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Price Increase

Price Increase

Any other high-number (10,000+) reservation holders or those that deferred (e.g., holding out for red!) out there a bit concerned that with the "time to build" emails coming out quickly now and delivery dates that either start to look too early (more like Q1 and Q2; planned for Q3 or Q4) or too late (say Q2 or Q3 for red) and may not be able to finalize in a "fair, predefined timeframe" to avoid the now officially announced price increase? This concerns me because when I made my reservation, I was told August would be the earliest I should expect a car as my lease ends in November 2013. If I need to make a decision in December/January and take delivery in, say, May or else face a price increase, that will be hugely annoying. I'm stretching the budget to make the 60 kWH work, and really don't want the car without at least the 60 kWH battery and the tech package...I'm already planning to skimp and pass on the air suspension which I'm not thrilled about, but won't give up anything else to accommodate a price increase!

How are others feeling about this?

riceuguy | 20 novembre 2012

Oh, and in case anyone missed the price increase info:

http://www.teslamotors.com/forum/forums/it-true-there-will-be-model-s-pr...

rmp123 | 21 novembre 2012

If they need to increase the price of Model S, why not add $2K, $3K, or whatever, to the base price of the car?

suegie | 21 novembre 2012

Well, if you have a reservation, you should be ok...right? The air suspension rocks! Maybe you should invest a little in Tesla stock and let them help you buy a couple options!

riceuguy | 21 novembre 2012

@Suegie: That's my question...am I ok? It seems as though that depends on what a "fair and predefined timeframe" is!

markapeterman | 21 novembre 2012

@riceuguy-

I think you may have a problem - from what I've read, they are planning to add sunset red to the design page in a month or so, anticipating implementing it in the mid spring. So if you get your time to build email in Jan with at June delivery window, I don't know that you will have a good reason to request that they push it back. Based on my interactions with Tesla though, you may be able to work something out - they are more reasonable than a typical car company.

riceuguy | 21 novembre 2012

Fingers crossed...

pilotSteve | 21 novembre 2012

Perhaps the Tech Package will become unbundled! Many of us asked for HID headlights without Audio, etc. Even if the sum total of individual items is more expensive than the current package it could make people happy if they aren't buying items they don't want.

Could also apply to some wheel/tire combos that will give better options to choose from.

And sure some things will cost more. Tesla is (a) creating value for early innovators and (b) watching out for shareholders by starting to focus on profit.

Not sure until we see what they announce but I am tentatively encouraged by this.

riceuguy | 21 novembre 2012

@pilotSteve, I wish I could be that optimistic, but generally if you're going to do something that's a net positive for customers, you don't start with calling it a price increase, you'd call it "improved choices" or something like that. I'm not turning anti-Tesla or anything, I'm just concerned that my maximum price point and minimum car configuration may cross paths...

Volker.Berlin | 21 novembre 2012

riceuguy, same thoughts here...

Brian H | 21 novembre 2012

suegle;

No, only a reservation with finalized purchase. So if you don't get and respond to the "finalize" email by ~mid-Dec and respond within a "fair and predefined timeframe" (30 days?), you will have to pay the new prices.

Or SLT.

danielccc | 21 novembre 2012

Not too crazy about this one.

I think it's good they are calling a spade a spade though. Calling it "improved choices" would be an insult to people's intelligence.

I'm not too crazy about it because the car is not cheap as things stand. Also, new reservation numbers will dry up immediately after the increase takes effect, for a month or two.

On the other hand, effectively it is an increase for Q3, maybe even Q4 2014. Tesla needs to lock in inflation adjustment three quarters in advance due to the long reservation queue. This is probably what is prompting the timing of the increase announcement, assuming the increase stays in the 2 to 3% range.

Also on the other hand, reservations should spike during the next few weeks. Tesla may even come close to selling out all of 2013's production. If so, then this is an increase for 2014.

It will be interesting to see how this plays out.

asblik | 21 novembre 2012

WHY???

Tesla produced roughly 1,000 Model S and it's already determined the price needs to go up, really???

If the car got better (like Volt which got Clean Air Certified and a few more electric miles or Leaf w added range for 2013 the price actually went down) then MAYBE... but Tesla is essentially jacking up the price without even producing a single 60/40kWh units...

