By on January 21, 2009

Tesla has increased the price of its Tesla Roadster by pricing once-standard equipment at $6,700. Customers who thought they’d locked-in pricing by submitting up to a $50k deposit, haven’t. “We want to have healthy margins on the car to guarantee the viability of the company,” says Tesla spokeswoman Rachel Konrad. “The margins are really important on this car for the next group of investors, whether it’s public shareholders in an IPO, the federal government looking at federal loan candidates or the next group of venture capitalists.” According to Wired, the biggest increase is to the “high-power connector” that recharges the car’s lithium-ion battery in as little as three hours. Once offered as standard equipment, it now costs $3,000. Tesla still includes a mobile 110-volt connector in the base price. But it requires as much as 37 hours to recharge a dead battery. “That can seem startling, and it is a big change,” Konrad admits. “But we have a lot of customers who use their mobile charger as a primary charger. Even with a 110 charger plugged in overnight, they’re nearly full again the next morning, because most customers aren’t driving the car to empty. They’re constantly topping off the battery.”

Other once-standard equipment includes the $2,300 forged-alloy wheels and a $400 “SolarPlus” windshield. Lower-cost alloy wheels and a regular glass windshield will be offered as standard equipment. The destination charge also rose $1,000, the price of metallic paint has doubled, and gizmos like bluetooth and navigation have been rolled into a $3k “electronics package.”

Aaron Bragman of IHS Global Insight, says charging customers more money after they’ve already put down deposits “is highly unusual” and implies that Tesla is “probably a lot closer to the edge than they want you to think.” Which is the only explanation for this massive “eff-you” to wait-listed customers.

Check out the reaction from the bait-and-switched Tesla depositers at the Tesla Motors Club forum.

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30 Comments on “Tesla Customers Shocked By Price Increases...”


  • avatar
    vww12

    From the blog of one of the shafted:

    “On a personal note, we complained a lot, but in the end picked a set of options and agreed to pay the price increase because we want Tesla to be successful”

    All he is missing is a “Thank you sir, can I have more please”

  • avatar
    tesla deathwatcher

    This is probably not going to stick. A lawyer might argue that this is not breach of contract. A judge will probably think that it is.

    Can you really argue that the price has not changed if the car as offered when the deposit was made now either costs more or comes with less? And if Tesla feels that they have to honor the base price (as apparently they do, since they say they don’t change it), how is this honoring that price?

    Tesla is really testing the car business in a lot of ways. That’s not a bad thing. But Tesla’s lawyers really screwed up the Fisker lawsuit. I think this price increase will end up a screwup as well.

  • avatar

    Stiffing your base is a bad, bad thing.

    I’ve said all along they under-priced the car by a huge margin. Tesla could have– should have– charged a LOT more than $110k for a Roadster.

    Introducing a new model is the only way they could make the jump to hyper-price now. An EV Esprit? Why not? Just stop producing the Roadster, refund existing deposits and hit reset.

    Makes too much sense, I know.

  • avatar
    lewissalem

    Post from the forum:

    “TTAC should have a field day with this one”

    We need to see a copy of the contract.

  • avatar
    toxicroach

    I think the depositors should be relieved that they are going to get a car at all, even if it costs 6k more than they had thought.

  • avatar
    Stephan Wilkinson

    I wonder what a “high-power connector” is. I suspect it’s a 240-volt cable, and as I said in another Tesla post, I last week made a serious 240-volt, 12-gauge extension cord for a compressor and it cost me about $60 including terminals. The Tesla might have a totally nonstandard carside receptacle unlike anything available at Lowe’s, but that’d be silly of them…

  • avatar

    No doubt their lawyers vetted the change.

    So, how soon will they have enough in the wild for me to get a good sample of them?

  • avatar
    tced2

    How much money does this “raise” for Tesla?
    $6700 times 1000 customers equals $6.7 million.
    or 67 million for 10,000 customers.
    How many orders do they have? It doesn’t seem worth it for 1000 customers.

  • avatar
    dgduris

    @RF,

    I think you’re right, but they don’t need to stop and reboot. They just need to bring on an Evora-based car asap and phase our the Roadster asap.

