Tesla Model S Pricing Analysis

Michael Karesh
by Michael Karesh

Tesla released the finalized features and pricing for the Model S sedan this week, with deliveries of the most expensive variants to begin in “mid-2012,” the others to follow by the end of next year. More than a few people who thought they were going to be able to buy a “premium electric sedan” for $50,000 seem miffed by the final pricing. Yes, there will eventually be a $50,000 car (after a $7,500 tax credit). But it won’t have full motor power, leather, nav, or the ability to use fast-charging stations. Tick off all the boxes, and the Model S pushes double the hyped number. But, let’s face it, these guys have to turn a profit and must pay at least as much for parts as the big established car companies, on top of that big expensive battery pack. So does the announced pricing seem reasonable?

First off, a caveat. Tesla released “full features and pricing,” but a few holes remain. The car has eight airbags, but what are the two beyond the typical six? Front knee airbags, rear side airbags, or counting each side curtain airbag as two (front and rear)? Does the base car have a leather-wrapped steering wheel or an auto-dimming inside rearview mirror? Are the external mirrors heated? Is obstacle detection standard, optional, or simply not available? None of these are pricey enough features to make a big difference in the following analysis, but be aware that the omissions, if they’re on the car, might be worth a few hundred dollars.

The big jumps from $50,000 are due to the optional battery packs. Three packs will eventually be available. The base car will have a 40 kWh battery pack good for a 160-mile range and a zero-to-sixty time of 6.5 seconds. How is acceleration affected? The electric motor appears to be a powerful 300 kW / 402 BHP unit in all cars, but only the highest capacity battery pack is capable of outputting enough energy per second to fully power it. The figures for the other two packs: 60 kWh / 230 miles / 5.9 seconds and 85 kWh / 300 miles / 5.6 seconds. With the largest pack another bottleneck is encountered. Step up to a “Performance” model, with the 85 kWh battery pack and a high-performance inverter, and the zero-to-sixty sprint drops to 4.4 seconds. One implication: with an electric car, it’s not enough to know the peak power output of the motor. The battery pack and inverter are also critical parts of the equation, and these aren’t always capable of providing the motor with sufficient energy.

To put the sizes of these battery packs in perspective, the Chevrolet Volt has a 16 kWH pack, while that in the Nissan LEAF is 24 kWh. So the increments between packs are as large as the entire pack in these smaller cars. And the lithium-ion pack in the new Prius Plug-in Hybrid? A mere 4.4 kWh, for which Toyota charges about $5,400 extra. Using Toyota’s math, even if we ignore the cost of the standard Prius’s 1.3 kWh NiMH battery pack (or at least assume it’s offset by the cost of a charging system), Tesla would charge about $24,500 to go from the 40 kWh to 60 Kwh and about $30,700 to go from 60 kWh to 85 kWh. Instead, they’re charging a mere $10,000 for each bump. So either Toyota is making a bundle, Tesla is losing one, or Tesla knows something about lithium-ion battery packs that Toyota does not. They certainly can’t be faulted for their battery pack pricing as much as it bumps the price of the car.

And that high-performance inverter? Another $10,000, plus an additional $5,000 to cover mandatory additional standard equipment (leather interior, air suspension, and 21-inch wheels) that costs $6,500 to add to the regular car. So the “quicker than a 911” Model S starts at $85,000.

Optional even on this top model: $750 metallic paint, $1,500 panoramic sunroof, $3,750 Tech Package (nav, rearview camera, xenon lights, power liftgate, passive entry, Homelink), $950 580-watt 7.1 audio system, and $1,500 for a kids-only rear-facing third row. Oh, and if you want a parcel shelf to hide your cargo (like the one standard in a Hyundai Accent) that’ll be another $250. Two further options ($1,500 for a second on-board charger, $1,200 for a high power wall connector to feed it) enable quicker battery charging. Include all of the listed items on the Performance model and you’re at $96,400. Of these options, the $3,750 price for the Tech Package seems to have prospective owners most in a tizzy, as the price seems a little high given the contents, at least some of which they thought would be standard.

Disregarded here, but certainly not elsewhere: the first 1,000 cars will be “Signature” models with a unique red exterior and white leather interior. These start at $87,900, a few thousand higher than a similarly equipped regular production Model S. [Ed: Residual value speculators, start your engines]

So, how does the non-intro car’s pricing compare to the Infiniti M35h I had last week, which has a 1.4 kWh battery pack? Add metallic paint, leather, and sunroof to the Tesla, to minimally match the M’s standard equipment, and it actually comes in nearly a grand lower, $53,650 vs. S54,595. But the Infiniti includes additional standard features. Adjust for these using TrueDelta’s car price comparison tool (where additional models can also be compared), and the Infiniti ends up with a $1,455 price advantage. Load the cars up further, adding nav and the high-end audio systems, and the Tesla comes out better, $57,600 vs. $61,745. A $2,850 adjustment for the Infiniti’s additional features leaves the Tesla with a $1,295 feature-adjusted price advantage. Coincidence that they’re so close? Probably not.

