Tesla's Financing Deal Is Just A Shortcut To Cheaper Electric Cars Without Real Innovation
Despite some fuzzy math, the company says the financing program is a way to drive down the cost of the car for customers, without actually making the product cheaper.
But Tesla's problem has never been a shortage of customer orders; it's been getting cars to everyone who has placed a reservation.
The company has about 20,000 reservations on the books now, just the number of cars it hopes to build in 2013, according to the New York Times.
So why the need for a program to fuel more reservations?
Tesla has long promised affordable cars, but its prices have only gone up in recent years, culminating with the cancellation of the cheapest version of the Model S earlier this week.
Asked on Tuesday why he was putting the financing scheme into place now — when demand has never been an issue — Musk replied:
It’s always been my goal since the beginning of the company to make mass market cars. I wish we could have done a mass market affordable car as our first car, it simply wasn’t possible, because it’s going to take three major iterations for the technology to get there.
However by providing a compelling financing solution for the Model S, we’re helping to broaden the access of customers to the car, and I think that’s a good thing.
Musk's simple master plan, outlined in August 2006, lists those three iterations: a sports car (the $89,000 Roadster), then an affordable car (the Model S), then an even more affordable car.
That last vehicle, the upcoming Model X, is scheduled for production in 2014, and there's no indication from Tesla it will be significantly cheaper than the Model S, which starts at $62,400. That's not "affordable" by most definitions.
Asked about the viability of the electric car as a product for the mass market, Jack Nerad, executive editorial director and market analyst at Kelley Blue Book, told Business Insider the key is the development of more affordable, more powerful battery technology.
Increased and faster production should help Tesla lower its costs, but that battery is the "holy grail," Nerad said.
"I think we will see better batteries," with quicker charging times, said Nerad. "Then electric cars become very very viable." But while many people are working on creating that technology, he noted, "nothing is imminent."
Tesla's new lease-buy hybrid financing scheme was created to fill gap between now and that moment in the future.