Ok, now I got "how smart am I" out of the way. Tesla can have stumbles as a product and we can forgive them because they're blazing a trail and early adopters understand that comes with the territory. I for one did not care too much about the NY Times article. It was such an extreme use case (traveling all that distance in freezing cold) that would solve itself within 18 - 36 months. It would not have impacted my buying decision. The response from Elon gave me more pause. "Wow, there's such a defensive attack response from this company. What happens to me if I buy one and it's a lemon? It can happen. Do I feel like they'd be supportive or blame me for everything that went wrong?" More troubling than it needed to be.
This now takes them into entirely new territory. This goes to the one feature that's critical to the success: credibility and trust. Carandriver says it best when they basically say "Why are they pulling these shenanigans? They don't need to. It's an awesome car"
What really matters is if I were in the market for a new car in the next 12 months up until pre NYTimes Tesla would have been my top choice. Post NYTimes I would have asked a lot more questions if I was going through the buying process. Now I would not buy a Tesla for at least 12 months as I want more proof points around what exactly is the culture of this company.
Elon will publicly apologize for this within 30 days is my best guess.
>This now takes them into entirely new territory. This goes to the one feature that's critical to the success: credibility and trust. Carandriver says it best when they basically say "Why are they pulling these shenanigans? They don't need to. It's an awesome car"
I think this shows that Tesla just doesn't get the market they're aiming for.
With their prices(around $60,000 MSRP for the Model S, and $90,000 for the Roadster), they're looking at car enthusiasts and rich people. They're looking at an informed audience that will see through(or are capable of paying people to see through) the marketing to the direct impact on their bottom line. They're informed customers, and don't need this kind of marketing. The key points here was that they've gotten a bank to issue loans on the cars. That's all they needed to announce, not the terms or the nebulous "Total cost of ownership" calculation.
It sounds like the problem is "the cause". If Tesla is successful, it will be because they focused on making a good car rather than relying on the cause to attract buyers. Yet there is this large cheering section that want the car to succeed, but probably aren't considering buying the car.
Take a look at some of the Reddit threads about the expected profits, and you highly see upvoted comments talking about the NY Times debacle as though it is something that Tesla "won".
I can't know whether Elon Musk is actually caught up in the cause of electric cars, but it increasingly passes for a explanation of strange decisions.
Well with Elon's personality type you know nothing would go out like this without his knowledge. But we don't have to guess - he was in the video personally announcing the $500 lease plan.
The only thing that irks me here is how the cost of fuel is deducted from the cost of the lease:-
If I'm paying $1200/mo for a lease, and any fuel / maintenance costs are on top of that amount. If I get an S-Class for $1200/mo, the fuel would be (for example) $200/mo on top, the total being $1400/mo. Increment accordingly for maintenance.
Tesla S is $1200/mo. I don't need fuel, hence I don't pay anything on top. It doesn't magically become $1200 - $200 = $1000/mo. You're still paying $1200/mo. Plus the cost of maintenance and electricity.
A manipulation that I don't see the point of, at that. Tell a people who can only afford a $600/mo payment that the TCO is under that, and it might get them to come into the dealership, but the real monthly cost will come out before the car could be sold.
If they pitched the calculator on the "true cost of ownership" page as a "here's a way to estimate the hidden costs of a gasoline car that make the Tesla more competitive than you'd think" they could make the same pitch but without the smell of a bait and switch. But even at that, it's not apples to apples (if you buy an S Class, nobody has to guarantee that there will be a market for reselling it in three years).
> Tell a people who can only afford a $600/mo payment that the TCO is under that, and it might get them to come into the dealership, but the real monthly cost will come out before the car could be sold.
Once you have them through the door you have the chance to pitch them the concept, which in sales is a big thing. And the whole point of a salesman's job is to close the deal.
(I don't disagree, just pointing out why they are doing a bait and switch)
The issue with getting them through the door is the reputational risk from everyone who walked into a showroom to be told the actual monthly cost was 1200 bucks, only to bring it up with all their friends as a misleading marketing gambit.
For a company that needs every ounce of credibility to make its product mainstream, this seems like a silly ad to place.
He said "plus the cost of maintenance and electricity".
