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Buy Model S, lease the battery pack?

Buy Model S, lease the battery pack?

Hello.

I just wonder if Tesla could do a bit like "lease Roadster, buy Model S" kind of deal with future better battery packs. I really would like to have Model S, but it doesn't have the range I need. However I believe in very close future you can have same (physical) size battery pack as 300 mile version that has 500 mile or bigger range. So I would not like to buy a expensive battery pack when I know I would need to replace it with better one soon and then pay same amount of money again, but I would like to have my EV ASAP.

So as solution for longer range trips I would need to use other methods of traveling, but I would have Model S for shorter trips at home and I could swap to better battery when it comes available by ending a lease of the battery pack and just installing a new one. If it has good enough range buy it instead of lease.

Car itself would be a bit cheaper, lease would be for battery pack (which needs to be replaced eventually anyway). Maybe even creating more market that way by lowering the initial cost of the car.

Does that make any sense?

GarySV | 19 septembre 2010

Timo-
The cover story in the October WIRED magazine tells the story of Mr.Musk's narrow escape in funding the Model S startup and indeed the Roadster, too. Having the factory absorb the cost of the S battery could be more financial stress than Tesla needs. Plus, Nissan recently announced Leaf owners will own their battery, and they're feeling no pain. As I've read on this entertaining website, batteries in the future are almost certain to be better (500 miles, maybe) and cheaper (Moore's Law?). Hang in there, Timo. It just gets better from here.

ChristianG | 21 septembre 2010

That's why Timo whant's to lease the battery, the bigger, better and cheaper battery is only 2 years away. Hell the 300 Mile battery sounds really so much better than the 240 mile. So it would be cool to kinda 'rent' it till the bigger is here.

But like you said, that's kinda unlikely. Still some sort of an upgrade option might be kinda cool.

chenglo1 | 21 septembre 2010

I totally agree with Timo. I think sales would go nuts if we could lease the battery. Tesla would need to build a few more plants to meet demand. Well, at least have an upgrade option. Battery technology is just going to get better quicker with today's technology. You should see the lithium chargers and lithium batteries my kids and i use for our "big boy toys". Did i mention the big boy toys use brushless motors that can crank out 60K rpms?

Cheng

chenglo1 | 21 septembre 2010

BTW, i'd like the 1000 mile range version OR have the ablity to tow an extra 500 mile battery behind me in a solar powered or wind powered cargo trailer built for the spare pack. I can do a swap at the rest area then plug in the first pack to charge in the trailer. Now, you can really do road trips! 300 miles would not be road trip capacity.

Cheng

Klaus | 22 septembre 2010

You and what team of gorillas are going to remove and replace that battery pack at a rest stop? Do you have any idea of the weight of one of those packs? Although Tesla has a technique for doing this and can probable do it in 5 minutes, this isn't like changing a tire on the ol' family sedan.

ChadS | 24 septembre 2010

300 miles is not road trip capacity? That's like 6 hours in the car. Won't you want to stop for lunch or something? An L3 charger should be able to give you another 240 miles in an hour while you're eating.

Timo | 24 septembre 2010

More like five hours.

Problem is that there are no L3 chargers where I need them in possible routes I might use. Not yet anyway. In future probably yes, but that's pretty uncertain for near future. I believe that we get the 500 mile version before we get the chargers here. Even the standard is not yet rock solid for L3 chargers.

ChadS | 26 septembre 2010

Well, the Model S is not available in the near future either, so I wouldn't worry about the near-term prospects for chargers.

It may well be different where you live, but in Washington state where I live, there will be 50 L3's put in over the next year. That will be more than enough to cover the state, and Oregon and California are doing the same thing.