    I think that – in the main – those with deposits on Roadsters won’t push back too much. My bet is that they are more concerned with the environment and Tesla’s viability than they are $6k.

    Besides, it’s not like they were promised a V-12 and got a blown 6.

  • avatar
    DeanMTL

    Whoever buys into this is an early adopter and probably doesn’t care about a measly 7k. No one will walk when they could be the first attention whore on their block driving this thing.

  • avatar
    tesla deathwatcher

    tced2, according to chief propagandist Rachel Konrad, it’s not the money, it’s the margin. Reading between the lines, I think they were selling the Roadster at a loss. This hike means they are making money on each one. Big difference.

  • avatar
    kovachian

    toxicroach:

    What makes you think they’re going to get a car at all?

  • avatar
    yalej

    Here’s my law student analysis (we’re doing this right now in Contracts): it depends. (this is the answer to most legal questions)

    Without seeing the contract, can’t do much legal analysis.

    Contract modifications may be invalid for lack of consideration where the person who modifies the terms is already legally obligated to deliver or provide what he promised.

    Anyway, since this is dealing with a merchant (Tesla) and goods worth more than $500, the UCC applies. Can’t be bothered to look it up.

    I wouldn’t necessarily assume, however, that merely because Tesla’s lawyers signed off on the initial contract or these changes, they are not liable for some sort of damages.

    Given their financially precarious position, one strategy might be to file suit for some kind of contractual breach then settle for the equivalent of the price increase. Their legal fees would surely be more than $6500. Alternatively, maybe some class action fun is in order.

  • avatar
    dgduris

    @Michael,

    I don’t think you’ll ever be able to collect a data set for this car that has any statistical validity do?

  • avatar

    From a strict legal perspective, Tesla is in the wrong, but a lawsuit to prove it would cost way more than $6,700.

    This is only a 7% price increase over more than a year of waiting, and might barely cover the inflation rate during this period.

    If I were a Tesla customer, I would be angry but pay up. As others have said, better to have a viable company that makes a small profit than see Tesla vanish.

    D

  • avatar
    Edward Niedermeyer

    dgduris: Lotus is gonna beat Tesla to the EVora punch. Oh, and it’s going to be a range-extended serial hybrid too! About time Lotus realized that they should just make EV versions of their whips instead of leaving it to everyone else and their little brothers.

  • avatar
    like.a.kite

    Absolutely it is correct that one should have in the first place cost near $200k.

  • avatar
    dgduris

    @Edward Niedermeyer,

    Nice thought – Lotus leading this, um, charge. I hope they pull it off. But, as the current issue brings to focus, the commercial viability of the electric sports car is yet unproven (has the Fisker DW begun yet).

    The beauty for Lotus here may be that, once – if – EV building becomes a profitable exercise the boys in Hethel gain a marketing advantage via the visual DNA shared with the Roadster.

  • avatar
    guyincognito

    @ tced2 :

    “How much money does this “raise” for Tesla?
    $6700 times 1000 customers equals $6.7 million.
    or 67 million for 10,000 customers.
    How many orders do they have? It doesn’t seem worth it for 1000 customers.”

    From what I’ve read it appears that this only affects 300 customers and it will add about $7500 to their purchase price = $2,250,000 total revenue. To pull a risky move like this with all the associated negative PR, Tesla would have to be down to its last dime.

  • avatar
    tesla deathwatcher

    guyincognito, as you point out, the money is not that much. So maybe it’s not the money. Indeed, as I noted above, Tesla says it’s not the money, it’s the margin.

    Why is margin important? Some people have speculated that Tesla is doing this because it has been told that it needs to show better margins to get the Department of Energy “loans.” That may be the reason for the price hike.

    But my speculation is that Tesla’s accounting is showing a small loss on each Roadster, but with this price increase can show a profit. That would be powerful motivation even if Tesla was not down to its last dime.

  • avatar
    austinseven

    Everyone has a 240v connector on the back of their clothes drier. Must be more than that for three large.

  • avatar
    Stephan Wilkinson

    So where are they going to get their charging current from? A typical home has 120 and–as you say for the dryer, the oven and possibly a variety of other things–240 volts.