For equivalent range, a Model S would cost me $8 per "fill-up" instead of $74. The difference would be bigger if I drove a sportier car with worse gas mileage.
For many owners, it actually is free. A lot of these cars are being bought by Californians working at companies with their own electric car discounts and charging stations at the workplace. The car comes with free recharges at Tesla's superchargers for life as well.
The average cost of a kilowatt-hour is something like $0.11-$0.12 in the US (some places are much higher, some are lower).
The highest-capacity model with an estimated 300-mile range holds 85kWh. Tesla claims >90% charging efficiency, but let's just say 95kWh to charge.
95kwh * $0.12 = ~$11.40 per 300 miles.
Right now, a gallon of regular gasoline in the US averages $3.601.
300 / 50mpg = 6 * 3.6 = $21.60
300 / 40mpg = 7.5 * 3.6 = $27.00
300 / 30mpg = 10 * 3.6 = $36.00
300 / 20mpg = 15 * 3.6 = $54.00
300 / 10mpg = 30 * 3.6 = $108.00
As a point of troubling comparison, the Model S gets compared to a BMW M5 a lot, which apparently has a 16mpg/24mpg city/highway rating.
Another useful comparison is to a basic Prius, which has a 51/48 rating, but is substantially smaller, lighter, and less performant than the Model S and M5, but the Model S still beats it by a large margin.
When Tesla gets around to a Prius-like EV, the numbers are going to be even more ridiculous. The "fuel cost" of commuter EVs will simply be noise in the typical family budget.
>When Tesla gets around to a Prius-like EV, the numbers are going to be even more ridiculous. The "fuel cost" of commuter EVs will simply be noise in the typical family budget.
Or some of the European diesels, some of which are pushing 100 MPG.
>Or some of the European diesels, some of which are pushing 100 MPG.
Unless I'm terribly mistaken, you are thinking of vehicles that were tested on a different driving cycle with a larger gallon (imperial vs US). If compared on an EPA cycle with US gallons, those cars get closer to 50 mpg.
> If compared on an EPA cycle with US gallons, those cars get closer to 50 mpg.
It's worse than that. Diesel fuel has a higher energy density than gasoline, and is more expensive. Anyone trying to directly compare the two in terms of miles per gallon and cost without the appropriate adjustments is simply speaking nonsense.
It's a pity Tesla didn't lay out the costs in a calculator as you have above. Would've been far more honest ("am I really paying that much on fuel every month?"), and this whole silly debate would've been avoided.
There are other costs to consider as well, not just fuel: add in the monthly insurance cost as well as the daily commute cost - depending on where you live, you may be paying $5 per day in commute tolls and several hundred per month for insurance.
I know no safe driver with a monthly insurance premium in the "several hundred per month" range. Even fairly expensive cars rarely go much above $2k/year for full coverage.
I even own a Tesla S and think the advertising of this program is terrible. I can't side with Elon on this. They definitely need to add some kind of qualifier like "$500 / month with savings." or "TCO equivalent to a $500 / month lease on a normal car."
15k/year assumption in the fuel savings calculator vs the 12k/year buyback program rate is hopefully an oversite rather than on purpose...
As an owner what do you think of the car? Do you regret being an early adopter and would you recommend waiting?
I'm gambling that they're eventually going to release one within my price range in the next five years. This financing program would make getting into a Tesla doable but I am not a big fan of leasing.
I love it. Doesn't feel like a 1.0 to me. The guaranteed buyback of this lease is a good deal I think. That said, they will release less expensive models within your time frame.
When someone who truly revolutionized online money with PayPal says they have a revolutionary new deal, they had better not come at me with smoke and mirrors like this. When Elon Musk sat in front of a camera and talked about a revolutionary new financing opportunity where I could get an $80k car for $500 a month I was stoked. I was a lot less stoked when I found out that the "$500 a month" payment was actually as large as my mortgage payment. I've always been enthusiastic about what Elon Musk has done, but this irks me. It's pretty shady when you subtract the value of the Model S at three years in your calculations, but you don't subtract the resale value of any other cars in the comparison. Just because other cars don't have "guaranteed" resale values doesn't mean they have zero resale value.
including PayPal, although they seem to have lost their direction since he left.
