Tesla Won’t Discount Model S For Bulk Purchases

3 years ago by Eric Loveday 61

Buy 1 Or 100 - The Price Remains The Same

Buy 1 Or 100 – The Price Remains The Same

But What If I Want To Buy 1,000?  Still No Price Change?

But What If I Want To Buy 1,000? Still No Price Change?

Perhaps the UK government won’t be taking deliveries of the Tesla Model S after all.

Word is that Tesla Motors has refused to offer any discounts on the Model S for bulk purchases.  This includes fleet buys and leasing companies interested in the Model S.

The industry norm is to offer discounts when purchases are made in volume, but Tesla apparently will not follow this norm.

As Business Car reports:

“Tesla will not be offering discounts or bulk deals to fleets or leasing companies on its Model S.”

“The stance from the electric vehicle manufacturer echoes budget brand Dacia’s approach at the other end of the scale. Tesla is looking to attract SME business, as well as one-off purchases the likes of architects and dentists.”

However, Tesla is trying to work out some sort of leasing deal in the UK:

“The electric vehicle manufacturer did say it is currently in talks with all the major leasing companies to work out how customers will be able to lease a Model S.”

“Georg Ell, Tesla Motors UK and Ireland country director, told BusinessCar it is also working with residual value experts Glass’s and Cap to help set an RV for the car.”

“He said: “[The RV setters] are confused by some of the economics of the Model S and we’re working with educating them.”

So, no bulk-buy discounts, but possibly leasing in the future in the UK.

Source: Business Car

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61 responses to "Tesla Won’t Discount Model S For Bulk Purchases"

  1. DaveMart says:

    ‘“He said: “[The RV setters] are confused by some of the economics of the Model S and we’re working with educating them.”’

    I bet Glass’s and cap are thrilled to be told they don’t know their job.

    That they obviously differ from the values that Tesla want them to use is not necessarily proof of their incompetence.

    In spite of their often marvellous engineering I think Tesla will come unstuck at some stage due to attitudes like that.

    1. Andrew K says:

      Agreed they probably don’t enjoy being told what to do, but it would seem Tesla is trying to gain a reputation for solid resale values. They are probably arguing, rightly in my opinion, that the Tesla can’t be compared to the Leaf because the battery has a longer projected life span, and that the Model S is different from the A8/7series/S-class because of the dramatically reduced maintenance costs, thus the lack of used german luxury car problems.

      to explain those two points:

      Leaf goes 70-85miles per cycle. limited cycles per battery, say for the sake of illustration 1000 cycles (average laptop/phone). That means the Leaf will go ~80,000miles before 75% degradation. And with a Leaf 75% is only 63miles, that will be a serious incentive to upgrade making the cars worth significantly less, very, very quickly. Compare this to the Model S 85kw, 265epa Miles ~265,000 miles until 75% battery. At which point the Model S can still go ~195 miles. Meaning it can still go from supercharger to supercharger and drive like a normal car. That removes a lot of the projected cost if a battery replacement is going to happen when the car is 15-20 years old. Not 8 years old.

      Point two explained, The reason german executive saloons drop like rocks in price beyond the usual new shiner technology being available is the long term wear and tear costs. Almost every generation of BMW has some engine related hick-up, replacing the water pump religiously, or randomly blowing up VANOS units (vairable-valve timing system), and on and on. Point is, if these costs are ignored the car will become extremely unreliable and plummet in value. With the Model S, there is a significant reduction in scheduled repair costs, no coolant, no turbos, no oil lines to fix, no “all rubber hose replacements” which is very common on top-tier cars, reduction in brake use leading to longer rotor lifespan, and on and on.

      1. vdiv says:

        Just curious, if the Model S has so few things to wear out why is there a $600/year service plan?

        http://www.teslamotors.com/service#/service-plans

        The Model S does have coolant loops, pumps and radiators. There is also the assumption that if the battery cells are used less they will necessarily keep longer their capacity or specific power (i.e. that they do not wear out if just sitting around exposed to the elements).

        We shall see 🙂

      2. sven says:

        “Compare this to the Model S 85kw, 265epa Miles ~265,000 miles until 75% battery.”

        I thought Tesla chose a battery chemistry that was good for about 400 cycles, not 1,000 cycles, since such a large battery would need less cycles to travel 100,000 miles than a much smaller battery.