But the Infiniti with a combined power output of 360 horsepower gets to sixty in about 5.5 seconds. So it’s as quick as the standard Model S with the 85 kWh battery pack. Add this pack–also the only one that will be available initially–and the Tesla comes in about $20,000 above the Infiniti.

So, for equivalent range and performance in the Tesla (or if you’re getting one of the first cars) you’re going to spend quite a bit more. How you evaluate this depends on whether you tend to see the glass as half full or half empty. Does Tesla deserve congratulations for doing a surprisingly good job of absorbing the cost of the standard 40 kWh battery pack ($20,000 even at their “bargain” prices) and charging much less than Toyota per kWh for the larger packs? Or should they be taken to task for not delivering the capability of the 85 kWh car at the price of the 40 kWh car?

I’m personally inclined towards the former view. But then this is a purely intellectual exercise for me: I haven’t plunked down $5,000 to get in line for one. If I had, then I might be upset to not be getting the car I expected for the price I expected to pay, even if it always did seem too good to be true.

Michael Karesh operates TrueDelta.com, an online provider of car reliability and real-world fuel economy information.

Michael Karesh
Michael Karesh

Michael Karesh lives in West Bloomfield, Michigan, with his wife and three children. In 2003 he received a Ph.D. from the University of Chicago. While in Chicago he worked at the National Opinion Research Center, a leader in the field of survey research. For his doctoral thesis, he spent a year-and-a-half inside an automaker studying how and how well it understood consumers when developing new products. While pursuing the degree he taught consumer behavior and product development at Oakland University. Since 1999, he has contributed auto reviews to Epinions, where he is currently one of two people in charge of the autos section. Since earning the degree he has continued to care for his children (school, gymnastics, tae-kwan-do...) and write reviews for Epinions and, more recently, The Truth About Cars while developing TrueDelta, a vehicle reliability and price comparison site.

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  • Alex Nigro Alex Nigro on Dec 28, 2011

    I think I want a Performance model, with everything but the in-law seats and the metallic paint (just want one in black, hot temperatures be damned).

  • Andy D Andy D on Dec 28, 2011

    Maybe I missed it. What is the expected lifetime of the battery packs? TIA.

  • Varezhka I have still yet to see a Malibu on the road that didn't have a rental sticker. So yeah, GM probably lost money on every one they sold but kept it to boost their CAFE numbers.I'm personally happy that I no longer have to dread being "upgraded" to a Maxima or a Malibu anymore. And thankfully Altima is also on its way out.
  • Tassos Under incompetent, affirmative action hire Mary Barra, GM has been shooting itself in the foot on a daily basis.Whether the Malibu cancellation has been one of these shootings is NOT obvious at all.GM should be run as a PROFITABLE BUSINESS and NOT as an outfit that satisfies everybody and his mother in law's pet preferences.IF the Malibu was UNPROFITABLE, it SHOULD be canceled.More generally, if its SEGMENT is Unprofitable, and HALF the makers cancel their midsize sedans, not only will it lead to the SURVIVAL OF THE FITTEST ones, but the survivors will obviously be more profitable if the LOSERS were kept being produced and the SMALL PIE of midsize sedans would yield slim pickings for every participant.SO NO, I APPROVE of the demise of the unprofitable Malibu, and hope Nissan does the same to the Altima, Hyundai with the SOnata, Mazda with the Mazda 6, and as many others as it takes to make the REMAINING players, like the Excellent, sporty Accord and the Bulletproof Reliable, cheap to maintain CAMRY, more profitable and affordable.
  • GregLocock Car companies can only really sell cars that people who are new car buyers will pay a profitable price for. As it turns out fewer and fewer new car buyers want sedans. Large sedans can be nice to drive, certainly, but the number of new car buyers (the only ones that matter in this discussion) are prepared to sacrifice steering and handling for more obvious things like passenger and cargo space, or even some attempt at off roading. We know US new car buyers don't really care about handling because they fell for FWD in large cars.
  • Slavuta Why is everybody sweating? Like sedans? - go buy one. Better - 2. Let CRV/RAV rust on the dealer lot. I have 3 sedans on the driveway. My neighbor - 2. Neighbors on each of our other side - 8 SUVs.
  • Theflyersfan With sedans, especially, I wonder how many of those sales are to rental fleets. With the exception of the Civic and Accord, there are still rows of sedans mixed in with the RAV4s at every airport rental lot. I doubt the breakdown in sales is publicly published, so who knows... GM isn't out of the sedan business - Cadillac exists and I can't believe I'm typing this but they are actually decent - and I think they are making a huge mistake, especially if there's an extended oil price hike (cough...Iran...cough) and people want smaller and hybrids. But if one is only tied to the quarterly shareholder reports and not trends and the big picture, bad decisions like this get made.