Looking at it, it's Tesla that failed to emphasise these benefits properly.
For a firm that is supposed to be innovative and disrupting the industry, this "deal" looks like standard car salesman fud. The only innovative thing is the buy back scheme, which is a little lost beneath the $500 stuff.
They'd be better off saying; look, the Tesla S will cost you ~£1,000 per month, but based on what you've entered the best alternative you could have would be $600/mo car, with $400/mo fuel cost (maybe pick some example cars in that price range to compare against directly). And emphasise the ability for you to get a premium car for your money.
In fact; this true cost of ownership thing could have worked if they hadn't stamped a big $500 on the front of it.
I understand why they have done it this way - fuel costs aren't a fixed cost for most people (by which I mean, you probably couldn't recall offhand exactly what you pay per month, or when you pay it) and so is a cost which people don't appreciate as much as their credit lines. But, still.
No fuel costs? What about the eventual battery pack replacement? That's not cheap.
Similarly the buyback is only for a very short window of ownership. It'll be interesting to see how they remind owners of this window - will it be months in advance, or will it be "Hello, as of today..."?
>- the savings from fuel/maintenance/etc are very real, not wishful thinking. The math is true for total cost of ownership
No, it's really not.
If I'm paying $1200/month for a BMW, and the cost of gas+maintenance is $400/month(ballpark), then my total cost per month is $1600.
If I'm paying $1200/month for a Tesla, and the cost of maintenance comes out to $200/month, then my total cost per month is $1400. The cost of gas should not be subtracted from the Tesla's cost, because that cost is $0. It can be used as a comparison point between the BMW and the Tesla, in which case the BMW does cost $200 more per month than the Tesla, but it absolutely cannot be subtracted from the Tesla's cost.
Here's something I can't figure out. I saw a list price of the Model S 60Kw as $62,400. The article says you pay $1,097 for 63 months for that model, and you can sell it back at 43% of the original price. Okay, at 36 months, you've paid $39,492 in payments. Assuming Tesla buys back at 43% of the $62,400 price, or $26,832 and you get that money, then all you are out at the end of 36 months is $12,660 or an effective $351/month (but only realized after three years).
After making $39,492 in payments, you still owe $22,908 on the car (well, not exactly, because I'm not accounting for the down payment or for interest on the loan, here—but you don't own the car free and clear). So that $26,832 doesn't all go straight into your pocket if you sell the car back.
That's why, in order to get to the $346 figure I'm seeing on loading up the page with the default options for the 60kWh model, most of the "savings" comes from stuff other than the buyback (primarily the business tax benefit and fuel costs). The guaranteed resale value portion is only credited a $40/month benefit.
No, your math is right. The $500 per month figure is for the 85 kWh car, which is more expensive. Tesla's "calculator" gives roughly the same figure as you for the 60kWh car. That doesn't mean it's comparable to a car payment of $351/month though. If you did equivalent discounting to a car that only had a $351/month payment (maybe some sort of Kia?) then that would come out to be in the ball park of $150/month, but you don't see Kia advertising their cars like that.
I did my math on the 85 kWh version and it came out to $417/month (effective after three years and selling it back). But you are right, you don't see other cars being advertised like that.
I'm a huge fan of the Model S and will be putting in an order for one as soon as I can decide which version to get. But I too think their whole financing announcement was really lame. Seems very beneath them for having such an amazing product to offer.
Not to dismiss this but have you EVER seen an honest financial product or advertisement for such?
I mean to get that result you'd have to throw bankers and marketeers in jail for bad behavior and that's never going to happen, so what exactly is their downside?
TIn several European countries that I've lived in, you would not be allowed to make claims of this kind in your advertising - it's regarded as abusive of the consumer. The first amendment gives advertisers wide latitude with the kind of claims they make, and even fairly blatant exaggeration is OK as sales talk is expected to involve a degree of 'puffery'. I like the first amendment but as a consumer I sometimes find the almost universal use of bait-and-swtich tactics in American advertising extremely tedious.