  • avatar

    The early adopters will pay for the privilege to get raked – to them the end justifies the means. Product marketing 101.

    The real question is – how do you cross the chasm and break into the mainstream? Companies die if they can’t get past that stage.

    Tesla’s problem is they wasted so much money on frivolous “luxuries” instead of focusing efforts and dollars on making the core technology feasible. I’d pay $7000 more (theoretically) to get 50 more miles on a charge – but not just to keep my rims from being de-blinged.

  • avatar
    golf4me

    I’m shocked there are Tesla customers! Dopes.

  • avatar
    guyincognito

    @ tesla deathwatcher :

    “But my speculation is that Tesla’s accounting is showing a small loss on each Roadster, but with this price increase can show a profit. That would be powerful motivation even if Tesla was not down to its last dime.”

    Profit based on what? Tesla’s borrowed somewhere in the neighborhood of $500M from VC’s and has sold a hundred or so cars for less than it cost to build them, plus spent a bunch of money setting up then closing down an office and building dealerships and starting and stopping the Model S project. If their accountants can’t already make that look like a good business plan, they need new accountants.

  • avatar
    tesla deathwatcher

    guyincognito, as you say, Tesla “has sold a hundred or so cars for less than it cost to build them.” I think you’re right that Tesla currently sells at a loss.

    But I speculate that Tesla’s accountants can show that it sells the Roadsters for more than it costs to build them if it raises the price by about $7,000. That’s what I mean by profit — gross margin, calculated as revenues minus cost of goods sold.

    By what I can find, Tesla has raised $155 million in 4 rounds of preferred stock sales, and $40 million from convertible notes. Tesla already spent almost all of that $195 million, some of it as you point out on less than productive projects. Not a good track record so far. But you still might be able to sell investors on your business plan.

    When you talk to an investor (and Tesla is talking to the US government), though, there is a huge difference between presenting them with figures that show a loss on each car sold, however small the loss, compared to figures that show a profit on each car sold, however small the profit. To me, it would be worth trying to jack the price by $7,000 if that means the difference between a positive margin or a negative one.

    But as I say, that is just speculation on my part.

    [Update: I saw an article that quoted Elon Musk as saying that it costs Tesla between $90,000 and $100,000 to build each Roadster. And that is after frantic efforts to get costs down. The first Roadsters, he said, cost about $140,000 to build, when Tesla had planned for $65,000 a car. Those cost overruns prompted the management bloodletting of last year, Musk said. He hopes to get production cost per Roadster down to $80,000 by this summer.]

  • avatar
    Galaxy Flyer

    This is land-bound version of the Elipse jet. Going into CH11 soon.

    GF

  • avatar
    John Horner

    Tesla is just another Silicon Valley hype monster. How many have we seen come and go?

  • avatar
    f8

    It’s been around for a while now and has produced some results, so it’s not exactly a “hype monster” on par with Pets.com for instance. Still, this is an expensive venture, and they’re doing work that is usually reserved for big corporations or billionaires with a vision.

  • avatar
    cancercomesfromoil

    Tesla has let America down. They need to go away now and let the others take the lead:

    Cheating:
    http://www.boingboing.net/2009/01/21/profile-of-paypal-an.html

    Battery Deal:
    http://www.autobloggreen.com/2008/08/16/some-complete-speculation-on-the-daimler-tesla-deal/

    Lawsuits:
    http://valleywag.gawker.com/380125/tesla-finds-the-electric-car-business-is-a-litigious-one

    Cancer:
    http://www.saxton.org/tom_saxton/2009/01/tesla-price-increase.html

    Bad karma from the start:
    http://www.alleyinsider.com/2008/11/tesla-s-musk-calls-cofounder-the-worst-individual-i-ve-ever-worked-with-

    More problems:
    http://wheels.blogs.nytimes.com/2008/10/15/more-sparks-from-tesla/

    http://greenfuelsforecast.com/ArticleDetails.php?articleID=683

    http://erith1.wordpress.com/2009/01/24/tesla-single-handedly-sets-back-the-electric-vehicle-industry-by-10-years/

    Pissing off the customers:
    https://www.thetruthaboutcars.com/tesla-to-angry-customers-its-all-about-us/

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