You are correct that not everybody has agreed on the standard, but I don't think that matters. Once a bunch of Tepco L3 chargers get on the streets (and they are coming), automakers are going to make sure that their vehicles are compatible with them. It's a good standard and there's no license fee, so there's no reason to not go with it.

whlin76 | 15 octobre 2010

In my opinion, this is a "deal-breaker" topic for most potential EV buyers. 1. The current battery system cost $30k, that's more than half the entire vehicle! 2. As many of you have mentioned, the battery technology will only get better and cheaper in the near future so it doesn't make financial sense to own this piece of VERY expensive technology that WILL become obsolete way before the useful life expectancy of the vehicle itself. 3. By leasing the battery, there will be so much more demand for EV's that the added car sales should be enough to offset the money lost in battery lease program. The companies do this all the time. For example the video game industry where they LOSE money on the Console sales to gain market share then rely on Game Sales to offset the loss and make profit. I think the bean counters at Tesla should do some serious number crunching to make this work. This IS the new future of mass transportation and the first to command the biggest market share will win out. Tesla certainly have the technological edge and production capacity with NUMMI so they are in a perfect position to do this now before the competition start to heat up.

whlin76 | 15 octobre 2010

I'm a POTENTIAL buyer of Model S but what's holding me back is the idea of owning the battery. If I have the option of buying just the car and lease the battery, Model S WILL BE MY NEXT CAR TO OWN. Otherwise, I probably won't consider buying an EV for another 5 to 10 years. Aside from your usual "Early Adapters" I'm sure most of us "average" consumers feel the same way.

jkirkebo | 16 octobre 2010

Different people, different strokes. I'm not getting an EV from a manufacturer that will only lease the battery, not sell it, like Renault. I'm buying both the car and the battery, or none of them. Leasing always works out more expensive. Especially if you are like me and usually keep cars for 7-10 years.

Timo | 16 octobre 2010

Problem with your approach is that you are stuck with that battery you get now, when battery tech is advancing _fast_. I would like to be able to swap to better battery when that becomes available without need to buy first this battery and then that new one.

There are already batteries in prototype stage that are approx double the current batteries (400Wh/kg, 1000+Wh/L), but it looks like early adopters are stuck with current generation batteries. If those batteries are available in 2014-2015 or so and give me 500-600 mile range instead of 300 I _really_ would like to have them. After the 600 mile range has been achieved it doesn't matter to me anymore if it gets bigger. After that it is only miniaturization of batteries and getting better performance from them.

whlin76 | 16 octobre 2010

I understand that different people have their own preferences therefore, battery lease program should be available as an OPTION for those who like Timo and I don't want to be stuck with inferior battery. I won't mind paying a bit more upfront to be able to upgrade in a couple of years. The car itself is fine and relative to battery, I don't think the future models will be all that better. On the other hand, the battery is an entirely different beast.

jkirkebo | 17 octobre 2010

Yes, if you need more range I agree it can be tempting. I don't need more than ~240 ideal miles, so the 300-mile pack would probably work for quite a few years before it's down to 80% capacity.

Vawlkus | 18 octobre 2010

All you really need is a program to recycle the battery. Then you can turn in your old one for a credit on a newer battery with more range, etc. Won't be a 1 to 1 swap, but with the credit you get it'll help with the price of the battery change.

BYT | 18 octobre 2010

I pray that this is one of those under promise and over deliver deals, that Tesla will say we can only do this or this will cost this much as we are in the research and prototyping stages. Once the Model S comes to market, imagine how happy we all would be to see they are delivering something better then what was promised and maybe a replacement for less the previously expected?

whlin76 | 18 octobre 2010

I don't think it is likey that Tesla can under promise and over deliver. I remember Tesla use to promise 260+ mile driving range on their Roadster but when everything was said and done, it was only 220 miles and that's probably a "lab" range and not even a real-world, practical range. As for Model S at $50k, I'm doubtful how they can produce mostly aluminum body car for $20k with battery itself will cost $30k and still make profit. I'm sure compromises have to be made and some corners being cut. I like the recycling credit idea by Vawlkus. Like some parts supplers offering core exchange credit on major components such as transmission, differentials, etc., I'm sure raw materials even on used battery should worth something.

Timo | 18 octobre 2010

IIRC they promised 250 miles. They have delivered 245 miles. Real world range depends pretty much of how you drive. Current record is over 300 miles. Tesla battery is actually quite cheap. IIRC Roadster battery cost is about $20k, not $30k, and Model S released price is for 160 mile version which will have quite a bit smaller battery.

