack of appreciation for what these early customers mean to a young company. The deposits if these customers - both the cash itself and the faith the cash represents - is a big part of what generated all the excitement about Tesla.

dpeilow · 01-20-2009, 09:35 AM

Another site picks it up: DailyTech - Tesla Motors Raises Roadster Price, Angers Those Who Pre-Ordered

vfx · 01-20-2009, 09:58 AM

Quote:

Originally Posted by dpeilow

Another site picks it up: DailyTech - Tesla Motors Raises Roadster Price, Angers Those Who Pre-Ordered

Commenter hckhwk:

Quote:

...
Those who fell for this are a bunch of fools.

stopcrazypp · 01-20-2009, 11:07 AM

Looks like Jalopnik picked it up also:
Tesla: Tesla Increases Prices On Already-Ordered Roadsters

Autoblog has it too:
http://www.autoblog.com/2009/01/20/t...ntroversy-ang/

On the one hand, it pains me to see all the Tesla haters get what they want, but on the other hand, we need to get this into the public so that Tesla Motors will fix it (hopefully they do).

dpeilow · 01-20-2009, 11:53 AM

Quote:

Originally Posted by stopcrazypp

On the one hand, it pains me to see all the Tesla haters get what they want, but on the other hand, we need to get this into the public so that Tesla Motors will fix it (hopefully they do).

Certainly there seem to be a lot of naysayers jumping on this, which is unfortunate as we are now getting the "told you so" digs on all these sites. If it is the case that Tesla need to show better margins to attract the next round of investment, I'm sure most people here would understand that. No one (here) wants to see the company struggle or worse. But it has been done in a back-to-front manner and the decision to include locked-in customers as well as those further down the list seems questionable. I wonder if a lack of new orders is ultimately behind this?

I'm hoping the silence is a sign that they are considering peoples' feedback and looking at what some alternative (better?) scenarios will do to the business, but all the while the story is being picked up by more and more outlets and it is only a matter of time before it appears outside the car "blogosphere". Hopefully we will get a statement in the very near future.

Kevin Harney · 01-20-2009, 12:20 PM

And now that the story is out there they really can't say "We needed the money" like they could have to the investors. If they do we will hear " TM is going under fast. Jump ship while you can" For someone that is apparently incredibly smart this was an incredibly stupid stunt to pull

SteveF · 01-20-2009, 01:09 PM

I don't know how to link to this, but here is Elon's response (sent via e-mail to owners).

"A much fuller account of the history of Tesla is worth telling at some point, but for now I will just talk about the essentials of why we needed to raise prices on options. Fundamentally, it boils down to taking the tough steps that are difficult but necessary for Tesla to be a healthy company and not fall prey to the recession.

When the initial base price, for cars after the Signature 100 series, of $92k was approved by the board a few years ago, it was based on an estimated vehicle cost of roughly $65k provided by management at the time. This turned out to be wrong by a very large margin.

An audit by one of the Series D investors in the summer of 2007 found that the true cost was closer to $140k, which was obviously an extremely alarming discovery and ultimately led to a near complete change in the makeup of the senior management team. Over the past 18 months, observers will note that Tesla has transformed from having a senior team with very little automotive experience to one with deep automotive bench strength. We now have executives with world class track records running everything from design to engineering to production to finance.

To bring the cost of the car down, we have reengineered the entire drivetrain, which is now at version 1.5 and will be at version 2 by June. The body supplier was also switched out from a little company that was charging us nutty money and had a max production of three per week to Sotira, who supplies high paint quality body panels to Lotus, Aston Martin and others. In the process, we had to pay several million dollars for a whole new set of body tooling, as the old tooling had been made incorrectly. The old HVAC system was unreliable and cost almost as much as a new compact car, so also had to be replaced. The wiring harness, seats, navigation system and instrument panel also had to be modified or replaced.

After reengineering and retooling virtually the entire Roadster and completely restructuring our supply chain, we are now finally coming to the point where the variable cost of the car (to be clear, this excludes fixed cost allocation) is between $90k to $100k. With a lot of additional effort by the Tesla team and the help of our suppliers, we should be at or below $80k by this summer. There is some variability here due to exchange rate shifts. Although we gain an automatic currency hedge by selling in both Europe and the US, we are still vulnerable to the Yen, which is very strong right now.

Obviously, this still creates a serious problem for Tesla in the first half of 2009, given the $92k to $98k price of most cars delivered over this time period. The board and I did not want to do a retroactive increase of the base vehicle price, as that would create an unavoidable hardship for customers. Instead, apart from a $1k destination charge increase to match our true cost of logistics, we only raised the price of the optional elements and provided new options and a new model (Roadster Sport) to help improve the average margin per car.

The plan as currently projected, and which I believe is now realistic, shows a high likelihood of reaching profitability on the Roadster business this summer. By that time, we will be delivering cars that have a base price of $109k plus about $20k or so of options (having worked our way through the $92k to $98k early buyers) at a rate of 30 per week. We are fortunately in the position, rare among carmakers, of not having to worry too much about meeting 2009 sales targets, as we are already sold out through October and have barely touched the European market.

My paramount duty is to ensure that we get from here to there without needing to raise more money in this capital scarce environment, even if things don't go as well as expected. I firmly believe that the plan above will achieve that goal and that it strikes a reasonable compromise between being fair to early customers and ensuring the viability of Tesla, which is obviously in the best interests of all customers. It’s also important to note that the price increases will affect 400 customers, all of whom will take delivery after Jan. 1 and receive a $7,500 federal tax credit. We made the pricing changes to ensure the viability of Tesla in the long term, regardless of government incentives, but we hope the credit will offset the increase for most customers.

There is one additional point that relates to the government loans that Tesla is seeking for the Model S program, a much more affordable sedan that we are trying to bring to market as soon as possible. A key requirement is that any company applying be able to show that it is viable without the loans. If we allow ourselves to lose money on the cars we are shipping today, we place those loans at risk. Mass market electric cars have been my goal from the beginning of Tesla. I don't want and I don't think the vast majority of Tesla customers want us to do anything to jeopardize that objective."

Elon Musk
CEO & Product Architect