Price increases are common in the automotive industry so the recent $2,500 jump in prices for upcoming Tesla Model S vehicles wasn't exactly a surprise. Still, most vehicle MSRPs don't go up two-and-a-half grand, and so to explain why the price for the award-winning electric vehicle was so "high," George Blankenship, Tesla vice president of worldwide sales and ownership experience, has written on the company blog with numbers and details.

For example, Blankenship says that inflation has gone up 8.75 percent since Tesla first mentioned a $57,400 base price for the Model S in 2009. Compared to a flat 8.75 price increase (which would be $5,000), the $2,500 jump could be seen as relatively reasonable. Even more reasonable is that anyone on the fence about a Model S can still order through the end of the year and get the current, $57,400 base price. There are other changes (heated front seats will now be standard, for example), which you can read about here, so you're not just getting charged more.

There are also new warranty and battery replacement costs and options. On top of the included four-year, 50,000-mile warranty, you can buy a four-year, 50,000-mile extension for $2,500. You can also buy a extension to the prepaid Tesla Ranger program. Details on how, exactly, these extensions will work (e.g., what is the deadline to buy them?), have not been announced.

Perhaps the biggest surprises are the low costs for replacement batteries: $8,000 for the 40-kWh battery, $10,000 for the 60-kWh and $12,000 for the 85-kWh pack. It sounds like you will need to buy this "warranty" soon, and then it "will provide you a new battery anytime after the end of the eighth year." We are curious to learn more about the math and expected rate of uptake on this, because it would be flatly shocking that an 85-kWh pack costs just $12,000, even eight years from now.

Canadians, your price increase for the Model S is $2,600 and Europeans will learn "very soon" what their new, higher costs will be. Actually, since Tesla has never announced the European Model S price, Tesla 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."