Shogun | 21 octobre 2010

Everyone asking for a leasing arrangement on the battery is forgetting one VERY important thing. That original battery MUST be paid for by someone. Once a lease is up, the leasing company OWNS that piece of equipment. Well, what company would LEASE a battery like this in this day and age when they KNEW when they got it back it would be out of date and barely worth pennies on the dollar? The reason OTHER car companies are leasing their battery is to make their car LOOK more financially attractive than it is. They are also probably absorbing some of the loss on the battery and padding it by financial profits from other (non-EV) leases just in order to get these out in the market.

If you look at history, one EV car was a "lease only" deal years ago and they FORCED people to hand them back so they could destroy them even though no one wanted to give them up.

I figure I'll get a Model S and live with it until such a time as either the original battery doesn't work for me anymore or that a replacement battery is reasonably enough priced and extends the range a sufficient amount for me to justify it. It will be interesting to see what the additional up charges are for the 230 and 300 mile battery over the 160 mile standard battery.

But, at the end of the day, I only commute about 15 miles each way - 30 total a day. Add in some side trips and I'm almost always under 50. That means that, theoretically, I could last 3 days with NO charging. I wouldn't do that. What I probably will do is just charge it off of 110 and save the ridiculous price they want for the L2 station (I once heard something like $2200).

I'm going to KEEP my gas SUV for the few times when I need to a) Tow something, b) carry some big/heavy stuff, c) use 4wd, like in the deep, deep snow or d) need a longer range. I expect that the number of times I drive my truck every year will be VERY VERY few, but I will not sell it, it's just not worth enough and will pay for itself over time in convenience and allowing me to decide at the last minute that I need to use a gas vehicle. I COULD just switch with my wife, but... I really DO like my truck!

Now, if Tesla would offer to do auto refits with electric drive trains, I would SERIOUSLY consider having my truck reworked or, more preferably, buying a retrofit kit and doing it myself, as an electric vehicle, but, being realistic, there is no way I would pay tons more than the truck is worth to do that either.

txjak | 3 juin 2011

Perhaps Tesla could work out a deal with Better Place to handle battery leasing and/or switching.

Vawlkus | 6 juin 2011

Better place has to prove it's concept first, which I am personally dubious of them being able to do.

Supergreekster | 6 juin 2011

Leasing:

What you guys apparently don't understand about how a lease is calculated:

3 yr lease is typical for vehicles, so let's think about this, $50k car for example... Total lease cost is about half, because they figure this car will be worth $25k at the end of the 3 yrs. If car is worth more at the end of lease, you will pay more to keep. If car is worth less, you can walk away "lucky"

The problem with battery technology lease is this: they will say "in 3 yrs, this battery will be worth how much?". The answer, unfortunately is probably remarkably close to $0. This means that a 3 yr battery lease will have to be figured for a final value of $0. This means a 3 yr loan for battery. With 4% interest, this is $884/mo battery lease. If you just roll into 5 yr loan, it will be $552/mo.

The problem is these are figured not by tesla, but by some financial person trying to "break even" with lease compared to loan... And "final value" of battery is UNPREDICTABLE, and therefore for safety must be calculated at $0.

Jeremy | 7 juin 2011

I have an early reservation for a Tesla and my only barrier is my concern about the battery. By the time my nuber is up they should have long term battery capacity charts that give me a better idea of how much capacity I can expect to lose over time. I usually keep cars til the end of their useful lifespan. If I am going to be ssaddled with a $20,000 battery pack replacement cost in 5-7 years it will be very difficult to make the argument for purchase as the residual value of the car at 5 years will be about 30% of it's purchase price. I think a 10 year or lifetime warranty on the battery pack will be required to make the car a practical purchase. I am hoping Tesla will come up with something to allay my fear of getting "electric shock" halfway through the cars useful lifespan.

Zorba | 7 juin 2011

On another forum, someone who knows someone working at Tesla (yeah I know) said the battery will be leased. At least here in Belgium.

jkirkebo | 7 juin 2011

Hope that's not an european thing, battery leasing would be a total deal breaker for me.