        1. Mint says:

          Panasonic claims that its batteries can do 3000 half-cycles (4.05V to 3.60V and back) at 50 deg C and still have over 85% capacity:
          http://ma.ecsdl.org/content/MA2011-02/17/1282.full.pdf

          The batteries should last a long time.

      3. DaveMart says:

        Tesla could argue the point without using such arrogant language.

        They will come unstuck big time if they try that in China and upset the wrong people.

  2. Rob Stark says:

    If you can pre-sell every vehicle you can make with deposit months ahead of actual production why would you discount?

    No discounts to Newport Convertible Engineering, Saleen, or the UK government.

    More evidence to those that scoff at the notion Tesla is supply constrained not demand constrained.

  3. ydnas7 says:

    Used Tesla model S-60 have extraordinarily strong residual values, but performance variants has much weaker residual values.

    look at the used Tesla for sale, typically there are no S-60, why, they sell fast, with a high residual. very different to other EVs.

    http://www.thecarconnection.com/inventory?make=tesla&model=model-s

    Glass’s and CAP have different ideas between themselves, but they have not experienced the high residual’s that base spec Tesla’s enjoy.

    1. Rob Stark says:

      Base models almost always have better residual values than well optioned and fully optioned vehicles.

      And only 20% of Model S are the 60 units.

    2. DaveMart says:

      Residual values in the US do not necessarily equate to residuals in the UK anyway.

      So far BEVS have not proved popular in the UK.
      If that continues to hold true it will not help residuals, and for UK streets the Tesla S is a hefty car to manoeuvre round.

      1. Spec9 says:

        Wow. I wonder how people manage to drive those Rolls Royces, Jaguars, Range Rovers, and Bentleys around. Maybe they don’t have those cars in the UK.

        1. Rick Danger says:

          They’re sure not owned by UK companies anymore. You know what always blew my mind? That the Brits would make all those 2 seat convertible sports cars when it rains all the time there, and that the roofs leaked like sieves on all of them. Go figure.

        2. Alonso Perez says:

          The thing is, most of those luxury cars are actually sold outside of the UK, in places like the US or the Middle East.

          The Model S is simply big in Europe. I have driven smaller cars than the S in Europe and had to navigate rather tight spots even then. Americans who have not spent time in Europe don’t really grasp urban conditions there. The Model S is huge and to many European drivers cars that size are simply out of the radar.

          The sweet spot for Tesla in Europe would be a top end Model III, with S features in a smaller package.

          1. Priusmaniac says:

            I just saw 2 model S in this 1 September morning traffic towards Brussels, they didn’t look that outsized compared to the other cars. It is a great to start the day with this nice view.

            1. Alonso Perez says:

              Europe is the land of the 500, the Clio, the Mini, and the Smart. Sure there are modern roads and streets all over the place, but there are also plenty of older areas with narrow streets and tiny parking spaces.

              In the UK a standard parking space is 2.4 x 4.8 meters. In the US it is 10 x 20 feet (3.05 X 6.10 meters). A “compact” parking space in the US is 8 x 18 feet (2.43 x 5.49 meters), still larger than the UK standard.

              It’s obviously possible to own and drive a Model S in Europe. I’m just saying it is perceived as a larger car than in the US and is beyond the size of car a lot of people would normally consider.

              Robert Llewellyn, who loves the Model S, expresses the feeling well in his latest Model S road trip “Fully Charged” video (http://www.youtube.com/watch?v=kSyDaKRMrFo): “It’s big, it’s much too big for me, I don’t need a car this big.”

            2. SeattleTeslaGuy says:

              The model S does not LOOK like a big car but it is. It’s fairly deceptive looking – check out the dimensions and you will see what I mean.

        3. jmac says:

          I was hitching rides in England a few years ago and a Bentley did an “auto-stop” for me.

          A rather large car, the Bentley….

          I don’t quite see the the argument that that the Model S is too large for English roads.

          There are numerous “streets” throughout Europe that are only passable by motorcycle or Moped. So what ?

          The English Motorways and German Autobahns can, however accomodate larger vehicles.

          The idea that the Model S will not work in Europe is troll drivel.