In this case I think Tesla went too far with their claims and the market (both on Main and Wall street) is punishing them accordingly. The buyback guarantee was a good idea, as is the lease scheme. Of course they want to make the price seem attractive, but I think they could have been frank about a $1000/month lease cost and got the same amount of business or even more. A surprising misstep.
We seem to have a particularly slippery financial services sector (with some notable exceptions) - the latest one being interest rate swaps being sold to relatively small and unsophisticated borrowers as "interest rate protection".
I'm not other countries' financial services sectors are necessarily any less slippery than the UK's; the main difference is the Ombundsman has come down squarely on the side of people not sophisticated enough to ask the right questions (or in the case of PPI, even read the small print of policies they'd been opted into)
I suspect in the UK the Advertising Standards Authority would have jumped on Tesla's marketing materiaal
(especially the bit where they calculate a "true cost of ownership" based on 15000 mile usage and quoting a buyback rate based on 12000 mile usage) before dissatisfied customers started complaining about the small print.
The ironic thing is that for Tesla's target market a breakdown vs a "leading competitor showing the total amount saved on running costs would probably look more impressive than the misleadingly low "cost of ownership" figure.
Not any more, but then financial products have always been regulated rather loosely, given the FSA's vague guidelines. That does sound pretty strange, but I was thinking more of regular consumer goods.
I do frequently miss the media landscape in the UK grabs lapels you don't know what the TV here is like!!
Depends on the state. Some states cap the sales tax on an auto purchase. IIRC, in SC it's capped at $350. Then of course you get the property tax bill about a month later assuming you didn't transfer tags.
> The sad part of this price comparison quagmire is that Tesla doesn’t need to do it. Its Model S is, flatly stated, very cool.
Totally agreed. I'm really disappointing that this BS is coming from what (up to this point) many of us have perceived as a trustworthy company. We all know Teslas are expensive but that they'll get more affordable with future models. There's no reason to pull this kind of stunt. Elon, you're better than this.
There is ample reason to "pull this kind of stunt". Exhausting the easy part of the market. Hence he needs to expand the market. I do find his choice of market comparison to be a bit suspect, there are other cars in this price range who have much higher residuals.
Elon has simply come to the realization that the low hanging fruit isn't going to pull his company along far enough to get to the next expensive car, the X. That everyman car is still beyond that point and he still has to get there.
As for the lease costs, remember its your tax dollars contributing towards someone's ownership of this vehicle. While some will claim its the cost of progress I see no reason progress to rewarded excessive costs of progress.
There should have been a restriction on the price of the car it was applied too, no need to subsidize luxury rides. There are many alternatives below 40k that if bought in sufficient numbers would do more for adoption
This is such a common sentiment, but why? Elon Musk has helped create a number of awesome things, but that does not make him a virtuous person. His handling of the NYTimes debacle strongly suggested the opposite, in fact
I suspect it's largely because he's the figurehead for the new-age EVs which are making many people giddy with excitement in much the same way that iPods did a few years ago.
But it should also be noted that they don't advertise it as the price of a Tesla but the cost, or "the true cost of owning a Tesla". Cost and price are 2 different things.
My problem though is that I don't think that they got the math right.
It's like saying: you spend 3000$ every month. A trip to Las Vegas would cost you an additional 1000$. But if you don't go to Las Vegas you are saving 1000$ and now your "true" spending is only 2000$ this month.
What they should have said is: non EV - car X has a monthly price of 1200$ and Tesla Model S also has a monthly price 1200$.
For car X you have some additional monthly costs of 1000$ but for the Tesla, the additional costs are only 300$. So the total cost for you would be 2200$ for having car X and only 1500$ for Tesla.
Or something like that.
this may be true but contextually it is not acceptable.
If a salesman emails me that the cost of their car is $500 (mind you, without asterisk or even something like 'terms and conditions apply/see (blank) for details) all am thinking about is the price of their car.
but if you start asking questions like how much is my time worth, because it counts towards the true cost of ownership it starts getting ridiculous.
and which time are you referring to? the trip to the corporate meeting or the trip to my son's baseball game? seriously
>But it should also be noted that they don't advertise it as the price of a Tesla but the cost, or "the true cost of owning a Tesla". Cost and price are 2 different things. My problem though is that I don't think that they got the math right.