I cannot imagine the cost of TSLA's batteries per kWh going up next year, if anything it'll go down further.

Not the direction I expected, especially since they predicted 25% Gross Profit for 2013 (listen to conference calls), they want to go to 30% GP now?

I understand this is a for-profit / publicly traded company, I get it. But there GB was crying at MT COTY award explaining how we're doing this for our children yadayadayada... please. I'm better off cancelling my reservation and waiting for next gen prius (65+MPG) at this rate.

markapeterman | 21 novembre 2012

Brian H.

I think you misinterpreted the post:

We are starting to hear rumors about "a price increase coming soon" and want to assure current reservation holders that the price increase will not affect them as long as they configure and finalize their order within a fair, predefined time frame after being invited to configure their Model S.

The "after being invited" part suggests the current prices will stay in effect long after mid December provided you reserved a car before the announcement. At least that's how I read it.

mrspaghetti | 21 novembre 2012

@danielccc

Also, new reservation numbers will dry up immediately after the increase takes effect, for a month or two.

I don't know why that would happen. A price increase will only prevent someone from making a reservation if it puts them over their max price point. Ditto for causing existing reservation holders to cancel.

Thinking out loud, I imagine there would be more outright cancellations or decisions not to reserve at all among those who would have ordered a 40kwh or 60kwh battery. Some who've ordered the 85kwh model might downgrade to the 60kwh, and some who were looking at Performance might go with the standard.

But I'm assuming that a large % of those ordering 85kwh cars are not that close to their budget limits and won't reconsider ordering unless the price increase is huge.

BYT | 21 novembre 2012

The Model S is worth it's cost if even it went up another $15k IMHO.

mrspaghetti | 21 novembre 2012

@h8tow8

WHY???

I'd imagine that when the increase is announced they will explain why.

Tesla produced roughly 1,000 Model S and it's already determined the price needs to go up, really???

Well, that should be enough to determine what their actual margins are. And if they have already determined that they won't hit their margin target without a price increase then it doesn't make sense to wait until more units are produced. (Speculating here that margins are the reason.)

If the car got better (like Volt which got Clean Air Certified and a few more electric miles or Leaf w added range for 2013 the price actually went down) then MAYBE... but Tesla is essentially jacking up the price without even producing a single 60/40kWh units...

Chevy and Nissan produce huge volumes of many models and so they can afford to take a loss (or at least, lower margins) on some of them. Tesla, not so much.

I cannot imagine the cost of TSLA's batteries per kWh going up next year, if anything it'll go down further.

Maybe, but they have to pay the bills right now. If the price comes down in the future they can factor that in later.

Not the direction I expected, especially since they predicted 25% Gross Profit for 2013 (listen to conference calls), they want to go to 30% GP now?

You're assuming they're on track to hit that number. If they're not, they'd be irresponsible not to do something about it.

I understand this is a for-profit / publicly traded company, I get it. But there GB was crying at MT COTY award explaining how we're doing this for our children yadayadayada... please. I'm better off cancelling my reservation and waiting for next gen prius (65+MPG) at this rate.

Let me point out that we don't even know how much of an increase this is going to be or how it's going to affect the bottom line of different configurations. It's a little premature to start burning Elon Musk effigies at this point.

Kal-el | 21 novembre 2012

@BYT
I'll take does 15k I'm already struggling to get the 40KWh, I can use the 60KWh upgrade :)

BYT | 21 novembre 2012

I know its not cheap, and I am not rich either, but when you break the car down and price it on it's features, tech, innovation, quality, service and so on, it's worth it. Like the ~$50M Tesla Motors spent to get the Fremont NUMMI plant but not that great of a value. :)

Maychi | 21 novembre 2012

I still dont get it. I am reservation holder #13860 (just reserved last week). -> I know that sucks ;(
Am I going to pay now a higher price or not?

sunnysailor | 21 novembre 2012

Maychi,

As a reservation holder your price will not increase.

Maychi | 21 novembre 2012

sunnysailor,

I hope that is the case. On the other hand I probably would get it anyways. ;) thanks for the answer.

