Tesla cuts Model S reservation price in half, keeps Model X at $5k

Official
Jul 8, 2013

2012 Tesla Model S

Danny King

Consider it Tesla Motors' hoi-polloi concession, sort of. The California-based maker of the all-electric Model S has cut the reservation price on the sedan in half. That means, while the starting price on the Model S remains a still-substantial $62,400 (and it can jump up pretty quickly from there to north of $100,000 with various goodies), folks can at least get in line for one for $2,500.

While Tesla doesn't reveal monthly sales figures, the company last reported that sales were more than expected, with first-quarter deliveries at about 4,900 units. Some analysts are now estimating that the company sold almost 9,000 Model S vehicles in the first half of 2013, but we'll have to wait until the next SEC filing is due to know for sure.

As for the upcoming Model X SUV. Tesla is keeping the $5,000 reservation price for that one.

Tesla Model S Information

34 Comments

purrpullberra
- 1 Year Ago
Inevitable move. But is there anything to learn? Would Tesla do this just to drum up sales? Doubtful since the amount required to buy a Tesla is the same it just changes how much is paid at what time, plus lease payments would go up. So it will allow some folks to "buy" who couldn't quite do it before but now can. I think it's about how large the barrier to purchase is and now it is very "do-able" to get a Tesla. $2500 is pretty easy to come by if you can afford a ModelS. 5k is harder, like wife-freaking-out harder. The lease payments come later and can be offset by fuel savings. The deposit is the obstacle. So it's good for that reason. But is it good they did this now? It seems to be a sign that Tesla are booking through the order backlog. They know how ticked off people got about the wait and especially about the many different times for 'delivery' so I doubt they would do this to just make the wait as long as it has been lately. I just don't see how Tesla is helped by building up a waiting list again right when overseas deliveries are starting. I would bet that this is just a sign that Tesla doesn't need the cash before delivery anymore. Nothing more. But what about Tesla replacing Oracle on the Nasdaq?!?!? Damn, that mean Tesla done hit it big time !! SO MANY investors HAVE to buy it now !!!!! :-) Stock will be at $200 by X-mas. Remember I predicted $100 by July 1 when it was under $40. Damn Damn DAMN !!!!
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- Rotation
  
  1 Year Ago
  @purrpullberra
  Yes, I assure you it is to drum up sales. There is no other reason to do it. You say it's to "lower the barrier to purchase". That's the same as to drum up sales. There is no actual lease for a Tesla Model S. So I'm not sure why you talk about lease payments. Their "lease" is an option to sell the car back after 39 months if you finance through Wells Fargo.
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Giza Plateau
- 1 Year Ago
Are reservations running out..
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- Grendal
  
  1 Year Ago
  @Giza Plateau
  Evidence seems to disagree with you, Dan. But, then again, that hasn't stopped your pessimism in the past.
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- Rotation
  
  1 Year Ago
  @Giza Plateau
  Yes. But they haven't run out yet and if Tesla pays their cards right they won't run out for a while longer, maybe not before the Model X comes out.
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- purrpullberra
  
  1 Year Ago
  @Giza Plateau
  Nope. Tesla are just rolling in the dough thanks to (brilliant people) the idiots who bet against them. They just don't need the cash upfront anymore. Like all fine purveyors.... "Yeah, yeah, I'll get your crack. Just gimme 5 grand first. I get you all the crack you need." Tesla - 10,000 addicts and growing !!! Price of entry cut in half !
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- ElectricAvenue
  
  1 Year Ago
  @Giza Plateau
  There is still a backlog. The question is whether the backlog is small enough that they are in danger of completely catching up at the current production rate. No one outside Tesla can know for sure, but the evidence suggests that the answer is "no". There is a large backlog of European orders that they are only starting on now. That will eat up production capacity so that the US backlog will start growing again. The other point to consider is that wait time reports are anecdotal. Unless you have full information about all orders you can't know what the true backlog is. One person might order an 85kWh model and get it quickly, while another orders a 60 kWh and it takes longer. Or vice versa. It may also depend on geography. I gather that they batch production runs and deliveries. As you would expect.
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  - Rotation
    