          1. KenZ says:

            I’m in the UK on a trip from the US right now, and leasing a car. It’s a SUPER small Fiat 500, (two door tin box), and I’m actually pretty darn glad it’s this small. Off the motorways, I’ve run into a ridiculous number of super tight situations where I would not have been comfortable in my regular US-sized vehicle. It doesn’t mean it can’t be done, but the delivery vans here are thinner than US vans for a reason.

          2. DaveMart says:

            So the Model S is selling so well in Europe because it is so well adapted to conditions there?

            Ex Norway with its huge incentives sales are poor to awful, although of course that is down allegedly to ‘supply problems’

            It is simply weird that that hits places like Germany which has no incentives so hard, which subsidy rich Norway so mysteriously is unaffected.

            If you believe that I have a bridge to sell you.
            You can pay now but may have to wait a while for supply to catch up with the demand we have.

            1. Jouni Valkonen says:

              Dave, you still continue that ignorant nonsense and anti-Tesla campaign. Tesla S demand in Germany is about 200 to 300 cars per week. And Tesla X demand is another 200 to 300 cars per week. But of course according to your logic, the model X demand in Germany is zero as Tesla did not sell not even single X in Germany in August 2014.

              1. DaveMart says:

                I’m not sure what planet the Germany you are talking about which has 2-300 Tesla S demand a week is, but it sure isn’t this one.

                In the year to date Tesla have sold 472 Model S cars in Germany, including a stonking 26 in July:
                http://ev-sales.blogspot.co.uk/2014/08/germany-july-2014.html

                How in the world even you manage to make that 2-300 a week beggars belief.

                Oh, of course, its all ‘demand limited’.

                That has got the advantage that demand is whatever Musk says it is, whereas sales are much more difficult to finesse.

                I can’t be bothered with that level of nonsense, and so will save the energy of responding to the rest of your bien penses in this thread.

                1. Alonso Perez says:

                  Due to batching effects from the low volume, monthly figures are not significant for Tesla at this point. They are too noisy.

                  Having said that, it is clear that the car is not a hit in Germany. This should not be entirely a surprise, given that it is the home of BMW, Audi, and Daimler.

                  Still, I expected better given the popularity of the Greens there and the money Germany has spent on renewables. I think a part of the problem is that the large luxury segment is probably made up of conservative buyers to whom Tesla is a science experiment, not a car built with solid German engineering.

                  1. Big Solar says:

                    “Solid” German engineering. Thats hilarious!

        4. Dr. Kenneth Noisewater says:

          Company cars are subject to Benefit In Kind tax in the UK….. Except for EVs.

          EVs are also exempt from congestion charges, as well as eligible for other benefits. When the UK Supercharger network builds out a bit more, Tesla will be a great option for Brits

        5. DaveMart says:

          Please point me to where I said that no one in the UK buys bug cars.

          I said that to some extent resale values might be impacted by the size.

          Have you seen the depreciation on some of the cars you mention?

          1. DaveMart says:

            The certainly don’t buy many bug cars, anyway!
            No one buys VW Beetles these days!

    3. Andrew K says:

      It is very common to see what was once a $10-20k options price delta between cars, evaporate to a $1-2,000 delta in only 2 years. Options are just more things to go wrong and the average used car buyer doesn’t care very much about options.

    4. See Through says:

      ydnas7,
      That car you linked to, looks like a new car to me. It oly has 392 miles. Who didn’t like their Model S at all, and is selling it after just 392 miles?

      1. Big Solar says:

        Who said they didnt like it? I loved mine but sold it after 5000 miles for a 2000$ profit. Maybe they did the same? Show me another car made in this country that you can do that with, add in ev tax incentives too if you want even if they are not there.

  4. GeorgeS says:

    It’s a tough call.

    The leasing companies have to get it right.

    If they set a high RV it helps with selling the leases.

    but if they set it higher than it turns out they get screwed at the end of the lease.

    I think a lot of leasing companies like Ally (Volt) and whatever company leases the Leaf are sorry they set such a high RV on the lease to entice lease buyers because now they are stuck w/ a bunch of cars that have resale values much below what they planned.

    This could very well be the case with Tesla with them coming out with Gen 3. Gen 3 could ruin resale values of the high priced Tesla cars now.

    On the other hand, so far used Tesla prices seem to be holding up well.

    It’s just a poker game and no one knows what will happen in the future.