DouglasR | 21 novembre 2012

As I said in the other thread, TM may just sit on this for a while. Prices will go up for non-North American cars because those prices haven't even been set yet. But the prospect of an increase in the future may help to insure robust reservations throughout 2013.

dahtye | 21 novembre 2012

A few comments:

The way I read it, current reservation holders don't have anything to worry about with regard to the price increase. Further, there is a timeframe between now and when they announce the new pricing that new reservation holders will have the old pricing. Once the official announcement is out, new reservation holders will have to pay the new pricing.

As it's been stated earlier, Tesla has to make these decisions now since there is such a backlog of cars (high number of reservations). They will not benefit from the new pricing for at least 6 months (if not 8 to 10 months - depending on production rate and how many new reservations they get between now and the official announcement).

Certainly, they could expect a slightly higher reservations in the short term - people trying to rush their reservations in before the announcement. Then I'd expect a slight drop off in reservations immediately following. But the steady state average reservation rate should remain relative constant, perhap a downtick of a percent or two. But I imagine the bean counters have analyzed this to death and determined that there enough elasticity in the model where they will net a higher profit overall - demand will drop slightly but not drop so much as to outweigh the increase in profit per vehicle.

All in all, IMO, this is good for us as stock holders and Tesla vehicle owners.

pbrulott | 21 novembre 2012

Two reasons why they let it filter a few weeks before the official price increase:

1) There was a leak and tried to kill the rumors (we know how it can go sideways when you don't have all the facts)

2) Tesla leaked it themselves to increase reservation rate in order to achieve the 3k + 20k = 23k reservations and fill their entire 2013 capacity.

Personnally, I'm on the fence as I reserved Model S a way back (P179 Can, Aug'11) but I still didn't get a chance to drive the car + the fact that many questions are unanswered yet on the 60kWh pack. While I am protected from the price increase, I might still be forced to finalize my order without knowing all about it.

stephen.kamichik | 21 novembre 2012

pbrulott...I am Canadian P157, also did not have a test drive. Maybe we should go to Toronto to test drive the model S.

TeslaTap.com | 21 novembre 2012

please. I'm better off cancelling my reservation and waiting for next gen prius (65+MPG) at this rate.

I’m surprise people still bother to think the Tesla is comparable to a Prius. While I’m sure the Prius is a fine car it is not close to the Tesla in style, comfort, features, luxury, environmental benefit and more! I guess they think a Mercedes S-Class ($100K) is just a gussied up Kio Rio ($14K) with an extra feature or two. They both have 4 wheels and can get you around town.

As a reservation holder for 3.5 years, Tesla hasn’t increased the price since I signed up. Since they are holding the price for reservation holders, and deliveries out to June or later, that means the price will be the same for more than 4 years. That’s rather impressive, as I can’t think of any other car that’s kept the same price for 4 years unless they drop off features and/or quality.

I’m surprised no one has pointed out the benefit of a price increase. For owners and all us reservation holders, it means the resale value will jumped up! I have no plans to sell my Model-S when it arrives, but it’s nice to know I got a good deal. Helping the bottom line is also good for Tesla, but also great for all Tesla car owners, as a stronger company helps us all.

So I say raise the price – Tesla has a year’s backlog and all the car magazines are saying it’s the best car you can buy. Seems like a smart move to me.

TeslaTap.com | 21 novembre 2012

That first line in my prior post was supposed to be marked as quote from a prior poster. I guess the HTML quote tags don't actually work :(.

pbrulott | 21 novembre 2012

Stephen,

I am planning on doing a business trip in the next 2-3 weeks to Toronto and will absolutely pass by Yorkdale and reserve a test drive.

If ever that doesn't work, I'm in. thanks for offering. will let you know

pbrulott | 21 novembre 2012

forgot to put my email address: pbrulott1@gmail.com

danielccc | 21 novembre 2012

@tesla.mrspaghetti,

It's obvious that the reservation rate will spike before the cutoff period and then drop afterwards. Who is going to order one day or one week after the price increase cutoff date? Nobody with a pulse.

I don't mean that sales will suffer on average. But the numbers will gyrate and I can already picture the naysayers claiming that Tesla is losing sales by doing sequential month comparisons.