    1 Year Ago
    
    @ElectricAvenue
    If the backlogs are different for two models, then count them differently, but you don't say that there is a backlog just because one config has a backlog. If I have to order a Cadillac CTS-V wagon in order to get one, does that mean there's backlog on the Cadillac CTS (after 5 years on the market)? No just on one config. I don't think making two different battery configs requires any changeover in the factory. Some options might trigger longer waits though if some parts are in short supply.
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chambo622
- 1 Year Ago
Makes sense. Tesla doesn't need that much cash coming in before each sale now that they are producing in volume. Keeping it at $2,500 makes sure people pre-ordering are serious about the car, but might open the door to a few more people who are a bit antsy about laying down cash up-front.
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mehul_kamdar
- 1 Year Ago
While Tesla might hold their sales figures close to their chests, I have been seeing more and more of their cars on the Chicago roads over the past week or so. I drive a fairly long drive from the Northern suburbs into the city, and the terrible traffic does leave me with a lot of time to look at other drivers who remain stuck on our "expressways" as they crawl for up to 2 hours on the I-90 into the city during rush hour everyday, and until the past week, I had only seen one Model S on the streets last winter. It will be interesting to see how many more they sell in a place that does have some cold weather challenges for five months every year. Of course, I wish them - and every other manufacturer of electric, plug in hybrid and fuel efficient cars - all the very best.
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- sdn
  
  1 Year Ago
  @mehul_kamdar
  Same in Seattle - I see a Tesla Model S almost every day I drive now.
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- SteveM
  
  1 Year Ago
  @mehul_kamdar
  Yep, in the DC area and its surrounds, I'm now seeing different Model S's nearly every day.
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- Grendal
  
  1 Year Ago
  @mehul_kamdar
  I haven't seen one yet in New Mexico.
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Rotation
- 1 Year Ago
I don't agree Grendal. Their sales are already remarkable for such an expensive car, I don't think more on the road is going to keep them outselling other $90K cars 3:1 forever.
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Rotation
- 1 Year Ago
A friend just ordered one last week. Quoted delivery time was 4 weeks and quite likely is actually less than that. Seems like Tesla is finally done using up the pent up demand in the US. Of course, they still are just getting into the world market with this model and they have the Model X on the way not too far off. ABG: The starting price is $69.9K.
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- raktmn
  
  1 Year Ago
  @Rotation
  Everyone who knows anything about Tesla's already knows that the $62,400 starting price that Tesla advertises on their site is "After $7,500 Federal Tax Credit". There is no need to repeat it in every article, or to be anal retentive about it. By far the majority of buyers will have enough taxes to qualify for the $7,500 rebate, so $62,400 is a very typical price buyers will pay. Quoting a higher net price that very few buyers will actually pay is actually LESS accurate, and would be the wrong number to list by default.
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  - Rotation
    
    1 Year Ago
    
    @raktmn
    Yes, Tesla advertises it on their site as after tax credit. AB left this portion off. Yes, there is need to repeat it or else you are giving out poor quality information. The problem with giving this price and not noting it is after rebate is that people then don't know if the price they will pay is $62.4K or $54.9K. So if an outlet is going to give the already rebated price, then it should say so, as Tesla does.
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  - Grendal
    
    1 Year Ago
    
    @raktmn
    There is plenty of articles that state the car is $100K. In fact, most of them say that. You are, of course, correct though.
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JakeY
- 1 Year Ago
From the forums, the reason they are doing it is to reduce credit card fees, make the transaction easier to process, and to low the barrier to entry. Model S wait times have reduced enough that they don't really need that big of a deposit.
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Anonymous
- 1 Year Ago
Elon Musk said during the May 9th conference call that they would prefer to eliminate the reservation fee altogether because most people pay for it with a credit card. Tesla pays (approx) 3% of $5000 to Mastercard/Visa... Tesla doesn't receive it. Before, Tesla would only get $4850 of the $5000 you pay. Now they only lose $75 because the reservation fee is half the size it was before. THAT is why the reservation fee is being lowered. Money is pretty tight over there at Tesla, if you follow the user forums the company is trimming bits off the car left, right and center. Fog lights, chrome strips, and things like the 21" wheel/tire package going UP in price by $1000 recently.
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Grendal
- 1 Year Ago
And probably not after that either. The more cars on the road seems to create that much more demand. People are just now beginning to become aware that Tesla even exists. They haven't even shipped to Europe or the Far East yet so there is plenty of demand still to go for the rest of the world.
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kEiThZ
- 1 Year Ago
Can't wait to see how the shorts and naysayers spin this.
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- purrpullberra
  
