Very illogical decision on a very logical reasoned company?

[andrewket]

Living in the US and paying USD 99.99% of the time I have not had to deal with currency fluctuations that much. Having read the arguments in the thread, it seems like Tesla should offer to re-price the car to the new price, minus $2500 USD (the deposit) if the car has already been built, and re-price open orders that have not been built to the new price. Otherwise people could cancel their orders and obtain the same pricing on a re-order, which not only creates a problem for Tesla and costs them something - even if it's just labor - and creates a poor customer experience. When you called to cancel your order, would they make you call back to place a deposit on the inventory car that just happens to match your specs, or can you do it on the same call?

I wonder what Tesla would say if you offered to pay for the car in full TODAY based on the new price. That way they don't have to hedge against the currency possibly (and likely) fluctuating again.

 

[flankspeed8]

It makes absolutely no sense that someone bought the car at a certain price, the markets change and then they expect Tesla to adjust the price so that it only benefits THEM and never Tesla. I might as well have asked Tesla for a coupon for 10% off, just cuz. It's not Tesla's fault that some country's dollar went to crap. All Tesla expects is the same amount in US dollars that the buyer originally was going to pay.

Seems like it is the cost of doing business. I buy a TV at Best Buy that drops in price within a certain time frame I get a refund. I don't have to pay a higher price if it increases. One way Tesla could minimize this is if there wasn't such a lag time from order to delivery. A lot can happen in that time. Not saying it is fair to Tesla, but in the end, they are still going to come out a head, maybe making a smaller profit but at least getting the sale.

 

[VAF]

I am a little confused. If the contract price is denominated in local currency, then the buyer would agree to that price and pay that price when the car is ready. In this case, the buyer really doesn't have Fx risk. It doesn't make sense why Tesla would have decreased the price in the past but there's probably more to it than just the Fx fluctuations. Although the headline may have implied Fx, I think Tesla was really trying to boost sales in foreign jurisdictions that were lagging so a price drop would have certainly helped increase sales. Tesla has Fx risk on the sourcing side as well and based on the strength of the USD, had a $4M Fx gain on their financials last year. I understand the frustration given Tesla's history of doing this and now changing their policy. But again, it makes no sense why they would have simply dropped the price due to the strengh of a foreign currency unless the motive was to sell more cars and build marketshare.

If the sales contract in foreign juridictions are in USD, then that's an entirely different story and the buyer is obviously at risk for the Fx fluctuations. I can't imagine that's the case but I don't know for certain.

 

[Tasdevil]

Just out of curiosity, why does the original poster not cancel when the car is at the Service Center ready for delivery, eat the $2500 then buy the car as it sits for the new price like anyone else that walks in the SC and sees the car?

+1
And by the sounds of things the service centre guys will give you a pat on the back.

 

[necho]

Tesla seems to have foreseen that and have given the policy that all canceled car must become demo cars, so they are not allowed to sell it immediately ...

I can't understand why a company does do that, it feels like you're being screwed by a company you really like and want the best for it...I ordered the fourth and fifth car at this company, I brought at least five colleagues to become a Tesla owner and now this ...

+1
And by the sounds of things the service centre guys will give you a pat on the back.

 

[bonaire]

You can easily cancel and reorder and the only loss(es) are the $2500 USD per order. With so many cars, you are obviously of "some wealth" and such a loss is possibly not that much overall. The rules are in place and as the company grows, it cannot be "friendly" even to repeat customers. They have no dealerships to "work deals" with customers. It may become more black and white as more customers come on board. Without dealerships (and Jerome is not the "dealer" to work things out with) - I think you are basically making a "deal" with a computer-based policy management system and a set of rules that everyone is bound-to. Think of Tesla as a very large vending machine. The OP is wanting Tesla to "work a deal that I would like to see happen - because I am loyal and got friends to buy". That is favoritism, at least and requires finances within each currency to have hedges in place based on expected orders in place. Tesla has done big hedges before (the convertible bonds, specifically) - but more hedging to keep customers in every country satisfied for every movement in ForEx? It can go on and on. Modern business is, of-course, based on friend-sourcing and favoritism, but I have to wonder if Tesla should conform to that or is "busting the norm" and trying to get around the problems inherent to dealerships and other normal business practices.

What about when Model 3 comes out and Forex comes into play for customer orders and they have to "satisfy" 20,000 European and Asian orders per month or some such number. ForEx and order backlog might grow to 6-months or more, maybe a year. They will need to figure out how to do that well.

I live in a world of "contracts are contracts". I am stunned that Tesla has let people cancel orders for cars that made it all the way to the delivery site. Then they have sold them for discounts after using them for demo cars for a few months. Tesla has spent a lot of money trying to "satisfy customers". In Q4, some discounts were very large. I think it should be graduated. Cancel after 2 weeks but before build - $2500. Cancel after Build but before car shipped from Fremont - $5000. Cancel after Build when car at sales site - $8000. Or, in other words - consider an $8000 reservation fee, then a slowly declining refund value.

In general, Tesla must face the problems inherent to a rising USD valuation. This is a much bigger corporate issue for the company than upsetting one particular Swiss buyer. Consider that by the time the GF is built - there is a possibility that USD/Yen valuation may indicate it would still be cheaper to build cells in Japan.

