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Model S price increase looming?

Model S price increase looming?

From "Top Speed"
http://www.topspeed.com/cars/tesla/index423.html

Here is the article text in case the link does not work.....

Currently, prices for the Tesla Model S range from $57,400 to $77,400 — $49,900 to $69,900, if you add the $7,500 federal tax credit. However, we are all well aware of the fact that the Model S is being sold at, or even possibly well below, the cost to build it. This means that it is only a matter of time before a price hike is in order.

Tesla has now lifted the veil of silence on this topic and announced that there will be a price increase in the near future. Surprise! Well, not really, since the rumors have been floating around about a price increase for a while. There is no information on just how much of an increase we are looking at, but we would guess that it will be significant. It may even push the upper end of the Model S toward the base price of the Fisker Karma. One bit of information that Tesla let us in on is that some features that are now standard equipment will later become option packages, which means that we will not only see a price hike, but also a decrease in standard features.

This price increase will not apply to the existing reservations. Those customers who have placed a reservation will receive an email from Tesla where they will be advice to finish their configuration and order within a "fair, predefined time frame."

For those of you who do not remember, the Model S has a variety of battery and motor choices. Depending on the version, the Model S can sprint from 0 to 60 mph in in 4.5 seconds and can hit a top speed of 126 mph.

Full details on the price increase will be announced in the next two to three weeks.

DouglasR | November 24, 2012

"we are all well aware of the fact that the Model S is being sold at, or even possibly well below, the cost to build it."

I'm not sure who "we" are, in view of TM's claim of gross margins up to 25%.

Superliner | November 24, 2012

Sorry to post something redundant.. My apologies. This is already covered elsewhere in the forum and I had not seen it. Mods please feel free to delete if you see fit. Guess I had better bite the bullet and get in the que Monday "if I still can"

KevinR.co.us | November 24, 2012

Superliner-- you can delete this thread as the author by hovering over the upper left Tesla logo & deleting.

Brian H | November 24, 2012

DR;
that's the minimum EM is guaranteeing once at full production. Until a significant % of that level was reached, it is possible the margin was marginal or slightly negative. There's considerable evidence lots of units were being scrapped during the ramp-up QC tuning. That would play Hob with margins, fer shure!

Elon has some bonuses available a few years down the line conditional on, in part, hitting 30%.

Jbeli444 | November 27, 2012

Just heard on good authority that the price increase will be announced this afternoon. $2500 on top of the base price. Also, among the changes, 12 way heated seats will be standard on all models.

reitmanr | November 27, 2012

How can we know about the interiorheated seat change? I would like cloth power and heated as standard with original price structure.Saves 1500 bucks.

nickjhowe | November 27, 2012

Best case scenario: Maybe TM has the inside track that the federal tax credit is going to be increased to $10k and so the 'net' price increase is zero?

DouglasR | November 27, 2012

Very unlikely, Nick. The budget negotiations they are going through now are aimed at CUTTING deductions, credits, and tax preferences, not increasing them.

b455starr | November 27, 2012

so.....if you have a reservation but not been called to place the order the price increase does not effect you????

djp | November 27, 2012

correct

nickjhowe | November 27, 2012

@DouglasR - agree, but the focus on US jobs, innovation, 'all avenues of energy production', etc. might just let it squeak through. Maybe?

cprenzl | November 27, 2012

I don't think they will raise the price until the sunset red is in the design studio for aleast a couple days, that is what it said on the bulletin board.

mrspaghetti | November 27, 2012

@cprenzl

It says you'll be able to finalize with sunset red prior to the price increase. I read that to mean that if you have a reservation before the price increase and have not yet finalized, you will not be hit with the price increase until at least the time the sunset red becomes available. So the increase could come first, followed by the availability of the sunset red within the "fair" time frame for people to finalize.

In any case, anyone who thinks they might want to buy this car should get a reservation now if they want to avoid the increase for sure.

Brian H | November 27, 2012

The catch is: once you get your "finalize" notice, you can no longer defer very long without being subject to the price increase.

GoTeslaChicago | November 28, 2012

Reading between the lines it is my prediction that the Model S Performance will now come standard with 19 inch tires. If you choose the 21 inch tires that will be the equivalent of a $3,500 price increase.