    1. sven says:

      “I think a lot of leasing companies like Ally (Volt) and whatever company leases the Leaf are sorry they set such a high RV on the lease to entice lease buyers because now they are stuck w/ a bunch of cars that have resale values much below what they planned.”

      Or the enticing low lease payments are because GM and Nissan gave the leasing companies whopping discounts. If the leasing companies were losing money on low residual values at the end of a lease, then they would have raised the lease payments on new leases to make up for the lower revised residual values. Since the leasing companies haven’t done this, they must be getting whopping discounts from GM and Nissan.

      1. Koz says:

        Both the Leaf and Volt have had their MSRP lowered since introduction, with the Volt being lowered about $6,000. That and the Fed tax credit affect give the appearance that resale values are lousy. In a real sense they have been for the early adopters but that will only translate to current buyers if the prices continue to come down, at least for the Volt. I just don’t ever see much of an aftermarket for used Leafs until the range gets significantly increased. Really, who wants a used car with an effective everyday range of 60 miles and likely less.

        The effects are more pronounced short term when many prospective buyers are comparing to new vehicles that are eligible for the tax credits. These are mostly off lease vehicles. Once the Volt gets beyond 5 year old models, the resale values will start to look a lot more favorable as long as the batteries continue to keep their range well like they have been. These will be crossed shopped against other used vehicles and the running costs bring enough interest.

        Tesla is a little different in that the tax credit is such a smaller percentage of the vehicles MSRP, so the short term impact on resale is diminished on a percentage basis. They also don’t have the Leaf’s issues with marginal range to start and an unconditioned battery. They are in a much better position and the growing Supercharger as well as fast DC networks should help residual values even more going forward. I think at the end of the day, the base 85’s will fare even better than the base 60’s, because they will be much better suited for the Supercharger network after 5 years in service. They are also only $8k more to start than a 60 with Supercharging.

        All EV’s residual values will be helped by charging infrastructure buildout at workplaces, destinations, highway-side, and multi-family. They’ll also be aided by exhausted tax credits and improved public mindshare. There is still about half of the US population that won’t even consider an EV yet.

  5. jmac says:

    If Tesla has world-wide waiting lists for their cars, why should they discount them ?

    1. Alonso Perez says:

      In general I agree, but if a small discount is required to sell to the UK government, it’s worth it. It’s monster free advertising day in, day out. Imagine CNN or BBC News footage of ministers or other officials getting in and out of their official Model S cars. It puts the brand on the radar of government officials from around the world, and that in turn would help promote the notion that EVs are real cars. There are many countries still where EVs are not taken seriously.

      1. Phr3d says:

        +1 (twice, your post above as well – wish we had a ‘like’ here – NOT facebook)

      2. Trace says:

        Yes, I can see a politician on the news, getting out of his Tesla, avoiding questions and cameras while he enters the Parliamentarian special session to face charges of fraud, graft and insider trading. Bonus if he sports a fedora to the indictment.

    2. See Through says:

      The ‘if’ in yoour question is the answer. It’s iffy.

      1. pjwood says:

        It is far easier to question the value, than the “if”. If you want to attack Tesla, there are softer targets than resale value.

        If Tesla is producing at the annualized rate of 100k units, at the end of 2015, that could be an entirely different supply and demand environment. Could go either way, but right now, they are out 3 months, instead of 1, on custom orders. Right now certain regions don’t even have inventory cars. Right now isn’t a buyers market. This story is correct. Why discount?

  6. Spec says:

    Meh. Their attitude will change eventually (hopefully). But for now, that is a nice statement on their current demand.

  7. jmac says:

    Tesla has a backlog of Model S orders of over 10.000 vehicles.

    Plus, there are nearly 20,000 pre-orders for the Model X.

    Doesn’t seem to me like Tesla needs to start offering deep discounts to satisfy trolls.

    1. Spec says:

      Uh . . . . where do you get that data from?

    2. Koz says:

      A reasonable idea of the X backlog is easy to find if you choose to look. The can also be extrapolated to some degree by lead times if you assume steady demand in established markets. Not sure about newly opened markets but they are producing at about a 40k annual clip and order to delivery averages around 3 months across all markets, so 10k is a reasonable number.

  8. Foo says:

    Are all “architects and dentists” super-rich in England or something? Architects maybe. But, dentists?!