 

[necho]

I agree on the most you wrote and I also understand that Tesla can not adopt to all individual wishes as a growing company. But, first in this case it's not me alone, it's a quite large number, and the local Tesla employees are all on the customers side as well. Second it's more the illogical approach of all the moves and changes they do. Why do you want to treat your most loyal customer base that helped you to start successfully the worst? No one was pushing that they should lower the price of the car, they did it without any pressure, in this price range anyhow I don't think you boost sales with a 5% price adoption? Why does Tesla respond to a customer two days before introduction of the new prices, no, there is no price adoption planned? Further, many Model S owner were awaiting a quote for the swap that has not been given the last 4 month. Obviously offering a swap quote after price reduction looks a bit different, so again those customers with an open order and already a Model S at home got an additional bump?

In Switzerland we have a very high density of Model S, the absolute number is quite small compared to whole Europe, where the prices were increased. What will happen if the prices will be lowered in Europe and there are some more complaining? Stick to the contract or adopt the open contracts to avoid cancellation? What about consistency? Last time same situation in Switzerland everyone got the price adoption, this time not. So one time contract is contract, onetime not?

What is if Tesla is delaying the delivery, as happened by 2 months and the price gets lowered then?

I guess it is not that difficult to create a clear and consistent set of rules, I would expect that of a global Sales Manager. And what is currently in place is definitely not consistent and thus not fair. To send then an email and say we have to be consistent and fair is simply a joke.

You can easily cancel and reorder and the only loss(es) are the $2500 USD per order. With so many cars, you are obviously of "some wealth" and such a loss is possibly not that much overall. The rules are in place and as the company grows, it cannot be "friendly" even to repeat customers. They have no dealerships to "work deals" with customers. It may become more black and white as more customers come on board. Without dealerships (and Jerome is not the "dealer" to work things out with) - I think you are basically making a "deal" with a computer-based policy management system and a set of rules that everyone is bound-to. Think of Tesla as a very large vending machine. The OP is wanting Tesla to "work a deal that I would like to see happen - because I am loyal and got friends to buy". That is favoritism, at least and requires finances within each currency to have hedges in place based on expected orders in place. Tesla has done big hedges before (the convertible bonds, specifically) - but more hedging to keep customers in every country satisfied for every movement in ForEx? It can go on and on. Modern business is, of-course, based on friend-sourcing and favoritism, but I have to wonder if Tesla should conform to that or is "busting the norm" and trying to get around the problems inherent to dealerships and other normal business practices.

What about when Model 3 comes out and Forex comes into play for customer orders and they have to "satisfy" 20,000 European and Asian orders per month or some such number. ForEx and order backlog might grow to 6-months or more, maybe a year. They will need to figure out how to do that well.

I live in a world of "contracts are contracts". I am stunned that Tesla has let people cancel orders for cars that made it all the way to the delivery site. Then they have sold them for discounts after using them for demo cars for a few months. Tesla has spent a lot of money trying to "satisfy customers". In Q4, some discounts were very large. I think it should be graduated. Cancel after 2 weeks but before build - $2500. Cancel after Build but before car shipped from Fremont - $5000. Cancel after Build when car at sales site - $8000. Or, in other words - consider an $8000 reservation fee, then a slowly declining refund value.

In general, Tesla must face the problems inherent to a rising USD valuation. This is a much bigger corporate issue for the company than upsetting one particular Swiss buyer. Consider that by the time the GF is built - there is a possibility that USD/Yen valuation may indicate it would still be cheaper to build cells in Japan.

 

[AmpedRealtor]

Rheazombi, on each contract for a car you can pull out of the sale by forfeiting the 2500 (in Switzerland)

The prices dropped by MORE than 2500 for each car, so for every customer it would be CHEAPER to just order another car, leaving Tesla stuck with a car that is worth less (due to the prices dropping) and an irritated customer.

Or in my case where I'm in the first 14 days and would get it ALL back if I decide not to order, I get to reorder, and they get to do the bureaucracy of reimbursing me and then starting the process over, additionally this gives an undecided customer another chance to rethink the whole thing... So in my case they get an irritated customer and gain more overhead

Both situations are ONLY lose/lose situations, in none of them does Tesla make money... so its just plain obstinate stupidity to decide to pull this.

For me, I now need to rethink doing business with a company that (in my experience to date) gives a sh... about me. (Note: the Tesla employees have been great in all this)

Tesla orders parts in bulk, and they do that based upon the orders it receives. Tesla cannot lower the price to you when the currency changes because they likely have already paid the higher price for the parts that were paid for and in stock well before your car was manufactured.

 

[NigelM]

Tesla orders parts in bulk, and they do that based upon the orders it receives. Tesla cannot lower the price to you when the currency changes because they likely have already paid the higher price for the parts that were paid for and in stock well before your car was manufactured.

That may well be, but it was Tesla's decision to lower the price. The price change being a difference greater than the cancellation penalty has put a few folks in a silly situation, that's a fact.

 

[grahamsimmonds]

I am grateful to Tesla for fixing the price at the time of contract. My car has gone up by £2300 since I ordered. However, I note that a currency conversion from GBP to USD indicates it is about the same since the increase if I had been able to buy the car in the US.