Is It Time For A Tesla Bank?

OCT 16 2016 BY STEVEN LOVEDAY 29

Tesla Model Y Render

Could It Be A Tesla Model Y Unveiling? (Tesl render via rmcdesign.com)

Recently, Elon Musk Tweeted that Tesla has another big announcement coming up. He noted that it is likely “unexpected by most”. Of course, this leads to a frenzy of people guessing. What could it be? A Tesla bank? What??? Well, Business Insider seems to think so.

Matthew DeBord, of Business Insider guessed maybe Musk will unveil the Model Y prototype (a crossover to be built on the Model 3 platform). But this is too expected, right? So, DeBord projects the coming of Tesla Financial.

GM, Among Many Others, Runs Its Own Lending Institution

GM, Among Many Others, Runs Its Own Lending Institution

Albeit pretty far-fetched, there’s no reason Tesla can’t move forward on such a venture. Musk founded PayPal, so the process should be old hat. It seems more and more companies with household names are diving into the financial world, along with owning or financing major sports venues, bowl games, television specials … the list goes on and on. Indirect advertising at its best, we suppose.

Other notable possibilities include another software or Autopilot update. Since a big one just passed, it makes this more unexpected. A solar car roof? Another battery capacity upgrade? They’re taking a Model 3 to Mars? Ha … who knows really. The good news is that we only have to wait a few more days (October 17 to be official) until the truth comes out.

Many automakers already have their own financial companies. It helps with lending and financing, and keeps everything in the family name. This is known as captive financing. Basically, a major automaker can borrow at low rates and then lend it at higher rates. Tesla could surely stand to increase capital. At the moment, Tesla arranges lending through a few outside sources.

This system works for Tesla on the current, small scale level. However, one of Tesla’s lending partners has already capped off lending. When the company is looking at huge momentum in production, with the upcoming Model 3, it doesn’t take a rocket scientist – Elon Musk – to see that the earning potential for Tesla could mean money in the bank, literally. Model 3 buyers, those looking at average priced vehicles, are most likely the type that rely on financing.

Added to all of this, Business Insider points out that since Tesla uses direct sales, and likes to keep everything “in house”, this would make the sales model even more self-contained.

Not a bad guess really. We shall see tomorrow.

Source: Business Insider

Categories: Tesla

Tags:

Leave a Reply

29 Comments on "Is It Time For A Tesla Bank?"

newest oldest most voted

M3 getting to Mars on a single charge?

Yup! Model 3 – gets charged up right here, inserted into the ‘Truck’ and takes a rocket ride to Mars, topped up along the way by Solar Panels on the Truck, and arrives on Mars – Fully Charged!

A centralized lending institution would be useful for both Tesla and SolarCity – you can borrow money for your new Model 3, 5kW rooftop system, and PowerWall with Tesla being the lender for all three (and a mighty high price tag of somewhere around $65,000).

The question though, is who will buy the bonds they issue to make all this happen? You’d have to pay me (a Tesla fan, solar power fan, but SolarCity skeptic) 8%+ to get me to invest in these bonds.

Well, with the best savings rates for large deposits currently at maybe 2.4% and for limited largest depositors in some places at maybe 5% – they could probably get cheaper money than your 8% – like – even 6% or even less! Plus – most Bank services are paying under 1.0% currently, Like these two: Tangerine Savings Account = 0.80% Tangerine US$ Savings Account = 0.25% Other Links: http://www.thesimpledollar.com/best-high-interest-savings-accounts/ and http://www.moneysavingexpert.com/savings/savings-accounts-best-interest (Scroll way down of click the in-page links at the top!) However – if they can offer rates lower than Line of Credit (Unsecured) – they will get a lot of traction or customers! How about this: “According to the FDIC, current average savings account rates are still a paltry 0.06%. Many of the nation’s biggest banks have rates as low as 0.01%. That’s a hard pill to swallow for savers who expect a safe place to park their cash.” – from: http://www.thesimpledollar.com/best-savings-account/ – where the author also says – “This year, I switched to Ally Bank for my main savings account. Why? At 1.00% interest I’m earning roughly 16 times the national average.” So – I suggest – that a well structured arrangement at a Tesla Bank could… Read more »

The most recent bond issue by SC went for 6.5%, so they aren’t going to get money very cheaply.

Tesla 2021 convertible bonds already trade at $0.84 for dollar:
https://www.thestreet.com/story/13852777/1/here-s-why-you-should-consider-tesla-s-convertible-bonds.html
So you may buy it, but I’m not advising anything. They are rated as JUNK for good reason, you may loose all your money.

A Tesla bank is something that will happen sooner or later and would seem to be an excelent move to do before the model 3 comes…
Tesla selling rather than leasing the solar panels makes a big difference on the bottom line and the leasing is why Solar City appers so shaky using standard GAAP accounting which does not work well with non standard business practices…

A Tesla Bank would make perfect sense in Elon’s vertical integration he’s so fond of.
I would certainly buy my M3 thru the Tesla bank before my actual CIBC bank that invest NOTHING or very little in my coutry, let alone my province.

Insurance not bank

I think you’re right.

Insurance product where you get a discount based on how much autopilot you use.