Then why was it worded in a way that gave the impression they were telling you the price? Even several people here, presumably somewhat intelligent, came away with that idea. The fact that TCO and price are different is no reason use language that muddies the difference.
I wonder if anyone at Tesla considered the idea of guaranteeing the gas savings? At it's simplest the buyer just gets some money back if the cost of gas goes way down.
Tesla could use futures to fund the guarantee at possibly a low cost?
The also valued an hour of stuck in traffic at $100. Imagine if we didn't sleep that much, or we ate while working, several hundred $ more a day. Because that's just how it works :)
"Excessive wear and use" gives them a license to renege on their promise to buy your car for 43% of the value after 3 years. Considering the truth stretching Tesla did with this advertisement, I'd trust them to take advantage of any miniscule opp to screw you.
Fisker is toast, what's the over-under on HN's favorite electric car boondoggle getting pinched? What greenism acolytes don't appreciate is that deflation lowers the price of goods and services--including car and fuel prices!
Value is conserved and deflation will burn the green industry in a bright white light like ice cold water on lithium. Green energy's only hope is that Bernanke's replacement starts handing out trillion dollar tokens on street corners.
All these bright minds and no one takes the time to model assumptions of perpetual compounding growth of the economy! It's not linear, duh!
Pass the pipe, yo! Who would want to live on Mars? Why not build a colony in the middle of a desert with no one but moneyed acquaintances and imported indentured slaves?
Oh wait, we already did over in Dubai! Bwahaha
Mars colonization is just a novelty to obscure reality and distract people from the bankruptcy of the debt-asset based financial-political system. Aka asset-based lending
The Tesla financing gimmick is nothing more than a retail level tax credit securitization scheme of the TIF pedigree that municipalities use.
The number one historical driver of wealth and geopolitical power: proximity to resources. On Mars, you're several times closer than Earth to the majority of the resources in the Solar System, on a planet that has terrestrial mineral resources and the ability to support agriculture. Also, not being at the bottom of such a deep gravity well, you're also at a strategic advantage.
Mars colonization is a PR boondoggle and there is no resource constraint on earth. Flying indentured servants and aristocrats to Mars to live in a manufactured community, in a manufactured environment to be closer to far-away minerals, sir, is idiotic when considered for what it is.
There is absolutely nothing scalable or sustainable about it. When people can build a sustainable community in our own deserts maybe we can talk about a sustainable desert community millions of miles away from our homeland.
Again, you reveal your ignorance. Constraint isn't required for geopolitical advantage.
> closer to far-away minerals
And you are revealing an ignorance of orbital mechanics and their implications. The shift of geopolitical power away from Europe wasn't because resource constraints were starving certain powers. It was because even more favorable conditions elsewhere manifested even larger economic potentials.
the media seems intent on sinking Tesla. While I agree with the conclusion that they should stick to car instead of loan technology, the tagline under the 500$ seems enough to me to indicate it is a cost of ownership figure. These practices are certainly not more deceptive than what is seen elsewhere in the auto industry
This is silly and borders on conspiracy theory. It would be suspicious if Tesla is being attacked over technicalities or falsehoods, but all of the criticism in this article is true, representative, and on the money.
It's not just Car & Driver, there have been recently discussions on HN also where it's been shown many times over that the $500 figure is straight out to lunch and grossly misleading.
Why is it that some of us here feel the need to constantly worship at the feet of demigod Musk, He Who Does No Wrong, and anything negative said about him is dismissed as slanderous propaganda by Big Automobile? What is this, the USSR?
I appreciate what Elon Musk is doing to advance electric cars and wean us off of oil, but he is a shrewd businessman subject to the fallibilities of all shrewd businessmen. He is neither a messiah nor a saint.
"he is a shrewd businessman subject to the fallibilities of all shrewd businessmen."
Rather a broad generalization, don't you think? Like most fields, business turns out to have more variation than outsiders think. "Businessmen" range from pure money grubbers who will do whatever makes the most, to people who are in business simply because the thing they want to build can only be embodied as a business. I don't know for sure, but it seems to me that Elon Musk is toward the latter end of the spectrum.