Volker.Berlin | November 28, 2012

Speculation running wild again... ;-) Hold your breath, we'll learn soon enough!

DouglasR | November 28, 2012

@GoTesla +1

That would be a great way to increase prices without burdening Performance purchasers like me, who prefer the 19" wheels. However, I'll bet it wouldn't bring in much of an increase in revenues.

ChasF | November 28, 2012

I predict service will be included with the price increase. Perhaps current reservationist will be grandfarthered in and get the service contract for free (excluding Telsa Ranger service). Wouldn't that be grand?

GoTeslaChicago | November 28, 2012

Prediction or wishful thinking?

Brian H | November 28, 2012

DR;
Hopefully, the increases will suffice to fend off taking losses on individual components, rather than per se boosting overall revenues or profits as such. I assume there will be some "price elasticity" (sales lost due to price increases), so keeping revenues neutral and maintaining margins is likely the goal.

GoTeslaChicago | November 28, 2012

DouglasR | NOVEMBER 28, 2012
@GoTesla +1

"That would be a great way to increase prices without burdening Performance purchasers like me, who prefer the 19" wheels. However, I'll bet it wouldn't bring in much of an increase in revenues."

DouglasR,

More revenue? depends.

If for 90% of Performance purchasers, 21 inch turbine style wheels are a "must have" item, then charging $3,500 will definitely bring in more revenue. If it's only 10%, then not so much.

Aleksandyr | November 28, 2012

I think Elon is focusing in on his 30% margins. He needs to change the current price stucture to do so. 19 inch wheels are likely cheaper. Probably will see a few other options that they are losing margin from.

jchangyy | November 28, 2012

Price increase is coming soon. Just received this email from Tesla...

"We will be announcing a price increase for Model S in the next few days.

This is our first price increase since the introduction of Model S and it is very important that we implement this in a way that recognizes those who already have a Model S reservation. This price increase will not apply to anyone with an existing reservation... as long as they finalize their order within a reasonable, predefined timeframe after receiving their "Invitation to Configure."

You will likely receive your invitation to configure between now and the end of January depending upon when you made your reservation. If you configure your car and finalize your order within four weeks after receiving your invitation, you will not be subject to the price increase.

Customers most often want to know if they will be invited to configure in the order in which they placed their reservation. The answer is 100% yes. However, we are finding that some customers finalize their order quickly while others take longer to complete their design and submit final paperwork. As a result, those invited later with "higher" sequence numbers are moving ahead of those with "lower" sequence numbers on a weekly basis.

To be fair, we fill all open production slots with the lowest sequence number reservations that have finalized their order. We need to do this in order to fill all production slots each week. This means the sooner you finalize your order, the sooner your Model S will be headed your way"

Yikes....

P12,893

skystream3.7 | November 28, 2012

November 28, 2012

Dear Rodrick,

We will be announcing a price increase for Model S in the next few days.

This is our first price increase since the introduction of Model S and it is very important that we implement this in a way that recognizes those who already have a Model S reservation. Thank you for completing the configuration process and finalizing your order in a timely manner.

We have everything we need to build your Model S and this price increase does not apply to you.

Sit back, relax and look forward to the arrival of your Model S!

Lou in SoCal | November 28, 2012

Does this mean that delivery will still be made within a 3-4 month timeframe from configuration? For example, if I configure in February, will my Model S will be delivered by May or June? Otherwise, it would now seem like the wait time between configuration and delivery will be much lengthier than 3-4 months.

christine_orita | November 28, 2012

@jchangyy
I got the same generic email an hour ago.
Can't wait till I get the invitation to submit my design!

I am P12704 and suspect we will probably get the invitation around the same time :-)

jbunn | November 29, 2012

I do not think it is a save assumption that if you have reserved you are immune from the price increace. A reservation just says you want a car, but with no configuration. 50K price difference almost from base model to best config.

I think what locks in your price is when you finalize your order. You've picked your config, changed to non-refundable, and have a MVPA signed by both parties. At that point, you are locked in.