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    • 1 Second Ago
  • 62 Comments
      Giza Plateau
      • 2 Years Ago
      The battery price is cheap. That's below cost. But if you plan on going bankrupt before anyone will attempt to buy a new battery then it doesn't matter what the price is : )
        Val
        • 2 Years Ago
        @Giza Plateau
        So they plan to go bankrupt? Because they can never be profitable or what? So why spend a billion dollars in building a factory and designing a whole car, then bothering to sell said car to people, if they could have just gone bankrupt 3 years ago, and taken all the deposits of customers along with the 400m government loan? Something doesn't add up in your mumblings.
          Grendal
          • 2 Years Ago
          @Val
          And why only raise your price $2500 if you need more. They are definitely on track for profitability. Some people prefer to be cynical though.
        JakeY
        • 2 Years Ago
        @Giza Plateau
        It's not really "below cost" when you consider they are getting an 8 year $12k no interest loan from you (using the 85kWh version as an example), plus they get to keep your used battery (which will still hold about 60kWh after 8 years) to use for their SolarCity energy storage program. They are already doing so with old Roadster packs and the terms of this battery replacement program looks to be the same (except the pricing is even lower). Considering the current speed of battery improvement (about 7-8% per year), in 8 years the battery price will be roughly halved. So Tesla's current price of $400/kWh retail will go down to about $200/kWh retail. An 85kWh pack would cost $17k retail, 60kWh pack $12k retail . So Tesla's giving you a $5k discount now and in the meantime getting an interest free $12k loan, and a used pack with ~60kWh capacity left (worth some percentage less than a new pack at $12k retail).
      Pandabear
      • 2 Years Ago
      It is possibly because they can get the old battery, recondition / swap some cells, and use it for other warranty replacement if any is needed, so their cost is probably not that bad even if they sell you a replacement for $8000 per 40kWh. Another is probably to prop up the volume so they would get a better price overall.
      Grendal
      • 2 Years Ago
      "Its peace of mind based on a delusion." That pretty much describes insurance accurately. There are so many things in life that you can analyze just like you're analyzing insurance. How about gambling? Why do people do it? Why do people buy a new car instead of a used one? They will absolutely save money by buying a used car over a new one. I hear you, DaveMart. Some people will want to buy this whether it is practical or not. Some people like a safety net whether it is illusionary or not.
      DaveMart
      • 2 Years Ago
      Thinking about this a bit more, Elon Musk is making people a spectacularly bad offer 'between friends'. Since there is clearly a very much non-zero risk of the company not being around to actually supply the battery pack after 8 years, you are in effect becoming a venture capitalist to the tune of up to $12,000. At a normal discount rate of around 5% the battery will still have cost you for the pack with a nominal cost of $12,000 perhaps $18,000 counting forgone interest, but of course venture capital which is what this is has a much higher interest rate, at least 10% and more realistically 15% for this highly speculative investment. Its a good deal for Tesla, financing their company at way below venture capital rates, and a lousy one for people parting with their money with no security.
        purrpullberra
        • 2 Years Ago
        @DaveMart
        You're assuming all these potential buyers (of insurance) have any desire to do venture capital investing. Most don't. Especially those who are likely to pay for 'peace of mind' insurance. I believe your argument falls apart there. I do agree that its a 'stupid' loan to Tesla IF one wants to see the glass as half empty. But it's also right to view it as Grendal states it, a low cost add on for total peace of mind. Failure is possible but very remotely now. It depends on the customer not on what we argue no matter how correct the logic.
          DaveMart
          • 2 Years Ago
          @purrpullberra
          Val: There really is one born every minute... An 8 year unsecured loan? ha ha ha!
          Val
          • 2 Years Ago
          @purrpullberra
          you may call the tesla customers fools as much as you want, that won't prevent them from paying if they want to. For them, the question of tesla surviving in the next 8 years is non-existent. You seem not only worried about the company survival, as though you own a majority stake in it, but now also for the people who are willing to pay 12k for a future battery replacement, as though those people are your debtors and won't be able to pay you in 8 years if they give their money to tesla and it folds. Why not stop worrying whether this is raising venture capital or not? It's not like the taxpayer is on the hook for this one, even if they go bankrupt tomorrow, they have enough assets to repay the 400 million debt to the government, and this is the only loan backed by the taxpayer. Are you simply pissed that you didn't come up with such a scheme yourself? Or that you would never find the customers tesla has that are more than willing to pay to see the company succeed? At least a small part of them. They paid for the roadster, they got shares, now they can pay even more knowing that this benefits tesla. Ah, yes, you are morally obliged to whine, because this is a ripoff... I think buying a ticket for one of those cruise ships that go around the world is a ripoff, or buying a rolls-royce for that matter, but people are free to do with their money whatever they want.
          DaveMart
          • 2 Years Ago
          @purrpullberra
          That is precisely the point. Although they don't realise it, but giving the company money now in the hope that the company will still be around to honour the battery replacement they are effectively becoming venture capitalists, only without the high rate of return that you normally get if the company is successful. You will loose your money just as much as the venture capitalist if the company folds.
          Val
          • 2 Years Ago
          @purrpullberra
          The people that are buying those early models and have demanded such a battery replacement have NO DOUBT about the future of the company. Ergo, they may be willing to part with up to 12k. Think about it, you are talking about resale value, what will be the resale value of a tesla model S in 8 years, if tesla folds in the meantime? You have a car that has a battery below 80% charge, maybe with some other issues, mechanical or electronic, that NO OTHER company can take care of. It's not like you can buy a battery from a third party. How much money do you think you will get for a car that can't be serviced? You will lose money whether you bought a prepaid pack or not, maybe equal to the $12k. So people who don't believe the company will survive are not buying the car, simple as that. The whole idea of the roadster was that wealthy people will be venture capitalists in a way, and they got a sports car in return. If you think there are doubts now if tesla will survive, after tha awards and the complete ramp up, imagine what was the thinking when they started taking money for the roadster.