> "the thing they want to build can only be embodied as a business."
I agree completely. It's easy to see how improving the state of electric
vehicles requires significant capital, so without a business, there's no
viable way to make the desired advancements.
Some of the backlash against Elon Musk seems to be caused by some people
having extremely high expectations for everything he does. Those
expectations are occasionally unrealistic, and blaming him personally
for every misgiving of the entire Tesla company is entirely unfair.
Most car sales/lease terms are horribly and intentionally confusing and
complicated, but someone in marketing at Tesla made a serious mistake.
The mistake wasn't using industry norm of difficult to comprehend
claims and terms, instead, the mistake was failing to live up to
expectations of something better, namely, clear and direct terms with
fair and easy comparisons.
As a business, Tesla must compete with all of the entrenched businesses
but by using the "best practices" of the industry in terms of marketing,
they missed an opportunity and failed to meet expectations. There are
few people on the planet who have set expectations so high as to get
blamed personally for failing to innovate absolutely everywhere, but it
seems Elon Musk is one of them.
The world would be a better place if more people had his problems. ;-)
> ""Businessmen" range from pure money grubbers who will do whatever makes the most, to people who are in business simply because the thing they want to build can only be embodied as a business."
True - but I don't think it's necessarily quite so polarized in this case. When Musk went off and screamed fraud at the New York Times for their review, one can reasonably explain it away as a passionate man protecting his dream company - an example of being on the latter end of the spectrum.
This is a bit different - and I think this Tesla financing brouhaha is proving that Musk has more of the former in him than we'd like to admit.
I for one am a bit disillusioned. We have heard the conveniently woven story many times - passionate individual starts a company to change the world for the better - but that's always overly simplistic. While I wouldn't describe Musk as a pure money grubber, I honestly do not believe Musk is as far down that spectrum as popularly believed.
Elon's more of the real deal than most of the ecosystem out there.. his degree of belief is evident post Paypal. Most exits of that scale spawn VCs or incubator dons..
“There’s a tremendous bias against taking risks. Everyone is trying to optimize their ass-covering.”[1]
Why is it that some of us here feel the need to constantly worship at the feet of demigod Musk, He Who Does No Wrong, and anything negative said about him is dismissed as slanderous propaganda by Big Automobile?
Many of the complaints are absolutely legitimate and have nothing to do with sinking tesla. For example:
" the fuel savings calculator nestled among these references to the buyback program defaults to driving 15,000 miles per year. Nowhere on the page does Tesla mention that the buyback program explicitly limits mileage to 12,000 per year, and that any miles in excess are charged at $0.25 apiece ... they’d have to pay an additional $2250 in mileage penalties."
This is the type of thing you expect from a scummy used car dealer.
It's not a cost of ownership figure. By definition, if you're paying Tesla or Wells-Fargo $1,200 a month for your car, your cost of ownership is at least $1,200 a month.
Rent one from me for $1500 a month. That will save you the $1200 you otherwise would pay to Tesla, so your total cost of ownership is only $300 per month.
In other words: your logic does not make sense to me.
Ok, now I got "how smart am I" out of the way. Tesla can have stumbles as a product and we can forgive them because they're blazing a trail and early adopters understand that comes with the territory. I for one did not care too much about the NY Times article. It was such an extreme use case (traveling all that distance in freezing cold) that would solve itself within 18 - 36 months. It would not have impacted my buying decision. The response from Elon gave me more pause. "Wow, there's such a defensive attack response from this company. What happens to me if I buy one and it's a lemon? It can happen. Do I feel like they'd be supportive or blame me for everything that went wrong?" More troubling than it needed to be.
This now takes them into entirely new territory. This goes to the one feature that's critical to the success: credibility and trust. Carandriver says it best when they basically say "Why are they pulling these shenanigans? They don't need to. It's an awesome car"
What really matters is if I were in the market for a new car in the next 12 months up until pre NYTimes Tesla would have been my top choice. Post NYTimes I would have asked a lot more questions if I was going through the buying process. Now I would not buy a Tesla for at least 12 months as I want more proof points around what exactly is the culture of this company.
Elon will publicly apologize for this within 30 days is my best guess.