That's how they handled it during the Great Supercharger Revolt of 2012.

trydesky | November 29, 2012

I got my invitation to build on Aug 14th, and am still waiting to hear that my car is ready. I don't think I'll be getting it in 2012....I'm getting rather impatient as the time grows closer.

P2234

Volker.Berlin | November 29, 2012

Today, Model S is the most award-winning car of the year and the base price remains at $57,400, the same price set over three and a half years ago. During this same period of time most automotive companies have had at least three price increases and general inflation (CPI) has gone up 8.75 percent. A straight 8.75 percent CPI increase would now yield a base price for Model S of $62,400, an increase of $5,000. Tesla is increasing prices only half that amount, giving Model S a new base price of $59,900 before federal tax credits.
http://finance.yahoo.com/news/tesla-motors-sets-pricing-award-131000153....

(Hat tip to Whity Whiteman for the pointer!)

Volker.Berlin | November 29, 2012

And here's the link to the original press release from Tesla (which was simply copy-pasted by the Yahoo Finance news ticker):

"Tesla Motors Sets New Pricing for Award-Winning Model S"
http://ir.teslamotors.com/releasedetail.cfm?ReleaseID=723919

markapeterman | November 29, 2012

See new blog post from George B today for details including info on extended warranty and service. Very reasonable IMHO.

Volker.Berlin | November 29, 2012

Ah, there it hides! I was looking at the Options & Pricing page and could not see a difference... Will sure be updated soon, but not yet. Here's the link to the blog post:
http://www.teslamotors.com/blog/2013-model-s-price-increase

pbrulott | November 29, 2012

Very well written. Very open. Truly fair as they give until Dec 31st to get your reservation in before the new prices apply.

And good move for Europe with the 1700E deduction and also responded to those who wanted to have the after 4 years maintenance and warranty. They covered all angles IMO.

Volker.Berlin | November 29, 2012

We plan to announce European pricing very soon, which will include this recent price increase. We have many reservation holders around the world who have faithfully supported us throughout the years and we want to make sure they are recognized for their support. Therefore, we will automatically deduct €1,700 (or the local equivalent in other countries) from the base price for everyone who has or makes a reservation by end of day on December 31, 2012…as long as they finalize their order within a reasonable, predefined timeframe after being invited to configure their Model S.
http://www.teslamotors.com/blog/2013-model-s-price-increase

Wow! They really learned their lesson well from the riots that ensued the original pricing announcement a year ago. I must say I'm positively impressed -- with the form, the timing, and the message of their announcements!

nickjhowe | November 29, 2012

Leaves a lot of open questions:

  • "This price increase will not apply to anyone who has or makes a reservation by end of day on December 31, 2012…as long as they finalize their order within a reasonable, predefined timeframe after being invited to configure their Model S" <--- what timeframe?
  • "An additional Four Year, 50,000 mile Extended Warranty will now be available for $2,500." <-- do we have to buy it in advance? Can we wait until the end of the first four years to buy it? Is it transferrable?
  • "You will now be able to purchase an additional Four Years and 50,000 miles of Prepaid Maintenance for an additional $1,900, or $2,400 with unlimited Tesla Ranger visits. " <-- do we have to buy it in advance? Can we wait until the end of the first four years to buy it? Is it transferrable?
  • "We have received many requests for a Battery Replacement Option. We are happy to now offer this option for all three battery variants. This option will provide you a new battery anytime after the end of the eighth year at a fixed price." <-- do we have to buy it in advance? Can we wait until the end of eight years to buy it? Is it transferrable?

markapeterman | November 29, 2012

Interesting that it says "This option will provide you a new battery anytime after the end of the eighth year at a fixed price".

I guess they anticipated someone might buy a 40kwh and try to immediately purchase an 85kwh battery to install for only $12k (vs. $20k price difference, though they would miss out on supercharging).

Interesting that the batteries cost only $2k more per level while the cars cost $10k more - suggests there is a lot of margin in the higher batteries (as many have suspected).