William13 | 7 juin 2011

Elon has always been cold to the battery lease idea when asked in interviews.

David70 | 7 juin 2011

I can guess why.

Battery survival depends not only on the battery management system, but how badly it may have been abused by the user. e.g., leaving the battery in a discharged state for an extended period of time, and even using range mode way too many times.

Apparently such actions would be recorded, but it certainly wouldn't be good publicity for a leased battery to fail, and the user to be told "You broke it, you buy it."

From my own point of view, I probably wouldn't trust leased batteries that hadn't been made by Tesla Motors.

Mittar | 8 juin 2011

Jeremy, I think you're overestimating the battery degredation after 5-7 years. It's not going to just give up the ghost, it will just lose some of it's capacity. And if battery tech has evolved as much as we think it will between now and then, if you chose to replace it, the equivalent range would cost you far less than the $20k you bought it for.

David M. | 8 juin 2011

I agree with Mittar. I've read that this battery will have approx. 70% of initial range after 7 years. So a 230 mi battery will get you about 160 miles after 7 years (or so). Anyway, with most (ICE) cars, you'd be lucky to get 30% of original price after 7 years. If you decided to replace the 230mi battery after 7 years, it would not be more expensive than maybe $6K to $10K. It would probably take your resale value to 50% of original price. Even without doing that, you could maybe get 35% of original price after 7 years. Hmmm.

varty | 25 août 2012

Lease the whole car. That makes sense for many people at this stage - value buyers both wealthy and middle class. Tesla will need a partner in teh USA for that with deep pockets and ability to take some risk... Issues are:

- The battery is warranted for 8 years - with Tesla themselves saying that after 7 years the battery is at about 70% max, e.g., losing 30% of its initial power/range which is based on 55 mph - if you drive the freeway at normal speeds with the AC at full tilt, likely less.

- If they lease the car for 3 years, they have 4-5 years left on warranty, on likely less battery backup power. How do you calculate that and will leasing cost more for a EV than a equivalient gas vehicle? If so, do you actually see any savings over gas powered, as you are paying for the partial cost of replacing the battery.

Interesting dilema. I really like the Tesla Model S... very well made and engineered car... and made in the USA. But early adapters are taking on a lot of risk as indicated by all the blog messages... and if that risk is transfered to the leasing company... that will be interesting to see how they price that risk... that is the bottom line and will show the real value.

jerry3 | 25 août 2012

1. Elon has said that the battery should last about twice as long as the warranty.

2. In the Roadster thread there is an owner who has put 200,000 hard kilomteres (including lots of racing) on his car and the capacity has only dropped 30%. That's really a worst-case scenario. The Model S has an improved battery cooling system and so should last much longer than the Roadster battery.

3. It's speculated that if battery cost continues to drop at 8% per year, in eight years a replacement battery should be much less expensive (or conversely have much greater range).

The one thing I've learned from my 12 years of Prius ownership is that the battery is a non-issue.

Sudre_ | 25 août 2012

I don't think lease companies care about the battery. They care about demand and resale value. The battery could explode in 6 years as far as they are concerned. As long as the car makes it though the 3 year lease and someone buys the car after that for a price they like.

Now those other details mentioned are important for the resale value... I just don't think the lease company will try to calculate it. They will wait and use real data.

jerry3 | 25 août 2012

Sudre,

No doubt. Probably the best kind of lease is the kind where you purchase the car for $1 at the end of the term. Then you check whether that is cheaper than just buying it outright. If you can write the Model S off for business, then there's no question that the lease is better because it eliminates all the arguments from the tax man.

Vall | 25 août 2012

Renault, as you know, is doing exactly that. The small detail is that the ZOE ev costs 20,000 euro (before 5000 tax subsidy in france). So a car WITHOUT the batteries, just with the infinitely more simple electric motor and none of the engine, transmission, exhaust or emission equipment, costs as much as well-equipped Golf, a much larger car that even comes with an engine and all the rest. So what they are doing is transferring the cost of the 22 kWh battery to the vehicle itself, and then leasing the battery for 80 euros/month for 3 years, limited to 12 500 km per year. Somebody has to pay for the battery, and it won't be renault, sacrificing their profits.