        Grendal
        • 2 Years Ago
        @DaveMart
        It's insurance. Insurance is never a good buy unless you suddenly get a really bad illness. It's a bet that generates piece of mind. And just like any bet - the house always wins. No one is forcing someone to buy this, so you don't have to participate if you don't want to. How is this not a really smart business move on the part of Tesla?
        DaveMart
        • 2 Years Ago
        @DaveMart
        BTW the assumed cost of batteries in 2020 counting the interest is at least $200kwh, which is not so wonderfully low.
      DaveMart
      • 2 Years Ago
      Nah. I used to work in insurance, and although you can never be perfectly safe, the numbers are nothing like this is. If you buy flood insurance, the company not only has lots of assets to spread the risk, it also lays it off to other companies, so you are not dependent on one company surviving, at any rate in the UK. This is totally different, and is similar to paying a furniture company to deliver to you, and there are a lot of people who have lost their money on that, as they are unsecured creditors, with just about everyone having priority over them, but no-one does that over 8 years. This is a complete, not quite scam job, but certainly very, very dodgy dealing.
      DaveMart
      • 2 Years Ago
      $141kwh? What the heck??
      EVnerdGene
      • 2 Years Ago
      there is no relationship between cost and what you sell it for If there was, and I-phone 5 would would sell for $37.23 with a 20% profit.
      Grendal
      • 2 Years Ago
      This is just an incredibly smart move for Tesla. It gets them more money up front, relieves battery anxiety, proves that battery prices are dropping, and batteries and packs are still usable even after their use in the cars.
      purrpullberra
      • 2 Years Ago
      My two cents on this story are, This is almost 100% due to the Tesla forums. Those folks are almost too involved in pressuring Tesla to do the right thing, at every turn. They can pick apart plans and see the issues in a heartbeat and then quickly tell Tesla where they effed up. It is constant pressure under fire, they manage expectations and hold hands of the timid and respond directly to customers literally every day. This is a direct response to the proven-loud, sizable portion of the customers who * will pay this cost for this peace of mind * So obviously Tesla would be stupid to not offer it. It will make no sense to many buyers. Some will scoff and laugh. But some will buy. That's all this is about. It's not *just* to 'make more money'. They are accommodating loyal customers by offering a service like no other. Nice and responsive like. Again, I think people should be duly impressed. And probably pass on the insurance. :-)
      BipDBo
      • 2 Years Ago
      The very low battery swap price may be an issue of core charge. There may be a much bigger price for a buyer who was making their own cutom car and diidn't have a "core" to exchange. Tesla is may aslo be setting the price artificially low to dispell potential worries from customers over reliability, counting on not having to make a significant number of replacement swaps in the near future. They are also counting on these swaps to happen mostly later when hopefully cell price is a bit lower.
        Grendal
        • 2 Years Ago
        @BipDBo
        The battery replacement will happen after 8 years of ownership. Everything else is covered under the battery warranty. It's unbelievably inexpensive insurance for the future of your battery pack if you're willing to spend the extra up front.
          DaveMart
          • 2 Years Ago
          @Grendal
          See above. It is unbelievably expensive 'insurance' which offers little surety.
      DaveMart
      • 2 Years Ago
      BTW other aspects of what Tesla are offering are no rip off, but astonishing value. This offer to be a poorly rewarded venture capitalist should be rejected with contempt though.
      purrpullberra
      • 2 Years Ago
      And Grendal, just reminding you that the only thing you can do today to ensure you get a genIII car ASAP is to buy a modelS. :-) It's too big for us too but I'm not waiting. Due to previous sketchy health issues I'm closer to 'live for today' than I am 'plan for 30 years of retirement'. So I takes my shots when I can.
        Grendal
        • 2 Years Ago
        @purrpullberra
        I'm sorry to hear about the health issues. I hear you about buying the Model S now. Trust me that it's a difficult battle I fight with myself not to jump in and get one. Instead, I've bought a lot (for me) of Tesla stock, which has gone up nicely this past week, as my support of Tesla for now. If in two years, the Gen III is delayed or it looks like the government is going to drop the $7500 tax credit, I may jump in a little early and grab an S. I have a love for my cars and I've only owned four in my life. Between the four I've driven over 600K miles and that includes my current one that is just about to hit 100K on the odometer. So, for me, it's practically a new car. Back in my "starving artist" and "rogue businessman" days I was much more of the "live for today" without a safety net kind of guy. Being married changed that and I do a lot of long term strategic thinking with insurance and retirement savings built into the equation. However, a chancy, impractical, and expensive EV is definitely in my future. That's my story with most of the sordid details left out. I hope I didn't bore you. :)
          EVnerdGene
          • 2 Years Ago
          @Grendal
          @$5 a pack, that's 5.14 packs per day. Talking about ashtray breath.
          Marcopolo
          • 2 Years Ago
          @Grendal
          @ Grendal "starving artist" and "rogue businessman" I knew there was something I liked about you ! :) Ah yes, families and responsibilities ! They do indeed change your sense of priorities! But sometimes an expensive purchase can prove a strong motivation to strive harder and earn more (and enjoy a faster treadmill) ! If you bought a Model S, ( $90k) over the cars life time, it's only $ 180 dollars a week, less than some people spend on cigarettes ! The savings on petrol, maintenance and inflation should take care of the interest and running costs. The Tesla Model S may be just the incentive you need to revitalize that creative spirit ? :) Indeed, maybe, you owe it to yourself, and your family to buy this lifestyle statement ! You may be depriving yourself, and neglecting to set an example to your loves ones for the future. Now, about the colour you prefer.........:)
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