Volker.Berlin | November 29, 2012

Interesting that the batteries cost only $2k more per level while the cars cost $10k more - suggests there is a lot of margin in the higher batteries (as many have suspected). (markapeterman)

It may also suggest that there is hardly any margin in the lower batteries, as I have suspected all along... :-)

Volker.Berlin | November 29, 2012

I guess they anticipated someone might buy a 40kwh and try to immediately purchase an 85kwh battery to install for only $12k (vs. $20k price difference, though they would miss out on supercharging). (markapeterman)

I guess they would sell the batteries at a loss for that price today, and they are banking on batteries becoming significantly cheaper over the course of the next eight years. They offer to take the downside risk from you, in exchange for the upside risk (that batteries purchased in 8 years will be even cheaper than that). Fair deal IMO and up to everybody's own to take it or not.

I for one will probably not take this option and rather wait until Tesla directly sells batteries for less than that, whether that's in 6 or in 12 years' time.

Vawlkus | November 29, 2012

That's not as bad as I was expecting. I'm not happy that the price has gone up, but it could easily have been a lot worse. What say the rest of yas?

mrspaghetti | November 29, 2012

@Vawlkus

I'm good with it.

JohnQ | November 29, 2012

I'm a little irritated that the Red is $1,500 rather than $750 (yes, I know it's multi-coat) as that's why I had deferred my reservation. Guess it's time to add red to my configuration and hit the finalize button. The timing is actually quite good for me as March is bonus time. P1,491.

hanstremblay | November 29, 2012

For my part It is a very reasonable and acceptable price increase.

Brian H | November 29, 2012

GB's summary is excellent. The issue still open I'm most curious about is if that's the full range of changes to the options and packages.

DouglasR | November 29, 2012

I think this is all good information, and very fair. There is, however, one additional ambiguity. GB states:

"Maintenance for an additional $1,900, or $2,400 with unlimited Tesla Ranger visits. With this additional program you can now cover everything on your Model S, except tires, for eight years and up to 100,000 miles for $3,800, or $4,800 with unlimited Tesla Ranger visits."

I suspect this isn't precisely true. In order to cover everything, you will also need to purchase the extended warranty for $2,500. The maintenance charge of $1,900 or $2,400 will be in addition to the extended warranty.

I may be wrong, but I'll bet I'm not.

gregv64 | November 29, 2012

As far as the reasonable timeframe, from the email I received this morning:

"If you configure your car and finalize your order within four weeks after receiving your invitation, you will not be subject to the price increase."

Alex K | November 29, 2012

@DouglasR | NOVEMBER 29, 2012: In order to cover everything, you will also need to purchase the extended warranty for $2,500. The maintenance charge of $1,900 or $2,400 will be in addition to the extended warranty.

Yes, that is how I read this also. Currently Tesla requires that to keep in initial warranty in force, you need to do the yearly maintenance. I'm sure to keep the extended warranty in force, you also need to do the yearly maintenance. Ideally, they should make the extended warranty available at any time during the first 4 years (assuming you have been paying for the yearly maintenance) rather than forcing you to buy it ahead of time.

Alex K | November 29, 2012

Edit: keep in the initial warranty in force

nickjhowe | November 29, 2012

There is a new(ish) post in the Bulletin Board explaining the timing.

http://www.teslamotors.com/forum/forums/how-will-new-model-s-pricing-rol...

jchangyy | November 29, 2012

I agree with most of you that the price increase and extended warranties seems fair.

Only thing that irks me is the battery replacement cost. As Volker mentioned earlier, the price difference of 20K now between the batteries vs. 4K difference 8 years from now bothers me. I'm sure it takes into account the change in technology, etc, but t think that I'm gonna pay 20K extra now when I know the price difference will be lot smaller makes me think twice about going through with purchasing the vehicle now.

your opinions would be very appreciated it.

I'm P12,893 and this would be a big purchase for me--most expensive car so far has been Acura MDX for my wife (I drive a camry hybrid). I guess I'ms a middle-middle class, so 20K is a good chunk of change for me. I also think that highest capacity is the way to go since I do drive >150-200 miles enough times in a day.

thanks everyone.

Docrob | November 29, 2012

Jchanggy, batteries are going to get cheaper, that is a reality you have to decide if you can stomach. My computer cost me $2,500 a few years ago, the same specs now can be had for ~$600, all new technology alls in price, that is the surcharge for being an early adopter. You need to decide if all the benefits of the car justify its cost. For me its a yes.

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