In a distant future I can imagine tesla and other companies offering just the vehicle, without the battery, and the customer having a choice to buy OR lease a battery from a third party that specializes in just batteries. That way there can be many different kinds of batteries, using different chemistries, different packaging, offering different levels of compromise between range and power/charge times. Second-hand market for batteries would be huge, offering flexibility and lower prices.

Brian H | 25 août 2012

@Vall;
Good imagining! +1

dborn @nsw.au | 25 août 2012

For Australia, where car prices generally are double those in the USA, largely due to value added taxes, the lower the value the lower the tax. In our special case, i have written to George asking for exactly this (leasing) scenario. In the alternative, given that there are a choice of three batteries, if the battery is sold as an aftermarket or separate item on a separate invoice, this too would make the car considerably cheaper here. The cars could be shipped batteryless, and the batteries fitted in Australia, for customs purposes.
There is precedent with the Better Place model, already in our country. I am sure a plan can be worked out which will be a win-win for us, the mug client, and Tesla.

Mark E | 25 août 2012

@dborn:

I'm keen on a leasing arrangement as well but for a different reason. Unfortunately when I've investigated the value added tax - including luxury car tax - it doesn't even come close to the doubling or tripling of prices that we see here. We commonly forget that the US price excludes local taxes - so GST has to be ignored. On the >$200k that the roadster costs here, about $30k is tax. (inc LCT)

This makes pricing from BMW and Porsche that are more than 2x the US price a bit rich.

I'd like to see the battery leased so that the whole vehicle can drop below the LCT threshold - taking a huge chunk out of the price and simultaneously allowing me to claim the full cost of the car when I use it for work.

Currently you can only depreciate and claim up to around $75k of the model s for business use, despite the fact that in an ICE environment you can also claim fuel and service costs.

Larry Chanin | 26 août 2012

During the last earnings call Elon mentioned that he was in general in favor of offering car leasing options. I believe he referenced the business model used by Solar City that relies on leasing arrangements. However, he pointed out that currently he had over 10,000 people willing to buy the car without the inducement provided by leasing so there was no immediate need to pursue leasing agreements. This was in the context of leasing the entire car, but obviously the same rationale would apply to leasing just the batteries. So from this I gather that any leasing would occur down the road when Tesla emerges from the red.

Larry

dborn @nsw.au | 27 août 2012

Mark E- please write to George B direct. The more letters he gets the more there is likely to be consideration of the matter. I would not rely on him reading these posts, or on having Jay pass messages back to the factory. These is enough time for us right hand drivers to get our point across before signing time.

SMOP | 27 août 2012

maybe buy the 40kwh model s, and tesla allows individuals to "rent" a higher capacity battey for extended road trips? This way you are not destroying your "daily" battery by supercharging it

BYT | 27 août 2012

@SMOP, TM abandoned the quick swap option for batteries. It can be swapped they said, rather quickly, but they are not putting the infrastructure to do so anymore. They focus is on the Super Charging network instead.

Timo | 27 août 2012

@BYT, TM abandoned the quick swap option for batteries

Is that final? I thought they had an idea of making this as option in Tesla stores. No swap-stations, but just what SMOP said, rent a bigger battery from a store (where swapping is done) for long range road trips, then put your own back into car after road trip is finished.

Even with Super Charging infrastructure I think that could be useful.

BYT | 28 août 2012

@Timo, I don't want to speculate that it was final, but at the Test Drive event in Fremont the end of June, I asked about this specifically and I was given the "impression" very strongly, that they were moving away from this idea completely. They said the system can still be swapped relatively quickly, but would be reserved for replacing packs that died or didn't have the capacity needed anymore vs. a swap for the reason of a temporary bump of range for a while.

Volker.Berlin | 28 août 2012

"Car lease option not available until Spring/Summer 2013"
http://www.teslamotors.com/forum/forums/car-lease-option-not-avaliable-u...