If they get their autopilot technology where they want it, so that accidents go down significantly, that’s potentially an additional profit of $1k per year per car.

Tesla bank looks not like a save place for somebodys money…

Why the negativity, ‘Pete’?

Any FDIC bank is “Safe”…

…right, and some of them will even open accounts for you that you have not approved, and then charge you for servicing said accounts. What great service.

Interesting speculation. Currently, Tesla does no in-house financing at all; all of Tesla’s cars are paid for at time of delivery, altho of course that payment often comes from various banks, who pay Tesla directly, and the car buyer makes payments to the banks.

(It may be that in China, Tesla is more directly involved in financing… I forget the details.)

Contrariwise, GM has its own financial branch. From Wikipedia:

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
General Motors Financial Company, Inc. is a financial services arm of General Motors. The company is a global provider of auto finance, with operations in the United States, Canada, Europe, China and Latin America.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

https://en.wikipedia.org/wiki/GM_Financial

The downside of Tesla doing in-house financing is that it would no longer get paid up front for all the cars it sells or leases. The upside would be that it might be able to attract more buyers, if it can offer low-cost or “zero cost” financing.

Income from their “Bank” would ease the need for any Wall Street Begging, too. 😉

Um, Musk did not found PayPal. He founded X.com, which layer merged with the company that already owned PayPal.

Solid reporting, guys. Now I have to fact check every single thing you write from now on. Sigh.

Wait. You haven’t been doing that up until just now????

“Where Zip2 had been a neat, useful idea, X.com held the promise of fomenting a major revolution. Musk, for the first time, would be confronting a deep-pocketed, entrenched industry head-on with the hopes of upending all of the incumbents. Musk also began to hone his trademark style of entering an ultracomplex business and not letting the fact that he knew very little about the industry’s nuances bother him in the slightest. He had an inkling that the bankers were doing finance all wrong and that he could run the business better than everyone else. Musk’s ego and confidence had started heading toward the levels that would inspire some and leave others thinking of him as pompous and unscrupulous. The creation of X.com would ultimately reveal a great deal about Musk’s creativity, relentless drive, confrontational style, and foibles as a leader. Musk would also get another taste of being pushed aside at his own company and the pain that accompanies a grand vision left unfulfilled.”

Four Electrics wrote:

“Now I have to fact check every single thing you write from now on.”

How many of your own posts would pass fact-checking? Maybe 2-3%, at most?

“THE SALE OF ZIP2 INFUSED ELON MUSK WITH A NEW BRAND OF CONFIDENCE. Much like the video-game characters he adored, Musk had leveled up. He had solved Silicon Valley and become what everyone at the time wanted to be—a dot-com millionaire. His next venture would need to live up to his rapidly inflating ambition. This left Musk searching for an industry that had tons of money and inefficiencies that he and the Internet could exploit. Musk began thinking back to his time as an intern at the Bank of Nova Scotia. His big takeaway from that job, that bankers are rich and dumb, now had the feel of a massive opportunity. During his time working for the head of strategy at the bank in the early 1990s, Musk had been asked to take a look at the company’s third-world debt portfolio. This pool of money went by the depressing name of “less-developed country debt,” and Bank of Nova Scotia had billions of dollars of it. Countries throughout South America and elsewhere had defaulted in the years prior, forcing the bank to write down some of its debt value. Musk’s boss wanted him to dig into the bank’s holdings as a… Read more »

Yes, this is a good idea. Everyone invests their money in bank for a 0% interest rate.

Why not that money be used to make and sell electric cars and give loans to the prospective EV buyers.

Here is a glimpse of Musk’s expertise in finance.
From his biography by Ashley Vance.

http://textuploader.com/d56yg

Perhaps not a bad guess but who would invest in this venture? Tesla is already up to their ears in debt.

Though it is in line with my previous guess of “some new grand plan that will require even more capital and therefore Tesla is going to have to postpone profitability another couple of years”

I believe in the US in order to get a banking license your primary business must be banking. So unless Tesla stops selling cars it won’t be a bank.
However Tesla can and probably will still partner with a bank to do a bunch of bank like things (loans etc).

No, they can spin off a “Tesla Finance” entity just like the finance entities for Ford, GM, BMW, VW, etc. That would be entirely legal.

A Tesla investment bank where they sell solar and EV leases to investors? It might work as long as greedy wall Street doesn’t begin to sell credit default swaps on solar and EV securities.

Personally I think Tesla should stay out of banking in that it has brought down a lot of other companies.

For Tesla motors in the united states, just doing auto lending doesn’t make sense; the average Joe doesn’t care about where they send their monthly payment too…Now a consumer checking/savings/credit cards would be somewhat desirable…Just to have “Tesla” on the credit card would be sought after and Tesla could set up a reward program that can only be redeemed for Tesla products locking you into the eco-system…

Yet maybe this is something they’ll need to do with Solar City and/or selling Tesla’s in foreign countries…

i’d guess from this list

1) Plug out Tesla Inverter letting the Tesla S power your hours.

2) Tesla P120 D With no outside mirrors, instead a nice smart display.
3) Tesla with a joystick no steering wheel.

4) Integrated solar parking lot canopy for Tesla .