  1 Year Ago
  @kEiThZ
  "Tesla admit car only worth half as much!"
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masteraq
- 1 Year Ago
I think dropping the 40kWh base model was a mistake. It's true that only 4% of sales were the base model, but that group was the early adopters who lean towards the top end models. As volume grows, many more of the sales would have been the base model. A lot of base model buyers otherwise cannot afford a Tesla and will go elsewhere.
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- kEiThZ
  
  1 Year Ago
  @masteraq
  Disagree. It's a burden to carry a model that's not selling. And by freeing up resources, it let's Tesla work on something else. Those S40 buyers will probably buy a better spec'd Gen III. Good for Tesla. Good for them.
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- Giza Plateau
  
  1 Year Ago
  @masteraq
  masteraq, yes and no. I think you are quite right that they loose a lot of sales (and credibility) without the entry model but if you look at the real reason they dropped it it becomes clearer that they were forced to do it. You see, with all the overpriced options the cars end up costing 100k$ average. That's what they are selling for and they are still losing big money despite 5000 per quarter sales. So how do you think selling almost the same car for 57k$ would work out for them... Tesla said it was too few to bother but when is it ever good business to cut your market by 4%? and it's not like putting fewer batteries in the pack is difficult to develop. And the 4% could just be the early days where the early adopters with unlimited funds who are not afraid to take a chance on a risky business, buy a car. Are they going to buy the cheapest? of course not. So the real percentage could be 20% or more as the market develops and the company looks less risky. But that would devastate their economy. They can't afford to sell them at that price. The real reason for the cancellation is that they are losing big money on the cars... And by my estimation of the situation it is the unforgivable sin of 2.1ton that's weighing them down. When you build a barge, all the parts to move it becomes that much more expensive. And weight begets weight.
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  - m_2012
    
    1 Year Ago
    
    @Giza Plateau
    I am more convinced everyday that you are just an idiot. They had no demand for the 40KW car, so they are not building any. People were willing to pay MORE for MORE car, simple. Unlike the bloated manufacturers you are used to, Tesla can actually make a decision and go with it. No demand, no build = done. Since they have a waiting list for people that are willing to pay $100K, it sounds like the car is under-priced to me. Quit with the 2.1 ton delusion. You have already been proven wrong soooo many times. The car is safe, fast, efficient, and fun. Name an ICE car that gets 100MPG, 0-60 in 4 seconds, and puts out 0 emissions. Could it be lighter (and smaller) to return better figures? Sure, but whats the point when you have such a better product than EVERYONE else.
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  - paulwesterberg
    
    1 Year Ago
    
    @Giza Plateau
    Good thing the car has very good aerodynamics.
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  - Grendal
    
    1 Year Ago
    
    @Giza Plateau
    I think Tesla decided that the low end Model S doesn't justify itself. In another 2 to 4 years then the Gen III will fill the low end Model S's position in sales. You still have to spend a lot of money to have the 40 kWh car be qualified for the streets. I'm sure someone did the math and it just wasn't worth the extra funds it would have cost. When you are limited to making 25K to 30K cars, you should focus on the ones make the most profit and promote the company the best.
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  - Ele Truk
    
    1 Year Ago
    
    @Giza Plateau
    "they are losing big money on the cars..." Care to share your source?
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- purrpullberra
  
  1 Year Ago
  @masteraq
  I agree with you that it was a mistake to flat-out drop the 40. But the reasons they did are sensible. How's that? Well everyone's already covered it plus they can always bring it back. But that's what they should've done all along, postpone further 40kWh production until you see demand for it, like starting sales in Europe and Hong Kong. It may make more sense to build and sell them in those places only, for more than the 50k they were charging here. The range is so much less an issue in those places that the 40 would've been much higher than the 4% take rate. So, yeah, they screwed a few people who were willing to stretch for the base version but at least very few people were affected.
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- Tysto
  
  1 Year Ago
  @masteraq
  They can always offer it again later, if sales of the 60 and 85 slow down. In the meantime, why build the cheaper version when you can sell all you can build if the more profitable one?
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ElectricAvenue
- 1 Year Ago
This is very old "news". As in, almost two months ago! http://www.teslamotorsclub.com/showthread.php/16914-Reservation-Deposit-Lowered-to-2500-USD
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