As for the reason? I'm guessing their financial model needs to keep ASP to a certain point and the average configuration so far results in a lower ASP than that. Meanwhile demand is strong and a second objective is for their backlog to decrease rather than grow.

This also tells me that they are not going to use this demand to push quantity significantly above 20,000 cars in 2013. They are opting for revenue from price, not volume.

And that makes sense in the short run. It lowers the risk that they would overshoot volume and start accumulating inventory. Tesla cannot afford that, and discounts to move product would be a big negative to their premium image.

riceuguy | 21 novembre 2012

@Dahtye, reservation holders don't have anything to worry about IF they take delivery as planned. Since my car is likely to be ready well before my current lease runs out and I may need to defer, I don't think I get to not worry!

dahtye | 21 novembre 2012

@riceuguy, you are absolutely right. Those who defer or take too long to configure will lose out. I have a few friends who are in that situation - one just bought a house and wants to defer about 6 to 12 months to ease the burden and the other is in a 2 year least on an Active-E BMW electric vehicle - he has about 14 months to go. But I guess TM has to draw the line somewhere.

ddruz | 22 novembre 2012

I wonder if the price increase will be primarily to include the service plan with the car price so that it is no longer a required purchase to maintain warranty.

Brian H | 22 novembre 2012

" an existing reservation prior to the effective date of the price increase and who also configures their car and finalizes their order within a fair, predefined timeframe." Sounds like you don't get to defer without limit, or for even for very long. So perhaps we'll see more people offering to swap places in line. (I believe I saw someone saying that was now permitted, but I'm not sure.)

Vawlkus | 22 novembre 2012

I actually wonder if this is for all three models. Think about it: Tesla has a good grasp on the 85 kwh packs now, but maybe they're running into issues with the two smaller packs. We've known from the start that each pack would be different in some way, and it's largely the most expensive part of the car. Maybe Panasonic is putting the price on their cells up or something.

It's WAY too soon to do much speculating, but I do appreciate the heads up from Tesla. Now if only I'd made a few choices differently, I'd be able to reserve an S before *sigh*

Erik M. | 22 novembre 2012

" an existing reservation prior to the effective date of the price increase and who also configures their car and finalizes their order within a fair, predefined timeframe."

Does this mean there will have to be two versions of the design studio available for a while: one version with pricing/packaging for existing, and a different version for new reservation holders? May get confusing...

Chris25 | 22 novembre 2012

Every year automakers change the prices for next years model. Some go up, some go down. Good chance it will just be a economic price adjustment for the 2014 year. They already have 2013 booked. You can't honor reservations too far out or you put economics at risk.

Brian H | 22 novembre 2012

Erik;
Yes, I think it means that whenever you get your notification the the car can be "finalized", you get the usual 30 days, or thereabouts, to do so at existing (current, pre-Dec.2012) prices, the prices that obtained when you reserved. The same will apply to all who reserve before the hike date.

The software may have two versions; based on your ID/account you will see the one that applies.

I'm sure many will want to see both, so they can decide whether the "hit" for deferring or waiting to reserve is worth it, though.

DouglasR | 22 novembre 2012

Brian, you would be able to see both simply by starting a new design (as opposed to modifying your existing one).

Brian H | 22 novembre 2012

DR;
Should work.

JoeFee | 22 novembre 2012

The price increase is bad PR now but needed for the “base” model in Q3 2013. All of the Sig’s paid a “Sig tax" of 3.5 to 8K for their cars (depending on options we would have ordered if we had a choice). Now that I have my Sig-P85, I feel it was worth every penny…over 3x what I payed for my last car!

IMHO the base car is worth 65K and the P85 is worth 130K before rebates (redsig @ TMC just got 140K for his Sig-P85 resale on the secondary market …. before the MT car of the yr award). TSLA stock will benefit from the extra cash so we all benefit by having a stronger company for the long run….you do want those firmware updates right? If it breaks your budget then hold off for a Gen III @ 30K.

JoeFee | 22 novembre 2012

BTY…it would take 200K to get me to sell mine…forget-about-it :)

KevinR.co.us | 23 novembre 2012

FYI, here's an interesting take on the price increase and the stock price...

http://blogs.barrons.com/techtraderdaily/2012/11/23/tsla-buying-opp-on-p...