    1. See Through says:

      Ouch! Those Model S delivery dates are looking terrible! Deliveries within 7 weeks? I mean, come on! Even with world wide expansions, Tesla seems to be waiting for orders to rush them to the factory floor 🙂

      1. Big Solar says:

        See Through you make no good sense once again. You better let Dave Mart handle this, at least he is intelligent.

        1. See Through says:

          Big Solar,
          I am trying to bring myself down to your level.

          1. Big Solar says:

            There ya go now that was a good one!

      2. Alonso Perez says:

        Considering it takes less than a week to make a Model S, how are those orders being “rushed”, exactly? Six weeks is enough time to deliver orders to the factory from any point in the US, on foot.

  9. TimE says:

    I have to side with Tesla – don’t discount the cars for bulk purchases.

    Want a reasonable bulk purchase incentive to offer? With purchase of every 10 cars, get 5 free 20 KW chargers installed at site of choice. Purchase 50 or more, get a 2 port SuperCharger installed at site of choice that needs to be made available to anyone with a Tesla…

    That should be incentive/discount enough and should also help with advancing infrastructure for charging.

    1. abhishekifmr says:

      +100: Most correct answer so far 🙂

  10. Jouni Valkonen says:

    This is good reminder that Tesla is different, because it is supply limited. As Tesla sales are supply limited, it does not make sense to offer discounts on bulk purchases.

    1. DaveMart says:

      That is one rationale.

      An alternative one might be that margins are not as good after everything is taken into account as they like to say, and they can’t afford to give discounts.

      You might be surprised at some of the things which are not always readily apparent from accounts with no implication of fraudulent accounting at all.

      Tesla is regularly in dispute with the US authorities on their presentation of accounts.

      1. Boris says:

        Yes, this is true. Model S for such an expensive car has only 25%-28% gross margin. German luxury cars in the same price band are probably at around 40%. But if there is a waiting list for the cars, why offer discounts, even if they were at 90% margin, right? As far as dispute with US authorities, you’re probably confusing this with GAAP vs. non-GAAP accounting. At this early stage of the company, non-GAAP makes more sense, and the street accepts this. Once the growth of the company comes down, they will go to GAAP.

        1. DaveMart says:

          The GAAP dispute is on Tesla’s accounting, which is what I said.

          Tesla claims that there is no lack of demand, it is simply a supply problem.

          Since subsidy rich Norway is mysteriously unaffected the more cynical of us may doubt that this is a full and frank explanation.

          1. Jouni Valkonen says:

            Tesla prefers subsidized markets, because subsidies are limited in Norway. This is the reason why Tesla does not prioritize germany yet, because there are no subsidies. But meanwhile Tesla is building the densest infrastructure in the world in Germany so I guess that Tesla starts delivering cars in Germany in 2015.

        2. Jouni Valkonen says:

          no, e.g. Porsches grossmargins are in line with Tesla, but Porsche is doing very good money on other sectors. Therefore Porsche’s Gaap grossargins are so high, but it does not come from selling cars. This is good example that often Gaap figures are misleading and non-Gaap figures are telling better what is going on under the hood.

        3. Koz says:

          GAAP doesn’t count full revenue from buyback guarantee purchases since the Feds consider this a lease model. Non-GAAP includes the revenue as if it were a sale. Cash doesn’t lie. Tesla makes plenty of money on the S and now that they are a public company it is black and white for everyone to see. They are just putting all of that money back into growth, as they should be at this point. They need to get to much higher scale for long term viability and their stated corporate goals. From an investor’s perspective non-GAAP is more easily understood and representative of their current profitability but you can parse both sets of data to similar results with conservative assumptions. There is already enough track history of aftermarket pricing to realize that, barring some unforeseen battery catastrophe, Tesla doesn’t have a financial liability issue with their buyback guarantee.

  11. Jouni Valkonen says:

    all who question Tesla are merely ignorant. But people are like you that they hate new technology and are inventing all kinds of nonsensical arguments to oppose the technology. For trolls, facts are irrelevant and this precisely why it is wasting of time to try to tell for you, Dave, why hydrogen cars are bulls***.

  12. ffbj says:

    No discount but how about for every 100 Tesla’s you buy you get a free supercharger installed.