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It's not the price of the car to the consumer that is being reduced. I assume the car is being sold to US Bank. The lease payments are being reduced, presumably due to the lower interest costs paid by the bank to its depositors compared to what Tesla Motors must pay a lender. Also used Model S prices may be better than previously estimated. I don't see this hurting Tesla's sales margins.
I'm pretty sure Elon did not decide to grant special information on sales data to "Ward's Auto" which is beholden to and funded by ICE manufacturers, so I'm pretty sure either A) they fudged numbers from guesstimates or B) they deliberately falsified data. They have no source.
So I bought weeklies.
So I bought weeklies.
I agree. However, based on my experience, when a stock attempts to take out a significant support (resistance) and fails to close below (above) the value multiple times, then it eventually ends up breaking it and continuing the down (up) trend. We still have a week and half to close below $224.
WSJ article today
Look at the second paragraph below. And it's written by the same WSJ guy I caught misquoting FEMA stats about car fires back in July.
By Mike Ramsey
Oct. 27, 2014 12:31 p.m. ET
"The move comes amid a sales decline in the U.S. for the Palo Alto, Calif.-based Tesla. The auto maker sold 10,335 Model S sedans through September, down 26% from the first nine months in 2014, according to WardsAuto.com, an industry publication that closely tracks sales and production."
Look at the second paragraph below. And it's written by the same WSJ guy I caught misquoting FEMA stats about car fires back in July.
By Mike Ramsey
Oct. 27, 2014 12:31 p.m. ET
"The move comes amid a sales decline in the U.S. for the Palo Alto, Calif.-based Tesla. The auto maker sold 10,335 Model S sedans through September, down 26% from the first nine months in 2014, according to WardsAuto.com, an industry publication that closely tracks sales and production."
Especially when an editor for Wards was "unaware of any such story": Tesla Stock Slides On Report Of Soft Sales, Leasing Incentives TSLA - Investors.com
Citizen-T
Active Member
Curt, yes, the price of the car is not being reduced, and US Bank's access to lower cost funds is no doubt a part of the reduction in the lease payment.
For me, however, a 25% decrease in lease payments sounds quite large, and I wonder whether the lower cost of funds US Bank benefits from is sufficient to reduce lease payments that significantly. I suspect, part of the improved payment terms for the consumer reflects a higher residual value assigned to the vehicle. In that case, I do think it is possible that there may be some form of agreement between Tesla and US Bank where some of the risk associated from the higher residual value has been taken on by Tesla (i.e. some floor at which they've agreed to buy back vehicles from the bank). I may well not be using the right terms here as the original lease was not really a lease, and I don't know if the current lease is a traditional lease or not.
I think a question about the mechanics behind the 25% reduction in lease payments would be of value on the conference call.
I feel like people are perhaps focusing too much on the 25% number here. The blog does not say that Tesla is giving a 25% discount on lease payments, it says "This will lower monthly lease payments by as much as 25% on a new Model S."
Note the words "as much as," and Tesla's history for, well, sort of making up numbers when it comes to price and savings. I am willing to bet that only a particular options configuration as compared to a previous one has been lowered by 25%, and others have been lowered by less. And this could have been arrived at by any number of things - lowering the amount of miles driven per year (maybe previous leases assumed 15k? anyone know?), inclusion of the federal tax credit in the lease (this is something that Tesla has not done before, I believe), cheaper money/better residual value/Tesla taking some of the residual value liability as mentioned as a possibility above, increasing the residual value calculation from certain options (which usually account for less residual value than the base car), maybe even Tesla doesn't get all the money upfront anymore, etc. etc. Keep in mind that Tesla had horribly high lease rates before, like really inexcusably high, and almost nobody ever leased a Tesla because of it. Now, look at the cost of leases at various models. I find that a fair "rule of thumb" is that a lease will have you paying something around 1% of the price of the car each month, and Tesla seems to be in that range. So I don't really know that there's much of a story here, except that Tesla has now made leasing viable, whereas prior to this it was not viable. This is a good thing, too, because leasing signals a more mature company, a company that expects to be around for at least 3 years.
Note the words "as much as," and Tesla's history for, well, sort of making up numbers when it comes to price and savings. I am willing to bet that only a particular options configuration as compared to a previous one has been lowered by 25%, and others have been lowered by less. And this could have been arrived at by any number of things - lowering the amount of miles driven per year (maybe previous leases assumed 15k? anyone know?), inclusion of the federal tax credit in the lease (this is something that Tesla has not done before, I believe), cheaper money/better residual value/Tesla taking some of the residual value liability as mentioned as a possibility above, increasing the residual value calculation from certain options (which usually account for less residual value than the base car), maybe even Tesla doesn't get all the money upfront anymore, etc. etc. Keep in mind that Tesla had horribly high lease rates before, like really inexcusably high, and almost nobody ever leased a Tesla because of it. Now, look at the cost of leases at various models. I find that a fair "rule of thumb" is that a lease will have you paying something around 1% of the price of the car each month, and Tesla seems to be in that range. So I don't really know that there's much of a story here, except that Tesla has now made leasing viable, whereas prior to this it was not viable. This is a good thing, too, because leasing signals a more mature company, a company that expects to be around for at least 3 years.
Fango, I was not aware that up until now Tesla's lease offering was "inexcusably high". If that's the case, then, yes, it just may be the savings associated with being able to go from a lease inexcusably high to one on a par with other brands. Yes, it's also possible that some of the savings has to do with how the $7,500 federal credit is distributed.
Is there any place in particular you'd seen the previous Tesla lease analyzed as so highly priced?
My background is in communications, which journalism falls under. Let me tell you something, I always felt that many journalism students didn't care about the newsworthiness and truthfulness of their work so long as they "got something out". In fact, when I was on staff for one of the college newspapers I was on, the editor in chief acted as if it were a TMZ-like tabloid and any little thing they could come up with was a story. That very same guy once chased an ambulance to where a student was having a seizure in order to fill the paper with content.
It's a sad state of affairs that journalism is in today and unconfirmed reports can be published and cause a company's stock, in this case TSLA, to dive as much as 6%.
chickensevil
Active Member
I just made a vintage 1Q 2014 Citizen-T trade, buying calls at the 200dma on "FUD" that is not demonstrably real/accurate.
Im going to be playing that game as well, If I lose then I am ok with that, but I feel reasonably comfortable that if the broader market keeps going up that this is just going to bounce back into the 230s in short order.
Unfortunately I don't have anything other than memory to serve me, and admittedly I hadn't checked leasing rates on the car recently. I just know that Tesla has never offered any really attractive leases, which is the sort of thing you see a lot of companies doing, particularly in this segment, because so many cars in the segment are leased. I do know that almost nobody ever leases a Tesla, both as a reflection of Tesla never having attractive leases (until now, perhaps) and as a reason for why Tesla doesn't bother to work on leasing because they haven't needed it to sell cars until now. I'm sure that's a reason that people are reading this as a bad thing, they think that leasing + the BS report combine to show that Tesla is having trouble selling cars, but personally I think they're just bringing leasing rates more in line with the competition, to offer more choice for customers, and that the new leasing thing isn't really very big news overall.
Also until recently Tesla only leased to "businesses." Which is more evidence to me that they're still figuring out leasing.
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